Question 1

FIFO is the inventory costing method that follows the physical flow of the goods.

Accepted Answer

A) True 
 B)False

Question 2

The lower of cost or market is a method of inventory valuation.

Accepted Answer

A) True 
 B)False

Question 3

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

Accepted Answer

The answer of During August, the first month of the...

Question 4

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

Accepted Answer

A) True 
 B)False

Question 5

Beginning inventory, purchases, and sales data for tennis rackets are as follows:? $$\begin{array} { | r | r | l | r | r | r | r | } 
\hline & \text { Apr. } 3 & \text { Inventory } & & 12 \text { units } & @ & \$ 45 \
\hline &11 & \text { Purchase } & & 13 \text { units } & @ & \$ 47 \
\hline &14 & \text { Sale } & & 18 \text { units } & & \
\hline &21 & \text { Purchase } & & 9 \text { units } & @ & \$ 60 \
\hline &25 & \text { Sale } & & 10 \text { units } & & \
\hline
\end{array}$$ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

Accepted Answer

The answer of Beginning inventory, purchases, and sales data for...

Question 6

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

What is the amount of cost of merchandise sold for the year according to the average cost method?

Accepted Answer

A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250 
A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250

Question 8

​Excess inventory results in all of the following except

Accepted Answer

A)  ​tied-up funds that could be used to improve operations 
B)  ​lost sales 
C)  ​increased storage expense 
D)  ​increased risk of loss due to damage 
A)  ​tied-up funds that could be used to improve operations 
B)  ​lost sales 
C)  ​increased storage expense 
D)  ​increased risk of loss due to damage

Question 9

Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you were running a clothing store, name three specific controls you would implement to guard inventory from theft.

Accepted Answer

Answers will vary but may include ink ta

Question 10

Match each situation to its impact (a-c) on the current year's net income.
-A consignor included merchandise in the hands of the consignee in ending inventory.

Accepted Answer

A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income. 
A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income.

Question 11

The units of an item available for sale during the year were as follows:? $$\begin{array} { | l | l | l | } 
\hline \text { January } 11 & \text { Inventory } & 60 \text { units } @ \$ 145 \
\hline \text { February } 27 & \text { Purchase } & 90 \text { units } @ \$ 150 \
\hline \text { November } 21 & \text { Furchase } & 75 \text { units } @ \$ 154 \
\hline
\end{array}$$ There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by 
(a) the first-in, first-out method, 
(b) the last-in, first-out method, and 
(c) the average cost method. Show your work.

Accepted Answer

(a) @#LAT-DLM& (48 units @#LAT-DLM&
(b)

Question 12

Match each description to the appropriate cost flow assumption (a-c).
-Widely used for tax purposes

Accepted Answer

A) FIFO 
B) LIFO 
C) Weighted average 
A) FIFO 
B) LIFO 
C) Weighted average

Question 13

If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is

Accepted Answer

A)  $15 
B)  $60 
C)  $75 
D)  $135 
A)  $15 
B)  $60 
C)  $75 
D)  $135

Question 14

The weighted average inventory cost flow method is the least used of the inventory costing methods.

Accepted Answer

A) True 
 B)False

Question 15

All of the following are reasons to use an estimated method of costing inventory except​

Accepted Answer

A)  perpetual inventory records are not maintained 
B)  purchase records are not maintained 
C)  a disaster has destroyed the inventory records and the inventory 
D)  interim financial statements are required but physical inventory is only taken at the end of the financial accounting period 
A)  perpetual inventory records are not maintained 
B)  purchase records are not maintained 
C)  a disaster has destroyed the inventory records and the inventory 
D)  interim financial statements are required but physical inventory is only taken at the end of the financial accounting period

Question 16

Match each description to the appropriate document used for inventory control (a-c).
-Authorizes the purchase of inventory from an approved vendor

Accepted Answer

A) Receiving report 
B) Vendor's invoice 
C) Purchase order 
A) Receiving report 
B) Vendor's invoice 
C) Purchase order

Question 17

Three identical units of merchandise were purchased during July, as follows:? $$\begin{array} { | l | c | c | r | } 
\hline \text { Date } & \text { Product Basic H } & \text { Units } & { \text { Cost } } \
\hline \text { July } 3 & \text { Purchase } & 1 & \$ 35 \
\hline 10 & \text { Purchase } & 1 & 36 \
\hline 24 & \text { Purchase } & 1 & 37 \
\hline \text { Total } & & \mathbf { 3 } & \mathbf { \$ 1 0 8 } \
\hline & & & \
\hline & \text { Average cost per unit } & & \$ 36 \
\hline
\end{array}$$ Assume one unit sells on July 28 for $45.Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using the 
(a) first-in, first-out, 
(b) last-in, first-out, and 
(c) average cost flow methods.

Accepted Answer

\[\begin{array} { | l | c | c | c |} 
\h

Question 18

If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. $$\begin{array} { | l | c | c | c | } 
\hline  { \text { Item } } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \
\hline \text { Product C } & 420 & \$ 6 & \$ 5 \
\hline \text { Froduct D } & 370 & 12 & 14 \
\hline
\end{array}$$

Accepted Answer

A)  $6,960 
B)  $7,700 
C)  $6,540 
D)  $7,280 
A)  $6,960 
B)  $7,700 
C)  $6,540 
D)  $7,280

Question 19

For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

Accepted Answer

A)  8.7 
B)  7.8 
C)  8.3 
D)  44.0 
A)  8.7 
B)  7.8 
C)  8.3 
D)  44.0

Question 20

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Accepted Answer

A) True 
 B)False

Exam 7: Inventories

FIFO is the inventory costing method that follows the physical flow of the goods.

The lower of cost or market is a method of inventory valuation.

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

What is the amount of cost of merchandise sold for the year according to the average cost method?

​Excess inventory results in all of the following except

Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you were running a clothing store, name three specific controls you would implement to guard inventory from theft.

Match each situation to its impact (a-c) on the current year's net income. -A consignor included merchandise in the hands of the consignee in ending inventory.

Match each description to the appropriate cost flow assumption (a-c). -Widely used for tax purposes

If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is

The weighted average inventory cost flow method is the least used of the inventory costing methods.

All of the following are reasons to use an estimated method of costing inventory except​

Match each description to the appropriate document used for inventory control (a-c). -Authorizes the purchase of inventory from an approved vendor

For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Filters

Excess inventory results in all of the following except

All of the following are reasons to use an estimated method of costing inventory except