Question 1

An EXCEPTION to the general rule that costs should be charged to expense in the period incurred is

Accepted Answer

A) factory overhead costs incurred on a product manufactured but not sold during the current accounting period. 
B) interest costs for financing of inventories that are routinely manufactured in large quantities on a repetitive basis. 
C) general and administrative fixed costs incurred in connection with the purchase of inventory. 
D) sales commission and salary costs incurred in connection with the sale of inventory. 
A) factory overhead costs incurred on a product manufactured but not sold during the current accounting period. 
B) interest costs for financing of inventories that are routinely manufactured in large quantities on a repetitive basis. 
C) general and administrative fixed costs incurred in connection with the purchase of inventory. 
D) sales commission and salary costs incurred in connection with the sale of inventory. A

Question 2

In a periodic inventory system, if the beginning inventory is overstated

Accepted Answer

A) net income is understated. 
B) working capital is understated. 
C) the current ratio is overstated. 
D) cost of goods sold is understated. 
A) net income is understated. 
B) working capital is understated. 
C) the current ratio is overstated. 
D) cost of goods sold is understated. A

Question 3

Use the following information for questions.
Giselle Ltd.is a calendar-year corporation.Its financial statements for the years 2018 and 2017 contained errors as follows:  
-Assume that no correcting entries were made at December 31, 2017, or December 31, 2018 and that no additional errors occurred in 2016.Ignoring income taxes, by how much will working capital, at December 31, 2016 be overstated or understated?

Accepted Answer

A) $0 
B) $4,000 overstated 
C) $4,000 understated 
D) $6,000 understated 
A) $0 
B) $4,000 overstated 
C) $4,000 understated 
D) $6,000 understated A

Question 4

The use of a "replacement cost" definition of "market" is based on the assumption that

Accepted Answer

A) a decline in an item's replacement cost results in a decline in its selling price. 
B) prices will fall in the same proportion as input costs fall. 
C) replacement cost is appropriate for all situations. 
D) using "net realizable value less a normal profit margin" will arbitrarily shift profits from one period to another. 
A) a decline in an item's replacement cost results in a decline in its selling price. 
B) prices will fall in the same proportion as input costs fall. 
C) replacement cost is appropriate for all situations. 
D) using "net realizable value less a normal profit margin" will arbitrarily shift profits from one period to another.

Question 5

Total merchandise available for sale is $119,000 at cost and $148,000 at retail.Net markdowns are $10,000 and sales are $50,000.The cost-to-retail ratio is

Accepted Answer

A) 80%. 
B) 75%. 
C) 60%. 
D) 63%. 
A) 80%. 
B) 75%. 
C) 60%. 
D) 63%.

Question 6

The inventory turnover ratio is calculated by dividing the cost of goods sold by

Accepted Answer

A) beginning inventory. 
B) ending inventory. 
C) average inventory. 
D) number of days in the year. 
A) beginning inventory. 
B) ending inventory. 
C) average inventory. 
D) number of days in the year.

Question 7

Use the following information for questions.
Ryerson Corp.records purchases at net amounts.On May 5, Ryerson purchased merchandise on account costing $6,000 (gross), terms 2/10, n/30.Ryerson returned $400 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid.
-The amount to be recorded as a purchase return is

Accepted Answer

A) $408. 
B) $400. 
C) $392. 
D) $360. 
A) $408. 
B) $400. 
C) $392. 
D) $360.

Question 8

NOT using the net method because of difficulties that may arise is a good example of applying

Accepted Answer

A) relevance. 
B) the cost/benefit constraint. 
C) representational faithfulness. 
D) the fair value principle. 
A) relevance. 
B) the cost/benefit constraint. 
C) representational faithfulness. 
D) the fair value principle.

Question 9

Use the following information for questions.
Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101:  
-Assuming Tehran uses the perpetual inventory system, the entry to account for the March 1 purchase is

Accepted Answer

A) debit Inventory and credit Accounts Payable, $875. 
B) debit Purchases and credit Accounts Payable, $875. 
C) debit Accounts Payable and credit Purchases, $875. 
D) debit Accounts Payable and credit Inventory, $875. 
A) debit Inventory and credit Accounts Payable, $875. 
B) debit Purchases and credit Accounts Payable, $875. 
C) debit Accounts Payable and credit Purchases, $875. 
D) debit Accounts Payable and credit Inventory, $875.

Question 10

Which of the following does NOT correctly describe the FIFO cost formula?

Accepted Answer

A) This method assumes that the oldest inventory costs are the first costs recorded for cost of goods sold. 
B) This method assumes that most current inventory costs are the first costs recorded for cost of goods sold. 
C) This method approximates the physical flow of most types of goods. 
D) This method is permitted under both ASPE and IFRS. 
A) This method assumes that the oldest inventory costs are the first costs recorded for cost of goods sold. 
B) This method assumes that most current inventory costs are the first costs recorded for cost of goods sold. 
C) This method approximates the physical flow of most types of goods. 
D) This method is permitted under both ASPE and IFRS.

Question 11

Which of the following is a characteristic of a perpetual inventory system?

Accepted Answer

A) Inventory purchases are debited to a Purchases account. 
B) Inventory records arenot kept for every item. 
C) Cost of goods sold is recorded with each sale. 
D) Cost of goods sold is determined as the amount of purchases less the change in inventory. 
A) Inventory purchases are debited to a Purchases account. 
B) Inventory records arenot kept for every item. 
C) Cost of goods sold is recorded with each sale. 
D) Cost of goods sold is determined as the amount of purchases less the change in inventory.

Question 12

Which of the following is NOT a premise upon which the gross profit method of estimating inventory is based?

Accepted Answer

A) Beginning inventory plus purchases equals cost of goods available for sale. 
B) The gross profit must be equal to the contribution margin on goods sold. 
C) Goods not included in cost of goods sold must be on hand in ending inventory. 
D) When an estimate of cost of goods sold is deducted from cost of goods available for sale, the result is an estimate of ending inventory. 
A) Beginning inventory plus purchases equals cost of goods available for sale. 
B) The gross profit must be equal to the contribution margin on goods sold. 
C) Goods not included in cost of goods sold must be on hand in ending inventory. 
D) When an estimate of cost of goods sold is deducted from cost of goods available for sale, the result is an estimate of ending inventory.

Question 13

When substantially all risks and rewards of ownership have passed to the purchaser, the purchaser then recognizes an asset.For this recognition, which of the following statements is correct?

Accepted Answer

A) The purchaser must have both legal title and possession of the goods. 
B) Legal title and possession do not always pass to the purchaser at the same time. 
C) In practice, recording inventory purchases often takes place when they leave the seller's place of business. 
D) The purchaser must have possession of goods before it has legal title. 
A) The purchaser must have both legal title and possession of the goods. 
B) Legal title and possession do not always pass to the purchaser at the same time. 
C) In practice, recording inventory purchases often takes place when they leave the seller's place of business. 
D) The purchaser must have possession of goods before it has legal title.

Question 14

Why are inventories included in the computation of net income?

Accepted Answer

A) to determine cost of goods sold 
B) to determine sales revenue 
C) to determine merchandise returns 
D) Inventories are not included in the computation of net income. 
A) to determine cost of goods sold 
B) to determine sales revenue 
C) to determine merchandise returns 
D) Inventories are not included in the computation of net income.

Question 15

On January 1, 2017, the merchandise inventory of Shoesmith Corp.was $600,000.During 2017, Shoesmith purchased $1,150,000 of merchandise and recorded sales of $1,350,000.The gross profit rate on these sales was 35%.What is the estimated dollar value of the inventory at December 31?

Accepted Answer

A) $877,500 
B) $872,500 
C) $562,500 
D) $472,500 
A) $877,500 
B) $872,500 
C) $562,500 
D) $472,500

Question 16

Use the following information for questions.
During 2017 Ebert Corp.transferred inventory to Siskel Corp.and agreed to repurchase the merchandise early in 2018.Siskel then used the inventory as collateral to borrow from Southern Bank, remitting the proceeds to Ebert.In 2018 when Ebert repurchased the inventory, Siskel used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2017 statement of financial position date?

Accepted Answer

A) Siskel Corp. 
B) Ebert Corp. 
C) Southern Bank 
D) Siskel Corp., with Ebert Corp.making appropriate note disclosure of the transaction 
A) Siskel Corp. 
B) Ebert Corp. 
C) Southern Bank 
D) Siskel Corp., with Ebert Corp.making appropriate note disclosure of the transaction

Question 17

The impact of the retail inventory method upon gross profit can be described as

Accepted Answer

A) use of the retail method increases gross profit. 
B) use of the retail inventory method does not impact gross profit. 
C) use of the retail method decreases gross profit. 
D) use of the retail method has an averaging effect for varying rates of gross profit. 
A) use of the retail method increases gross profit. 
B) use of the retail inventory method does not impact gross profit. 
C) use of the retail method decreases gross profit. 
D) use of the retail method has an averaging effect for varying rates of gross profit.

Question 18

When the conventional retail inventory method is used, markdowns are commonly ignored in the calculation of the cost-to-retail ratio because

Accepted Answer

A) there may be no markdowns in a given year. 
B) this tends to give a better approximation of the lower of cost and market. 
C) markups are also ignored. 
D) this tends to result in showing a normal profit margin in a period when no markdown goods have been sold. 
A) there may be no markdowns in a given year. 
B) this tends to give a better approximation of the lower of cost and market. 
C) markups are also ignored. 
D) this tends to result in showing a normal profit margin in a period when no markdown goods have been sold.

Question 19

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Accepted Answer

A) An overstatement of ending inventory will result in an understatement of income. 
B) An overstatement of ending inventory will result in an overstatement of income. 
C) An overstatement of beginning inventory will result in an understatement of income. 
D) An understatement of beginning inventory will cause cost of goods sold to be understated. 
A) An overstatement of ending inventory will result in an understatement of income. 
B) An overstatement of ending inventory will result in an overstatement of income. 
C) An overstatement of beginning inventory will result in an understatement of income. 
D) An understatement of beginning inventory will cause cost of goods sold to be understated.

Question 20

Arizona Inc.uses the perpetual inventory system, and recorded the following data pertaining to raw material X during January 2017:   The moving-average unit cost of raw material X inventory at January 31, 2017 is

Accepted Answer

A) $4.70. 
B) $4.50. 
C) $4.43. 
D) $4.35. 
A) $4.70. 
B) $4.50. 
C) $4.43. 
D) $4.35.

An EXCEPTION to the general rule that costs should be charged to expense in the period incurred is

In a periodic inventory system, if the beginning inventory is overstated

The use of a "replacement cost" definition of "market" is based on the assumption that

Total merchandise available for sale is $119,000 at cost and $148,000 at retail.Net markdowns are $10,000 and sales are $50,000.The cost-to-retail ratio is

The inventory turnover ratio is calculated by dividing the cost of goods sold by

NOT using the net method because of difficulties that may arise is a good example of applying

Use the following information for questions. Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: -Assuming Tehran uses the perpetual inventory system, the entry to account for the March 1 purchase is

Which of the following does NOT correctly describe the FIFO cost formula?

Which of the following is a characteristic of a perpetual inventory system?

Which of the following is NOT a premise upon which the gross profit method of estimating inventory is based?

When substantially all risks and rewards of ownership have passed to the purchaser, the purchaser then recognizes an asset.For this recognition, which of the following statements is correct?

Why are inventories included in the computation of net income?

On January 1, 2017, the merchandise inventory of Shoesmith Corp.was $600,000.During 2017, Shoesmith purchased $1,150,000 of merchandise and recorded sales of $1,350,000.The gross profit rate on these sales was 35%.What is the estimated dollar value of the inventory at December 31?

The impact of the retail inventory method upon gross profit can be described as

When the conventional retail inventory method is used, markdowns are commonly ignored in the calculation of the cost-to-retail ratio because

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Arizona Inc.uses the perpetual inventory system, and recorded the following data pertaining to raw material X during January 2017: The moving-average unit cost of raw material X inventory at January 31, 2017 is

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Complex Financial Instruments

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters

Exam 8: Inventory

An EXCEPTION to the general rule that costs should be charged to expense in the period incurred is

In a periodic inventory system, if the beginning inventory is overstated

The use of a "replacement cost" definition of "market" is based on the assumption that

Total merchandise available for sale is $119,000 at cost and $148,000 at retail.Net markdowns are $10,000 and sales are $50,000.The cost-to-retail ratio is

The inventory turnover ratio is calculated by dividing the cost of goods sold by

NOT using the net method because of difficulties that may arise is a good example of applying

Use the following information for questions. Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: -Assuming Tehran uses the perpetual inventory system, the entry to account for the March 1 purchase is

Which of the following does NOT correctly describe the FIFO cost formula?

Which of the following is a characteristic of a perpetual inventory system?

Which of the following is NOT a premise upon which the gross profit method of estimating inventory is based?

When substantially all risks and rewards of ownership have passed to the purchaser, the purchaser then recognizes an asset.For this recognition, which of the following statements is correct?

Why are inventories included in the computation of net income?

On January 1, 2017, the merchandise inventory of Shoesmith Corp.was $600,000.During 2017, Shoesmith purchased $1,150,000 of merchandise and recorded sales of $1,350,000.The gross profit rate on these sales was 35%.What is the estimated dollar value of the inventory at December 31?

The impact of the retail inventory method upon gross profit can be described as

When the conventional retail inventory method is used, markdowns are commonly ignored in the calculation of the cost-to-retail ratio because

All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?

Arizona Inc.uses the perpetual inventory system, and recorded the following data pertaining to raw material X during January 2017: The moving-average unit cost of raw material X inventory at January 31, 2017 is

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Complex Financial Instruments

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters