Question 1

Specific Identification must be used for inventory valuation where the inventory items are not interchangeable 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 must be used for inventory...

Question 2

The factor which determines whether or not goods should be included in a physical count of inventory is

Accepted Answer

A)  physical possession. 
B)  legal title. 
C)  management's judgment. 
D)  whether or not the purchase price has been paid. 
A)  physical possession. 
B)  legal title. 
C)  management's judgment. 
D)  whether or not the purchase price has been paid.

Question 3

Elly Company uses a periodic inventory system. Details for the inventory account for the month of January 2016 are as follows: $$\begin{array} { l c c r } 
& \text { Units } & \text { Per unit price } & \text { Total } \
\hline\text { Balance, } 1 / 1 / 16 & 200 & \$ 5.00 & \$ 1,000 \
\text { Purchase, } 1 / 15 / 16 & 100 & 5.30 & 530 \
\text { Purchase, } 1 / 28 / 16 & 100 & 5.50 & 550
\end{array}$$ An end of the month (1/31/16) inventory showed that 150 units were on hand. If the company uses FIFO and sells the units for $9 each what is the gross profit for the month?

Accepted Answer

A)  $1000 
B)  $985 
C)  $900 
D)  $1440 
A)  $1000 
B)  $985 
C)  $900 
D)  $1440

Question 4

If beginning inventory is understated by $15000 the effect of this error in the current period is $\begin{array}{cc}
 \text { Cost of Goods Sold } & \text { Net Incom } \\end{array}$

A) $\begin{array}{cc} \text { Understated } && \text { Understated } \\end{array}$
B)$\begin{array}{cc}  \text { Over stand } &&& \text { Over stand } \\end{array}$
C)$\begin{array}{cc}  \text { Understated } &&& \text { Over stand } \\end{array}$
D)$\begin{array}{cc}  \text { Over stand } &&& \text { Understated  } \\end{array}$

Accepted Answer

The answer of If beginning inventory is understated by $15000...

Question 5

It is generally recognized that a major objective of accounting for inventory is the proper determination of ______________.

Accepted Answer

The answer of It is generally recognized that a major...

Question 6

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Accepted Answer

A) True 
 B)False

Question 7

Disclosures about inventory should include each of the following except the

Accepted Answer

A)  basis of accounting. 
B)  costing method. 
C)  quantity of inventory. 
D)  major inventory classifications. 
A)  basis of accounting. 
B)  costing method. 
C)  quantity of inventory. 
D)  major inventory classifications.

Question 8

Accountants believe that the write down from cost to market should not be made in the period in which the price decline occurs.

Accepted Answer

A) True 
 B)False

Question 9

In a manufacturing company goods that are ready to be sold to customers are referred to as ________________ whereas in a merchandising company they are generally referred to as _______________.

Accepted Answer

finished g

Question 10

Agler Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company Agler Company developed the following information: $\begin{array}{lr}
\text { March net sales through March } 28 & \$ 350,000 \
\text { Beginning Inventory, March 1 } & 100,000 \
\text { Merchandise purchases through March 28 } & 180,000
\end{array}$ The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period.
Instructions
Using the gross profit method prepare an estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.

Accepted Answer

None

Question 11

The only acceptable cost flow assumptions under IFRS are

Accepted Answer

A)  FIFO and LIFO. 
B)  FIFO and average. 
C)  LIFO and average. 
D)  FIFO LIFO and average. 
A)  FIFO and LIFO. 
B)  FIFO and average. 
C)  LIFO and average. 
D)  FIFO LIFO and average.

Question 12

Galena Pharmacy reported cost of goods sold as follows: $\begin{array}{lcc}
& \underline{2016}& \underline{2017}\
\text {Beginning inventory}&54,000 & \$ 64,000 \
\text {Cost of goods purchased}& \underline{847,000} & \underline{891,000} \
\text {Cost of goods available for sale}&901,000 & 955, 000 \
\text {Ending inventory}& \underline{ 64,000} &  \underline{55,000 }\
\text {Cost of goods sold}& \underline{ \$ 837,000} & \underline{ \$ 900,000}
\end{array}$

Jim Holt the bookkeeper made two errors:
(1) 2016 ending inventory was overstated by $7000.
(2) 2017 ending inventory was understated by $16000.
Instructions
Assuming the errors had not been corrected indicate the dollar effect that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U). 11eb1392_1bf1_b3a7_8021_79c4e89749fb

Accepted Answer

None

Question 13

The cost of goods available for sale consists of the beginning inventory plus the cost of goods purchased.

Accepted Answer

A) True 
 B)False

Question 14

Nicholas Industries had the following inventory transactions occur during 2014: $$\begin{array} { l l c c } 
&& \text { Units } & \text { Cost/unit } \
2 / 1 / 16 & \text { Purchase } & 54 & \$ 45 \
3 / 14 / 16 & \text { Purchase } & 93 & \$ 47 \
5 / 1 / 16 & \text { Purchase } & 66 & \$ 49
\end{array}$$ The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used what is the company's after-tax income using FIFO? (rounded to whole dollars)

Accepted Answer

A)  $1672 
B)  $1840 
C)  $2388 
D)  $2628 
A)  $1672 
B)  $1840 
C)  $2388 
D)  $2628

Question 15

Goods in transit should be included in the inventory of the buyer when the

Accepted Answer

A)  public carrier accepts the goods from the seller. 
B)  goods reach the buyer. 
C)  terms of sale are FOB destination. 
D)  terms of sale are FOB shipping point. 
A)  public carrier accepts the goods from the seller. 
B)  goods reach the buyer. 
C)  terms of sale are FOB destination. 
D)  terms of sale are FOB shipping point.

Question 16

The selection of an appropriate inventory cost flow assumption for an individual company is made by

Accepted Answer

A)  the external auditors. 
B)  the SEC. 
C)  the internal auditors. 
D)  management. 
A)  the external auditors. 
B)  the SEC. 
C)  the internal auditors. 
D)  management.

Question 17

Elly Company uses a periodic inventory system. Details for the inventory account for the month of January 2016 are as follows: $$\begin{array} { l c c r } 
& \text { Units } & \text { Per unit price } & \text { Total } \
\hline\text { Balance, } 1 / 1 / 16 & 200 & \$ 5.00 & \$ 1,000 \
\text { Purchase, } 1 / 15 / 16 & 100 & 5.30 & 530 \
\text { Purchase, } 1 / 28 / 16 & 100 & 5.50 & 550
\end{array}$$ An end of the month (1/31/16) inventory showed that 150 units were on hand. How many units did the company sell during January 2016?

Accepted Answer

A)  50 
B)  150 
C)  200 
D)  250 
A)  50 
B)  150 
C)  200 
D)  250

Question 18

At May 1 2016 Bibby Company had beginning inventory consisting of 200 units with a unit cost of $7. During May the company purchased inventory as follows: 800 units at $7
500 units at $9
The company sold 500 units during the month for $12 per unit. Bibby uses the average cost method. The value of Bibby's inventory at May 31 2016 is

Accepted Answer

A)  $6400. 
B)  $7667. 
C)  $5600. 
D)  $4333. 
A)  $6400. 
B)  $7667. 
C)  $5600. 
D)  $4333.

Question 19

Understating beginning inventory will understate

Accepted Answer

A)  assets. 
B)  cost of goods sold. 
C)  net income. 
D)  owner's equity. 
A)  assets. 
B)  cost of goods sold. 
C)  net income. 
D)  owner's equity.

Question 20

Compute the lower-of-cost-or-market valuation for Gantner Company's total inventory based on the following: $\begin{array}{ccc}
\text { Inventory Categories }& \text { Cost Data }& \text { Market Value Data }\
\hline\text { A } & \$ 18,000 & \$ 16,900 \
\text { B } & 13,900 & 14,600 \
\text { C } & 21,000 & 20,500
\end{array}$

Accepted Answer

None

Exam 6: Inventories

Specific Identification must be used for inventory valuation where the inventory items are not interchangeable under A) Yes No B) Yes Yes C) No No D) No Yes

The factor which determines whether or not goods should be included in a physical count of inventory is

If beginning inventory is understated by $15000 the effect of this error in the current period is Cost of Goods Sold Net Incom A) Understated Understated B) Over stand Over stand C) Understated Over stand D) Over stand Understated

It is generally recognized that a major objective of accounting for inventory is the proper determination of ______________.

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Disclosures about inventory should include each of the following except the

Accountants believe that the write down from cost to market should not be made in the period in which the price decline occurs.

In a manufacturing company goods that are ready to be sold to customers are referred to as ________________ whereas in a merchandising company they are generally referred to as _______________.

The only acceptable cost flow assumptions under IFRS are

The cost of goods available for sale consists of the beginning inventory plus the cost of goods purchased.

Goods in transit should be included in the inventory of the buyer when the

The selection of an appropriate inventory cost flow assumption for an individual company is made by

Understating beginning inventory will understate

Compute the lower-of-cost-or-market valuation for Gantner Company's total inventory based on the following: Inventory Categories Cost Data Market Value Data A \ 18,000 \ 16,900 B 13,900 14,600 C 21,000 20,500

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

In a manufacturing company goods that are ready to be sold to customers are referred to as __ whereas in a merchandising company they are generally referred to as _.