Question 1

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Accepted Answer

A) True 
 B)False

Question 2

Match each description to the appropriate cost flow assumption (a-c).
-Rarely used with a perpetual inventory system

Accepted Answer

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

Question 3

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Accepted Answer

A) True 
 B)False

Question 4

Beginning inventory and purchases and sales data for T-shirts are as follows:? $\begin{array}{rrllll}
Apr.&3 & \text { Inventory } & 24 \text { units } & @ & \$ 10 \
&11 & \text { Purchase } & 26 \text { units } & @ & \$ 12 \
&14 & \text { Sale } & 36 \text { units } & & \
&21 & \text { Purchase } & 18 \text { units } & @ & \$ 15 \
&25 & \text { Sale } & 20 \text { units } & &
\end{array}$ Assuming the business maintains a periodic inventory system, calculate the cost of merchandise sold and ending inventory under the following assumptions: 
a. FIFO
b. LIFO
c. Average cost (round cost of merchandise sold and ending inventory to the nearest dollar)

Accepted Answer

a. FIFO?

Question 5

Match each description to the appropriate document used for inventory control (a-c).
-Establishes an initial record of the receipt of inventory

Accepted Answer

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

Question 6

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

Accepted Answer

A) True 
 B)False

Question 7

If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on owner's equity?

Accepted Answer

A)  understated 
B)  overstated 
C)  correctly stated 
D)  None of these choices 
A)  understated 
B)  overstated 
C)  correctly stated 
D)  None of these choices

Question 8

Assume that three identical units of merchandise are purchased during October, as follows:?? $$\begin{array} { | l | c | c | c | c | } 
\hline & & & \text { Units } & \text { Cost } \
\hline \text { Oct. } & 5 & \text { Purchase } & 1 & \$ 5 \
\hline & 12 & \text { Purchase } & 1 & 13 \
\hline  & 28 & \text { Purchase } & \underline { 1 } & \underline { 15 } \
\hline \text { Total }&&&\underline{3}&\underline{\$33}\
\hline
\end{array}$$ Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross profit, and ending inventory under the FIFO method.

Accepted Answer

\[\begin{array} { | l | c | } 
\hline &

Question 9

Applying the lower of cost or market to each item of inventory, what should the total inventory value be for the following items?​ $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Item } & \begin{array} { c } 
\text { Inventory } \
\text { Quantity }
\end{array} & \begin{array} { c } 
\text { Cost per } \
\text { Unit }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { value per } \
\text { Unit }
\end{array} & \begin{array} { c } 
\text { T otal } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Market }
\end{array} \
\hline \text { A } & 300 & \$ 15.00 & \$ 14.50 & \$ 4,500 & \$ 4,350 \
\hline \text { B } & 200 & 14.00 & 15.00 & 2,800 & 3,000 \
\hline \text { C } & 100 & 17.00 & 17.50 & 1,700 & 1,750 \
\hline
\end{array}$$

Accepted Answer

The answer of Applying the lower of cost or market...

Question 10

Inventory turnover measures the length of time it takes to acquire, sell, and replace the inventory.

Accepted Answer

A) True 
 B)False

Question 11

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Accepted Answer

A) True 
 B)False

Question 12

The units of Manganese Plus available for sale during the year were as follows:? $$\begin{array} { l c l l l l } 
\text { Mar. } & 1 & \text { Inventory } & 16 \text { units } & @ \$ 30 & \$ 480 \
\text { June } & 16 & \text { Purchase } & 30 \text { units } & @ \$ 35 & 1,050 \
\text { Nov. } & 28 & \text { Purchase } & \underline { 45 } \text { units } & @ \$ 39 & \underline { 1,755 } \
& & & \underline { { \mathbf { 9 1 } } \text { units } } & & \underline { \mathbf { \$ 3 , 2 8 5 } }
\end{array}$$ There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.

Accepted Answer

FIFO cost of merchandise sold

Question 13

Ending inventory is made up of the oldest purchases when a company uses

Accepted Answer

A)  first-in, first-out 
B)  last-in, first-out 
C)  average cost 
D)  retail method 
A)  first-in, first-out 
B)  last-in, first-out 
C)  average cost 
D)  retail method

Question 14

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account:? $$\begin{array} { r l l } 
\text { June } 1 & \text { Balance } & 25 \text { units at } \$ 60 \
6 & \text { Sale } & 20 \text { units } \
8 & \text { Purchase } & 20 \text { units at } \$ 61 \
16 & \text { Sale } & 10 \text { units } \
20 & \text { Purchase } & 20 \text { units at } \$ 62 \
23 & \text { Sale } & 25 \text { units } \
30 & \text { Purchase } & 15 \text { units at } \$ 63
\end{array}$$ Calculate the cost of the ending inventory at June 30, using 
(a) the first-in, first-out 
(FIFO) method and 
(b) the last-in, first-out 
(LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory.

Accepted Answer

\[\begin{array}{l}
\begin{array} { r l r

Question 15

The beginning inventory and purchases of an item for the period were as follows:? $\begin{array}{ll}
\text { Beginning inventory } & 6 \text { units at } \$ 70 \text { each } \
\text { First purchase } & 10 \text { units at } \$ 75 \text { each } \
\text { Second purchase } & 18 \text { units at } \$ 80 \text { each } \
\text { Third purchase } & 10 \text { units at } \$ 90 \text { each }
\end{array}$ The company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine the cost of the 15 units in the inventory by each of the following methods, presenting details of your computations: 
(a) first-in, first-out; 
(b) last-in, first-out; 
(c) average cost. Do not round your intermediate calculations. Round your final answer to two decimal places.

Accepted Answer

None

Question 16

Control of inventory should begin as soon as the inventory is ordered. Which of the following internal control steps is not done to meet this goal?

Accepted Answer

A)  check the invoice to the receiving report 
B)  check the invoice to the purchase order 
C)  check the invoice with the person who specifically purchased the item 
D)  check the invoice for mathematical accuracy 
A)  check the invoice to the receiving report 
B)  check the invoice to the purchase order 
C)  check the invoice with the person who specifically purchased the item 
D)  check the invoice for mathematical accuracy

Question 17

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. Depot Max's days' sales in inventory is closest to

Accepted Answer

A)  42 
B)  46 
C)  8 
D)  44 
A)  42 
B)  46 
C)  8 
D)  44

Question 18

Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item, assuming a period of increasing costs. $$\begin{array} { | l | l | l | } 
\hline & \text { Highest Amount } & \text { Low est Amount } \
\hline \text { Cost of merchandise sold } & & \
\hline \text { Gross profit } & & \
\hline \text { Net income } & & \
\hline \text { Ending merchandise inventory } & & \
\hline
\end{array}$$

Accepted Answer

The answer of Complete the chart, indicating whether LIFO or...

Question 19

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using

Accepted Answer

A)  first-in, last-out 
B)  last-in, first-out 
C)  first-in, first-out 
D)  average cost 
A)  first-in, last-out 
B)  last-in, first-out 
C)  first-in, first-out 
D)  average cost

Question 20

Unsold consigned merchandise should be included in the consignee's inventory.

Accepted Answer

A) True 
 B)False

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Match each description to the appropriate cost flow assumption (a-c). -Rarely used with a perpetual inventory system

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Match each description to the appropriate document used for inventory control (a-c). -Establishes an initial record of the receipt of inventory

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on owner's equity?

Inventory turnover measures the length of time it takes to acquire, sell, and replace the inventory.

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Ending inventory is made up of the oldest purchases when a company uses

Control of inventory should begin as soon as the inventory is ordered. Which of the following internal control steps is not done to meet this goal?

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. Depot Max's days' sales in inventory is closest to

Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item, assuming a period of increasing costs. Highest Amount Low est Amount Cost of merchandise sold Gross profit Net income Ending merchandise inventory

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using

Unsold consigned merchandise should be included in the consignee's inventory.

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

Exam 7: Inventories

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Match each description to the appropriate cost flow assumption (a-c). -Rarely used with a perpetual inventory system

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Match each description to the appropriate document used for inventory control (a-c). -Establishes an initial record of the receipt of inventory

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on owner's equity?

Inventory turnover measures the length of time it takes to acquire, sell, and replace the inventory.

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Ending inventory is made up of the oldest purchases when a company uses

Control of inventory should begin as soon as the inventory is ordered. Which of the following internal control steps is not done to meet this goal?

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. Depot Max's days' sales in inventory is closest to

Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item, assuming a period of increasing costs. Highest Amount Low est Amount Cost of merchandise sold Gross profit Net income Ending merchandise inventory

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using

Unsold consigned merchandise should be included in the consignee's inventory.

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