Question 1

If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is

Accepted Answer

A) net realizable value. 
B) original cost. 
C) market value. 
D) net realizable value less a normal profit margin. 
A) net realizable value. 
B) original cost. 
C) market value. 
D) net realizable value less a normal profit margin.

Question 2

In no case can "net realizable value" (in the lower of cost and net realizable value rule)be more than

Accepted Answer

A) estimated selling price in the ordinary course of business. 
B) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. 
C) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for a normal profit margin. 
D) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for a normal profit margin, and an adequate reserve for possible future losses. 
A) estimated selling price in the ordinary course of business. 
B) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. 
C) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for a normal profit margin. 
D) estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for a normal profit margin, and an adequate reserve for possible future losses.

Question 3

When using a periodic inventory system,

Accepted Answer

A) a Purchases account is not used. 
B) a Cost of Goods Sold account is used. 
C) two entries are required to record a sale. 
D) a Cost of Goods Sold account is not used. 
A) a Purchases account is not used. 
B) a Cost of Goods Sold account is used. 
C) two entries are required to record a sale. 
D) a Cost of Goods Sold account is not used.

Question 4

The average days to sell inventory ratio is calculated as

Accepted Answer

A) average inventory divided by inventory turnover. 
B) inventory turnover divided by cost of goods sold. 
C) inventory turnover divided by 365 days. 
D) 365 days divided by inventory turnover. 
A) average inventory divided by inventory turnover. 
B) inventory turnover divided by cost of goods sold. 
C) inventory turnover divided by 365 days. 
D) 365 days divided by inventory turnover.

Question 5

Which of the following best describes the concept of product costs?

Accepted Answer

A) They are costs that are "attached" to inventory. 
B) They are costs that are usually expenses. 
C) They usually don't include freight charges. 
D) They usually don't include conversion costs. 
A) They are costs that are "attached" to inventory. 
B) They are costs that are usually expenses. 
C) They usually don't include freight charges. 
D) They usually don't include conversion costs.

Question 6

Which of the following is correct?

Accepted Answer

A) Goods on consignment are included in the consignee's inventory. 
B) Goods on consignment are included in the consignor's inventory. 
C) The consignee essentially has the risks and rewards of ovwnership. 
D) Inventory on consignment is always shown in a separate account. 
A) Goods on consignment are included in the consignee's inventory. 
B) Goods on consignment are included in the consignor's inventory. 
C) The consignee essentially has the risks and rewards of ovwnership. 
D) Inventory on consignment is always shown in a separate account.

Question 7

Use the following information for questions.
Tang Inc.uses the retail inventory method.The following information is available for the current year:  
-The approximate cost of the ending inventory by the conventional retail method is

Accepted Answer

A) $153,720. 
B) $147,000. 
C) $143,850. 
D) $142,380. 
A) $153,720. 
B) $147,000. 
C) $143,850. 
D) $142,380.

Question 8

When inventory declines in value below original (historical)cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?

Accepted Answer

A) net realizable value 
B) selling price 
C) historical cost 
D) net realizable value reduced by a normal profit margin 
A) net realizable value 
B) selling price 
C) historical cost 
D) net realizable value reduced by a normal profit margin

Question 9

Which of the following does NOT correctly describe a perpetual inventory system?

Accepted Answer

A) Cost of goods sold is calculated every time a sale is made. 
B) Assuming shrinkage of zero, inventory and cost of goods sold do not have to be updated at the end of the period. 
C) The use of this system eliminates the requirement for an annual physical inventory count. 
D) Assuming a FIFO cost flow, cost of goods sold would equal that calculated by the periodic system. 
A) Cost of goods sold is calculated every time a sale is made. 
B) Assuming shrinkage of zero, inventory and cost of goods sold do not have to be updated at the end of the period. 
C) The use of this system eliminates the requirement for an annual physical inventory count. 
D) Assuming a FIFO cost flow, cost of goods sold would equal that calculated by the periodic system.

Question 10

Rounded to the nearest whole percent, a markup of 35% on cost is equivalent to what percentage of gross profit on selling price?

Accepted Answer

A) 26% 
B) 29% 
C) 40% 
D) 60% 
A) 26% 
B) 29% 
C) 40% 
D) 60%

Question 11

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

Accepted Answer

A) invoice price plus any purchase discount lost. 
B) invoice price less the purchase discount taken. 
C) invoice price less the purchase discount allowable whether taken or not. 
D) invoice price. 
A) invoice price plus any purchase discount lost. 
B) invoice price less the purchase discount taken. 
C) invoice price less the purchase discount allowable whether taken or not. 
D) invoice price.

Question 12

All else being equal, which of the following statements is correct for a company that uses the FIFO costing formula with a perpetual inventory system (compared to a periodic system)?

Accepted Answer

A) The value of the ending inventory would be higher under a periodic system. 
B) The value of the ending inventory would be lower under a periodic system. 
C) The value of the ending inventory would be the same under both systems. 
D) The periodic system would not require any additional entries at the end of the period. 
A) The value of the ending inventory would be higher under a periodic system. 
B) The value of the ending inventory would be lower under a periodic system. 
C) The value of the ending inventory would be the same under both systems. 
D) The periodic system would not require any additional entries at the end of the period.

Question 13

The gross profit method is normally used

Accepted Answer

A) for insurance purposes, in cases where inventory has been destroyed. 
B) for all of these (all of these are exmaples of how the gross profit method is used). 
C) to provide a rough check on the accuracy of a physical inventory count. 
D) by auditors to estimate a company's inventory for quarterly reporting. 
A) for insurance purposes, in cases where inventory has been destroyed. 
B) for all of these (all of these are exmaples of how the gross profit method is used). 
C) to provide a rough check on the accuracy of a physical inventory count. 
D) by auditors to estimate a company's inventory for quarterly reporting.

Question 14

Certain industries allow full or partial refunds for returned inventory.In such cases, which of the following is INCORRECT?

Accepted Answer

A) The vendor retains the risks and rewards for those items expected to be returned. 
B) If returns can be reasonably predicted, then the goods may be considered sold by the vendor and removed from inventory. 
C) If returns cannot be predicted, the sale is not recognized and the goods are not removed from inventory. 
D) If returns cannot be predicted, the sale is still recognized but the goods are not removed from inventory. 
A) The vendor retains the risks and rewards for those items expected to be returned. 
B) If returns can be reasonably predicted, then the goods may be considered sold by the vendor and removed from inventory. 
C) If returns cannot be predicted, the sale is not recognized and the goods are not removed from inventory. 
D) If returns cannot be predicted, the sale is still recognized but the goods are not removed from inventory.

Question 15

An estimated loss on purchase commitments is reported

Accepted Answer

A) under other expenses and losses. 
B) as a deduction from purchases. 
C) as a current liability. 
D) as an extraordinary item. 
A) under other expenses and losses. 
B) as a deduction from purchases. 
C) as a current liability. 
D) as an extraordinary item.

Question 16

In a periodic inventory system, if ending inventory is understated,

Accepted Answer

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

Question 17

Which of the following does NOT correctly describe a periodic inventory system?

Accepted Answer

A) Cost of goods sold is calculated every time a sale is made. 
B) Cost of goods sold is a residual amount. 
C) Assuming a FIFO cost flow, cost of goods sold would equal those that calculated by the perpetual system. 
D) Inventory and cost of goods sold must be updated at the end of the period. 
A) Cost of goods sold is calculated every time a sale is made. 
B) Cost of goods sold is a residual amount. 
C) Assuming a FIFO cost flow, cost of goods sold would equal those that calculated by the perpetual system. 
D) Inventory and cost of goods sold must be updated at the end of the period.

Question 18

Under IFRS, bearer plants used to grow produce including tea bushes, grape vines, and rubber trees are accounted for

Accepted Answer

A) as agricultural assets, in accordance with IAS41. 
B) using the cost or revaluation method. 
C) as inventory, at cost, in accordance with IAS2. 
D) as inventory, at fair value less costs to sell, in accordance with IAS2. 
A) as agricultural assets, in accordance with IAS41. 
B) using the cost or revaluation method. 
C) as inventory, at cost, in accordance with IAS2. 
D) as inventory, at fair value less costs to sell, in accordance with IAS2.

Question 19

In its first year of operations as a retailer, Dudley Ltd.reported a gross profit of $121,000, total purchases of $150,000, and an ending inventory of $60,000.Therefore, Dudley's sales in its first year must have been

Accepted Answer

A) $61,000. 
B) $90,000. 
C) $210,000. 
D) $211,000. 
A) $61,000. 
B) $90,000. 
C) $210,000. 
D) $211,000.

Question 20

Lower of cost and net realizable value

Accepted Answer

A) is most conservative if applied to the total inventory. 
B) is most conservative if applied to major categories of inventory. 
C) is most conservative if applied to individual items of inventory. 
D) must be applied to major categories for income tax purposes. 
A) is most conservative if applied to the total inventory. 
B) is most conservative if applied to major categories of inventory. 
C) is most conservative if applied to individual items of inventory. 
D) must be applied to major categories for income tax purposes.

Exam 8: Inventory

If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is

In no case can "net realizable value" (in the lower of cost and net realizable value rule)be more than

When using a periodic inventory system,

The average days to sell inventory ratio is calculated as

Which of the following best describes the concept of product costs?

Which of the following is correct?

Use the following information for questions. Tang Inc.uses the retail inventory method.The following information is available for the current year: -The approximate cost of the ending inventory by the conventional retail method is

When inventory declines in value below original (historical)cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?

Which of the following does NOT correctly describe a perpetual inventory system?

Rounded to the nearest whole percent, a markup of 35% on cost is equivalent to what percentage of gross profit on selling price?

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

All else being equal, which of the following statements is correct for a company that uses the FIFO costing formula with a perpetual inventory system (compared to a periodic system)?

The gross profit method is normally used

Certain industries allow full or partial refunds for returned inventory.In such cases, which of the following is INCORRECT?

An estimated loss on purchase commitments is reported

In a periodic inventory system, if ending inventory is understated,

Which of the following does NOT correctly describe a periodic inventory system?

Under IFRS, bearer plants used to grow produce including tea bushes, grape vines, and rubber trees are accounted for

In its first year of operations as a retailer, Dudley Ltd.reported a gross profit of $121,000, total purchases of $150,000, and an ending inventory of $60,000.Therefore, Dudley's sales in its first year must have been

Lower of cost and net realizable value

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

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