Question 1

If the company uses the FIFO method, what is the cost of its ending inventory?

Accepted Answer

A)  $24 
B)  $42 
C)  $58 
D)  $76 
A)  $24 
B)  $42 
C)  $58 
D)  $76

Question 2

Which of the following statement is true?

Accepted Answer

A)  The sales revenue is $1,500. 
B)  The gross profit is $1,500. 
C)  The cost of goods sold is $1,500. 
D)  The net income is $1,500. 
A)  The sales revenue is $1,500. 
B)  The gross profit is $1,500. 
C)  The cost of goods sold is $1,500. 
D)  The net income is $1,500.

Question 3

The specific identification method would probably be most appropriate for which of the following goods?

Accepted Answer

A)  Boxes of brass 4-inch drywall screws at Home Depot. 
B)  Bottles of suntan lotion in Wal-Mart's central warehouse. 
C)  Sets of tires at the Goodyear plant. 
D)  Diamond necklaces at a Tiffany's & Co. jewelry store. 
A)  Boxes of brass 4-inch drywall screws at Home Depot. 
B)  Bottles of suntan lotion in Wal-Mart's central warehouse. 
C)  Sets of tires at the Goodyear plant. 
D)  Diamond necklaces at a Tiffany's & Co. jewelry store.

Question 4

The understatement of beginning inventory balance causes cost of goods sold to be understated and net income to be understated.

Accepted Answer

A) True 
 B)False

Question 5

Acme sells 300 units during this quarter. If Acme uses the LIFO method, what is its cost of goods sold for the quarter?

Accepted Answer

A)  $1,600 
B)  $1,400 
C)  $1,500 
D)  $1,800 
A)  $1,600 
B)  $1,400 
C)  $1,500 
D)  $1,800

Question 6

A company has beginning inventory of $128,400 and an ending inventory of $89,100. The company purchased $67,900 during the accounting period. Assuming no returns, calculate the goods available for sale and the cost of goods sold.

Accepted Answer

The answer of A company has beginning inventory of $128,400...

Question 7

What is the journal entry to be recorded by

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  Flynn Company on November 15?
  
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
E)  Flynn Company on November 15?

Question 8

What is the amount of the gross profit?

Accepted Answer

A)  $720,000 
B)  $150,000 
C)  $200,000 
D)  $72,000 
A)  $720,000 
B)  $150,000 
C)  $200,000 
D)  $72,000

Question 9

A new textbook is published in the spring of 2011. Your campus bookstore buys 400 copies at $70 each in June, an additional 1,000 copies in August at $72 each, and 600 copies in December at $75 each. At the end of December 2011, the bookstore has sold 1,900 copies of the text.
Find the cost of goods sold and the cost of ending inventory:
a) under the weighted average cost method. b) under the FIFO method.
c) under the LIFO method.
Using your calculations as a guide, explain how different inventory costing methods affect the numerator and
denominator of the inventory turnover ratio when unit costs are increasing. Conclude your explanation by identifying the method that produces the highest (and lowest) inventory turnover ratio.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& During a period of rising costs, FIFO

Question 10

The most commonly used inventory costing method in the U.S. is:

Accepted Answer

A)  FIFO. 
B)  specific identification. 
C)  LIFO. 
D)  weighted average. 
A)  FIFO. 
B)  specific identification. 
C)  LIFO. 
D)  weighted average.

Question 11

Alphabet Company buys different letters for resale. It buys A thru J on January 1 at $4 per letter, and sells C on January 15. On February 1, it buys K and L at $6 per letter and sells A and K on February 9. It then buys M thru O on March 1 at $7 per letter and sells F, L, M, N, and O on March 19. If the company uses the LIFO method on a perpetual basis, what is the cost of goods sold for the three months ended March 31 (rounded to the nearest dollar)?

Accepted Answer

A)  $32 
B)  $41 
C)  $45 
D)  $56 
A)  $32 
B)  $41 
C)  $45 
D)  $56

Question 12

A $15,000 overstatement of the 2011 ending inventory was discovered after the financial statements for 2011 were prepared. How would that inventory error impact the 2011 financial statements?

Accepted Answer

A)  Current assets were overstated and net income was understated. 
B)  Current assets were understated and net income was understated. 
C)  Current assets were overstated and net income was overstated. 
D)  Current assets were understated and net income was overstated. 
A)  Current assets were overstated and net income was understated. 
B)  Current assets were understated and net income was understated. 
C)  Current assets were overstated and net income was overstated. 
D)  Current assets were understated and net income was overstated.

Question 13

When a company uses a perpetual inventory system, purchase returns will be recorded by:

Accepted Answer

A)  debiting inventory. 
B)  debiting purchase returns. 
C)  crediting accounts payable. 
D)  crediting inventory. 
A)  debiting inventory. 
B)  debiting purchase returns. 
C)  crediting accounts payable. 
D)  crediting inventory.

Question 14

If BetterBuy uses the weighted average method, its cost of goods sold will be:

Accepted Answer

A)  $2,900. 
B)  $2,950. 
C)  $3,040. 
D)  $3,033. 
A)  $2,900. 
B)  $2,950. 
C)  $3,040. 
D)  $3,033.

Question 15

In a period of falling prices, the inventory costing method that assigns a value to inventory that approximates current cost is

Accepted Answer

A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Specific identification 
A)  LIFO 
B)  FIFO 
C)  Weighted average 
D)  Specific identification

Question 16

Which of the following statements regarding inventory costing methods is true?

Accepted Answer

A)  The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory. 
B)  During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. 
C)  Internal Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. 
D)  In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial 
A)  The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory. 
B)  During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. 
C)  Internal Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. 
D)  In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial

Question 17

When the replacement cost of inventory drops below the cost recorded in the financial records, applying the lower of cost or market (LCM) rule causes:

Accepted Answer

A)  a decrease in cost of goods sold. 
B)  no change in net income, other things being equal. 
C)  a reduction in the book value of total assets. 
D)  an increase in net income. 
A)  a decrease in cost of goods sold. 
B)  no change in net income, other things being equal. 
C)  a reduction in the book value of total assets. 
D)  an increase in net income.

Question 18

If inventory is sold with terms of FOB destination, the goods belong to the seller until they reach their destination.

Accepted Answer

A) True 
 B)False

Question 19

On July 1,B. Darin Company sold merchandise costing $4,500 to S. Dee Company for $6,000, terms 2/10, n/30. Both companies use the perpetual inventory system. S. Dee Company pays the invoice on July 8 and takes the appropriate discount. What is the journal entry that S. Dee Company will make on July 8?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 20

Which of the following statements is true with regard to all inventory costing methods?

Accepted Answer

A)  The ending inventory balance and cost of goods sold move in the same direction. 
B)  The ending inventory balance and the cost of total assets move in the opposite direction. 
C)  The ending inventory balance and net income move in the same direction. 
D)  The ending inventory balance and net income move in the opposite direction. 
A)  The ending inventory balance and cost of goods sold move in the same direction. 
B)  The ending inventory balance and the cost of total assets move in the opposite direction. 
C)  The ending inventory balance and net income move in the same direction. 
D)  The ending inventory balance and net income move in the opposite direction.

If the company uses the FIFO method, what is the cost of its ending inventory?

Which of the following statement is true?

The specific identification method would probably be most appropriate for which of the following goods?

The understatement of beginning inventory balance causes cost of goods sold to be understated and net income to be understated.

Acme sells 300 units during this quarter. If Acme uses the LIFO method, what is its cost of goods sold for the quarter?

A company has beginning inventory of $128,400 and an ending inventory of $89,100. The company purchased $67,900 during the accounting period. Assuming no returns, calculate the goods available for sale and the cost of goods sold.

What is the journal entry to be recorded by

What is the amount of the gross profit?

The most commonly used inventory costing method in the U.S. is:

A $15,000 overstatement of the 2011 ending inventory was discovered after the financial statements for 2011 were prepared. How would that inventory error impact the 2011 financial statements?

When a company uses a perpetual inventory system, purchase returns will be recorded by:

If BetterBuy uses the weighted average method, its cost of goods sold will be:

In a period of falling prices, the inventory costing method that assigns a value to inventory that approximates current cost is

Which of the following statements regarding inventory costing methods is true?

When the replacement cost of inventory drops below the cost recorded in the financial records, applying the lower of cost or market (LCM) rule causes:

If inventory is sold with terms of FOB destination, the goods belong to the seller until they reach their destination.

Which of the following statements is true with regard to all inventory costing methods?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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Exam 7: Reporting and Interpreting Inventories and Cost of Goods Sold

If the company uses the FIFO method, what is the cost of its ending inventory?

Which of the following statement is true?

The specific identification method would probably be most appropriate for which of the following goods?

The understatement of beginning inventory balance causes cost of goods sold to be understated and net income to be understated.

Acme sells 300 units during this quarter. If Acme uses the LIFO method, what is its cost of goods sold for the quarter?

A company has beginning inventory of $128,400 and an ending inventory of $89,100. The company purchased $67,900 during the accounting period. Assuming no returns, calculate the goods available for sale and the cost of goods sold.

What is the journal entry to be recorded by

What is the amount of the gross profit?

The most commonly used inventory costing method in the U.S. is:

A $15,000 overstatement of the 2011 ending inventory was discovered after the financial statements for 2011 were prepared. How would that inventory error impact the 2011 financial statements?

When a company uses a perpetual inventory system, purchase returns will be recorded by:

If BetterBuy uses the weighted average method, its cost of goods sold will be:

In a period of falling prices, the inventory costing method that assigns a value to inventory that approximates current cost is

Which of the following statements regarding inventory costing methods is true?

When the replacement cost of inventory drops below the cost recorded in the financial records, applying the lower of cost or market (LCM) rule causes:

If inventory is sold with terms of FOB destination, the goods belong to the seller until they reach their destination.

Which of the following statements is true with regard to all inventory costing methods?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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