Question 1

An overstatement of ending inventory in one period results in

Accepted Answer

A) no effect on profit of the next period. 
B) an overstatement of profit of the next period. 
C) an understatement of profit of the next period. 
D) an overstatement of the ending inventory of the next period. 
A) no effect on profit of the next period. 
B) an overstatement of profit of the next period. 
C) an understatement of profit of the next period. 
D) an overstatement of the ending inventory of the next period.

Question 2

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

Accepted Answer

A) True 
 B)False

Question 3

To ensure the accuracy of the inventory during a physical inventory count,

Accepted Answer

A) the employee is required to count all items twice for the sake of verification. 
B) the items counted are compared to the inventory account balance. 
C) a second employee or auditor counts the inventory and compares the result to the count made by the first employee. 
D) pre-numbered inventory tags need not be used. 
A) the employee is required to count all items twice for the sake of verification. 
B) the items counted are compared to the inventory account balance. 
C) a second employee or auditor counts the inventory and compares the result to the count made by the first employee. 
D) pre-numbered inventory tags need not be used.

Question 4

Use the following information for questions 
The following information was available for Riley Limited at December 31, 2015:  
-Riley's days in inventory was

Accepted Answer

A) 40.6 days. 
B) 48.7 days. 
C) 60.8 days. 
D) 73.0 days. 
A) 40.6 days. 
B) 48.7 days. 
C) 60.8 days. 
D) 73.0 days.

Question 5

A company just starting in business purchased three merchandise inventory items at the following prices.March 2, $75; March 7, $80; and March 15, $90.If the company sold two units for $125 each on March 10 and March 20, and used the FIFO cost formula in a perpetual inventory system, the gross profit for March would be

Accepted Answer

A) $100. 
B) $95. 
C) $90. 
D) $75. 
A) $100. 
B) $95. 
C) $90. 
D) $75.

Question 6

If prices never changed, there would be no need for alternative inventory cost methods.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding inventory cost determination methods is correct?

Accepted Answer

A) A company may use more than one inventory cost determination method. 
B) A company should use the method that is easiest. 
C) A company must use the method that allows them to manage profit. 
D) A company may never change its inventory cost method once it has chosen it. 
A) A company may use more than one inventory cost determination method. 
B) A company should use the method that is easiest. 
C) A company must use the method that allows them to manage profit. 
D) A company may never change its inventory cost method once it has chosen it.

Question 8

In the average cost method used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

Accepted Answer

A) True 
 B)False

Question 9

An aircraft manufacturer would most likely have a

Accepted Answer

A) high inventory turnover. 
B) low profit margin. 
C) high volume. 
D) low inventory turnover. 
A) high inventory turnover. 
B) low profit margin. 
C) high volume. 
D) low inventory turnover.

Question 10

The factor which determines whether or not goods should be included in a physical count of inventory is

Accepted Answer

A) physical possession. 
B) ownership. 
C) management's judgement. 
D) whether or not the purchase price has been paid. 
A) physical possession. 
B) ownership. 
C) management's judgement. 
D) whether or not the purchase price has been paid.

Question 11

Use the following information for questions 
A company just starting business made the following four inventory purchases in June:   On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-Using the FIFO cost method, the amount of the cost of goods sold for June is

Accepted Answer

A) $645. 
B) $695. 
C) $1,650. 
D) $1,700. 
A) $645. 
B) $695. 
C) $1,650. 
D) $1,700.

Question 12

An error that understates the ending inventory will cause the cost of goods sold for the period to be understated.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost method in a perpetual inventory system.  
-The cost of goods sold for the July 9 sale was

Accepted Answer

A) $475. 
B) $480. 
C) $495. 
D) $500. 
A) $475. 
B) $480. 
C) $495. 
D) $500.

Question 14

Goods held on consignment are

Accepted Answer

A) never owned by the consignee. 
B) included in the consignee's ending inventory. 
C) kept for sale on the premises of the consignor. 
D) not included in anyone's ending inventory. 
A) never owned by the consignee. 
B) included in the consignee's ending inventory. 
C) kept for sale on the premises of the consignor. 
D) not included in anyone's ending inventory.

Question 15

Days in inventory is calculated by dividing 365 days by

Accepted Answer

A) average inventory. 
B) beginning inventory. 
C) ending inventory. 
D) the inventory turnover ratio. 
A) average inventory. 
B) beginning inventory. 
C) ending inventory. 
D) the inventory turnover ratio.

Question 16

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

Accepted Answer

A) debit to the Inventory account. 
B) debit to the Cost of Goods Sold account. 
C) credit to the Cost of Goods Sold account. 
D) credit to the Sales account. 
A) debit to the Inventory account. 
B) debit to the Cost of Goods Sold account. 
C) credit to the Cost of Goods Sold account. 
D) credit to the Sales account.

Question 17

Which of the following statements regarding inventories is correct?

Accepted Answer

A) FIFO assumes that the costs of the earliest goods acquired are the last to be sold. 
B) It is generally good business management to sell the most recently acquired goods first. 
C) Under FIFO, the ending inventory is based on the latest units purchased. 
D) FIFO seldom coincides with the actual physical flow of inventory. 
A) FIFO assumes that the costs of the earliest goods acquired are the last to be sold. 
B) It is generally good business management to sell the most recently acquired goods first. 
C) Under FIFO, the ending inventory is based on the latest units purchased. 
D) FIFO seldom coincides with the actual physical flow of inventory.

Question 18

An error that overstates the ending inventory will cause profit for the period to be understated.

Accepted Answer

A) True 
 B)False

Question 19

The method of inventory cost determination that best matches cost and revenues is FIFO.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

Accepted Answer

A) whether the method closely follows the physical flow of goods 
B) whether the method reports an inventory cost that approximates recent cost 
C) using the same method for inventory of similar nature and use 
D) all of the above. 
A) whether the method closely follows the physical flow of goods 
B) whether the method reports an inventory cost that approximates recent cost 
C) using the same method for inventory of similar nature and use 
D) all of the above.

An overstatement of ending inventory in one period results in

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

To ensure the accuracy of the inventory during a physical inventory count,

Use the following information for questions The following information was available for Riley Limited at December 31, 2015: -Riley's days in inventory was

If prices never changed, there would be no need for alternative inventory cost methods.

Which of the following statements regarding inventory cost determination methods is correct?

In the average cost method used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

An aircraft manufacturer would most likely have a

The factor which determines whether or not goods should be included in a physical count of inventory is

An error that understates the ending inventory will cause the cost of goods sold for the period to be understated.

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -The cost of goods sold for the July 9 sale was

Goods held on consignment are

Days in inventory is calculated by dividing 365 days by

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

Which of the following statements regarding inventories is correct?

An error that overstates the ending inventory will cause profit for the period to be understated.

The method of inventory cost determination that best matches cost and revenues is FIFO.

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

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Exam 6: Reporting and Analyzing Inventory

An overstatement of ending inventory in one period results in

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

To ensure the accuracy of the inventory during a physical inventory count,

Use the following information for questions The following information was available for Riley Limited at December 31, 2015: -Riley's days in inventory was

If prices never changed, there would be no need for alternative inventory cost methods.

Which of the following statements regarding inventory cost determination methods is correct?

In the average cost method used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

An aircraft manufacturer would most likely have a

The factor which determines whether or not goods should be included in a physical count of inventory is

An error that understates the ending inventory will cause the cost of goods sold for the period to be understated.

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -The cost of goods sold for the July 9 sale was

Goods held on consignment are

Days in inventory is calculated by dividing 365 days by

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

Which of the following statements regarding inventories is correct?

An error that overstates the ending inventory will cause profit for the period to be understated.

The method of inventory cost determination that best matches cost and revenues is FIFO.

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters