Question 1

For companies that use a perpetual inventory system all of the following are purposes for taking a physical inventory except

Accepted Answer

A)  to check the accuracy of the records. 
B)  to determine the amount of wasted raw materials. 
C)  to determine losses due to employee theft. 
D)  to determine ownership of the goods. 
A)  to check the accuracy of the records. 
B)  to determine the amount of wasted raw materials. 
C)  to determine losses due to employee theft. 
D)  to determine ownership of the goods.

Question 2

Inventory accounting under IFRS differs from GAAP in regard to

Accepted Answer

A)  neither the use of LIFO nor lower-of-cost-or-market. 
B)  the use of LIFO but not lower-of-cost-or-market. 
C)  the use of lower-of-cost-or-market but not LIFO. 
D)  the use of LIFO and lower-of-cost-or-market. 
A)  neither the use of LIFO nor lower-of-cost-or-market. 
B)  the use of LIFO but not lower-of-cost-or-market. 
C)  the use of lower-of-cost-or-market but not LIFO. 
D)  the use of LIFO and lower-of-cost-or-market.

Question 3

The requirements for accounting for and reporting of inventories under IFRS compared to GAAP tend to be more

Accepted Answer

A)  detailed. 
B)  rules-based. 
C)  principles-based. 
D)  full of disclosure requirements. 
A)  detailed. 
B)  rules-based. 
C)  principles-based. 
D)  full of disclosure requirements.

Question 4

Penny Company made an inventory count on December 31 2016. During the count one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31 2016 the effects of this error are $\begin{array}{lll}& \underline{\text { Assets } }&& \underline{ \text { Liabilities }}& \underline{\text { Owner's Equity }}\\end{array}$
A)$\begin{array}{lll}
\text { overstated } & \text { understated } & \text { overstated } \\end{array}$
B)$\begin{array}{lll}\text { understated } & \text { no effect } && \text { understated } \\end{array}$
C)$\begin{array}{lll}\text { overstated } && \text { no effect } && \text { overstated } \\end{array}$
D)$\begin{array}{lll}\text { overstated } & \text { overstated } && \text { understated }
\end{array}$

Accepted Answer

The answer of Penny Company made an inventory count on...

Question 5

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods.

Accepted Answer

A) True 
 B)False

Question 6

Specific Identification can be used for inventory valuation under $\begin{array} { l l l } 
& \underline{ \text {GAAP  }} & \underline{ \text {  IFRS }} \\end{array}$
A)$\begin{array} { l l l }  &\text { Yes } & &\text { No } \\end{array}$
B)$\begin{array} { l l l } &\text { Yes } && \text { Yes } \\end{array}$
C)$\begin{array} { l l l }& \text { No } && \text {No } \\end{array}$
D)$\begin{array} { l l l } &\text {  No } && \text {Yes  }
\end{array}$

Accepted Answer

The answer of Specific Identification can be used for inventory...

Question 7

Raw materials inventories are the goods that a manufacturer has completed and are ready to be sold to customers.

Accepted Answer

A) True 
 B)False

Question 8

Henri Company's inventory records show the following data: $$\begin{array} { l r r } 
& \underline { \text { Units } } &\underline  { \text { Unit Cost } }\
\text { Inventory, January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: June 18 } & 9,000 & 8.00 \
\text { November 8 } & 6,000 & 7.25
\end{array}$$
 A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. What is the difference in taxes if LIFO rather than FIFO is used?

Accepted Answer

A)  $1170 additional taxes 
B)  $630 additional taxes 
C)  $1290 additional taxes 
D)  $630 tax savings 
A)  $1170 additional taxes 
B)  $630 additional taxes 
C)  $1290 additional taxes 
D)  $630 tax savings

Question 9

Nolen Company is preparing the annual financial statements dated December 31 2016. Information about inventory stocked for regular sale follows: $$\begin{array} { c c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
\text { on Hand }
\end{array} & \begin{array} { c } 
\text { Unit Cost } \
\text { When Acquired }
\end{array} & \begin{array} { c } 
\text { Replacement Cost } \
\text { (market) at year end }
\end{array} \
\hline\mathrm { A } & 50 & \$ 20 & \$ 19 \
\mathrm { B } & 100 & 45 & 45 \
\mathrm { C } & 20 & 59 & 62 \
\mathrm { D } &40&40&36
\end{array}$$ Instructions
Compute the valuation for the December 31 2016 inventory using the lower-of-cost-or-market basis.

Accepted Answer

None

Question 10

If the unit cost of inventory has continuously increased the ______________ first-out inventory valuation method will result in a higher valued ending inventory than if the ______________ first-out method had been used.

Accepted Answer

The answer of If the unit cost of inventory has...

Question 11

The consistent application of an inventory costing method is essential for

Accepted Answer

A)  conservatism. 
B)  accuracy. 
C)  comparability. 
D)  efficiency. 
A)  conservatism. 
B)  accuracy. 
C)  comparability. 
D)  efficiency.

Question 12

The more inventory a company has in stock the greater the company's profit.

Accepted Answer

A) True 
 B)False

Question 13

The requirement that companies use the same cost flow assumption of all goods of a similar nature is found in  $\begin{array} { l l l } 
& \underline{ \text {GAAP  }} & \underline{ \text {  IFRS }} \\end{array}$
A)$\begin{array} { l l l }  &\text { Yes } & &\text { No } \\end{array}$
B)$\begin{array} { l l l } &\text { Yes } && \text { Yes } \\end{array}$
C)$\begin{array} { l l l }& \text { No } && \text {No } \\end{array}$
D)$\begin{array} { l l l } &\text {  No } && \text {Yes  }
\end{array}$

Accepted Answer

The answer of The requirement that companies use the same...

Question 14

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a common cost flow assumption used in costing inventory?

Accepted Answer

A)  First-in first-out 
B)  Middle-in first-out 
C)  Last-in first-out 
D)  Average cost 
A)  First-in first-out 
B)  Middle-in first-out 
C)  Last-in first-out 
D)  Average cost

Question 16

Mesa Company's inventory records show the following data for the month of September: $$\begin{array} { l c c } 
& \underline { \text { Units} } & \underline { \text { Unit Cost } }  \
\text { Inventory, September 1 } &100& \$ 3.35 \
\text { Purchases: September8 } & 450 & 3.50 \
\quad\quad\quad\quad\quad\text { September 18 }& 350 & 3.70
\end{array}$$
 A physical inventory on September 30 shows 250 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

Accepted Answer

Ending inventory. @#LAT-DLM& u

Question 17

Berry Inc. has 6 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date each computer has a current replacement cost of $450. What value should Berry Inc. have for the computers at the end of the year?

Accepted Answer

A)  $1800. 
B)  $2700. 
C)  $3600. 
D)  $5400. 
A)  $1800. 
B)  $2700. 
C)  $3600. 
D)  $5400.

Question 18

Ortiz Department Store utilizes the retail inventory method to estimate its inventories. It calculated its cost to retail ratio during the period at 70%. Goods available for sale at retail amounted to $600000 and goods were sold during the period for $440000. The estimated cost of the ending inventory is

Accepted Answer

A)  $112000. 
B)  $160000. 
C)  $308000. 
D)  $420000. 
A)  $112000. 
B)  $160000. 
C)  $308000. 
D)  $420000.

Question 19

Two widely used methods of estimating inventories are the ______________ method and the _____________ method.

Accepted Answer

gross prof

Question 20

The following information was available for Paul Company at December 31 2016: beginning inventory $90000; ending inventory $70000; cost of goods sold $968000; and sales $1360000. Paul's inventory turnover in 2016 was

Accepted Answer

A)  10.8 times. 
B)  12.1 times. 
C)  13.8 times. 
D)  17.0 times. 
A)  10.8 times. 
B)  12.1 times. 
C)  13.8 times. 
D)  17.0 times.

Exam 6: Inventories

For companies that use a perpetual inventory system all of the following are purposes for taking a physical inventory except

Inventory accounting under IFRS differs from GAAP in regard to

The requirements for accounting for and reporting of inventories under IFRS compared to GAAP tend to be more

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods.

Specific Identification can be used for inventory valuation under A) Yes No B) Yes Yes C) No No D) No Yes

Raw materials inventories are the goods that a manufacturer has completed and are ready to be sold to customers.

If the unit cost of inventory has continuously increased the ______________ first-out inventory valuation method will result in a higher valued ending inventory than if the ______________ first-out method had been used.

The consistent application of an inventory costing method is essential for

The more inventory a company has in stock the greater the company's profit.

The requirement that companies use the same cost flow assumption of all goods of a similar nature is found in A) Yes No B) Yes Yes C) No No D) No Yes

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Which of the following is not a common cost flow assumption used in costing inventory?

Berry Inc. has 6 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date each computer has a current replacement cost of $450. What value should Berry Inc. have for the computers at the end of the year?

Two widely used methods of estimating inventories are the ______________ method and the _____________ method.

The following information was available for Paul Company at December 31 2016: beginning inventory $90000; ending inventory $70000; cost of goods sold $968000; and sales $1360000. Paul's inventory turnover in 2016 was

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

If the unit cost of inventory has continuously increased the first-out inventory valuation method will result in a higher valued ending inventory than if the first-out method had been used.

Two widely used methods of estimating inventories are the __ method and the _ method.