Question 1

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Accepted Answer

A) There would be no tax savings. 
B) $ 800 
C) $ 1,200 
D) $ 2,000 
A) There would be no tax savings. 
B) $ 800 
C) $ 1,200 
D) $ 2,000

Question 2

Transportation-in is

Accepted Answer

A) an operating expense. 
B) part of purchases. 
C) added to transportation-out as part of the calculation of cost of goods sold. 
D) part of cost of goods purchased. 
A) an operating expense. 
B) part of purchases. 
C) added to transportation-out as part of the calculation of cost of goods sold. 
D) part of cost of goods purchased.

Question 3

The cost of goods purchased is equal to net purchases plus .

Accepted Answer

freight-in

Question 4

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Accepted Answer

A) True 
 B)False

Question 5

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Accepted Answer

A) True 
 B)False

Question 6

Payment for the acquisition of inventories is shown on the statement of cash flows as

Accepted Answer

A) An operating activity 
B) An investing activity 
C) A financing activity 
D) Either an operating activity or a financing activity 
A) An operating activity 
B) An investing activity 
C) A financing activity 
D) Either an operating activity or a financing activity

Question 7

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

Accepted Answer

A) True 
 B)False

Question 8

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Accepted Answer

A) $12,670 
B) $9,070 
C) $8,420 
D) $17,230 
A) $12,670 
B) $9,070 
C) $8,420 
D) $17,230

Question 9

Eversoll Inc.uses the periodic inventory system.   If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Accepted Answer

A) $1,354.00 
B) $1,366.50 
C) $1,590.42 
D) $1,594.00 
A) $1,354.00 
B) $1,366.50 
C) $1,590.42 
D) $1,594.00

Question 10

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

Accepted Answer

A) The company will report sales of $1,200,000. 
B) The gross margin will be $1,200,000. 
C) The company's average inventory is $18,750. 
D) It sells its inventory 1,200 times per year. 
A) The company will report sales of $1,200,000. 
B) The gross margin will be $1,200,000. 
C) The company's average inventory is $18,750. 
D) It sells its inventory 1,200 times per year.

Question 11

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Accepted Answer

A) As a direct reduction to the Purchases account 
B) In contra accounts to the Purchases account 
C) As operating expenses 
D) As miscellaneous expenses 
A) As a direct reduction to the Purchases account 
B) In contra accounts to the Purchases account 
C) As operating expenses 
D) As miscellaneous expenses

Question 12

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Accepted Answer

A) Purchase Returns 
B) Accounts Receivable 
C) Sales Returns 
D) Sales Revenue 
A) Purchase Returns 
B) Accounts Receivable 
C) Sales Returns 
D) Sales Revenue

Question 13

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Accepted Answer

A) True 
 B)False

Question 14

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Accepted Answer

A) an overstatement of inventory on the year-end balance sheet. 
B) an understatement of gross profit in the following year. 
C) an overstatement of retained earnings at the end of the year. 
D) an overstatement of cost of goods sold for the current year. 
A) an overstatement of inventory on the year-end balance sheet. 
B) an understatement of gross profit in the following year. 
C) an overstatement of retained earnings at the end of the year. 
D) an overstatement of cost of goods sold for the current year.

Question 15

Eversoll Inc.uses the periodic inventory system.   If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

Accepted Answer

A) $2,263.00 
B) $2.373.00 
C) $2,945.00 
D) $3,626.50 
A) $2,263.00 
B) $2.373.00 
C) $2,945.00 
D) $3,626.50

Question 16

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Accepted Answer

A) Raw materials inventory 
B) Work in process inventory 
C) Finished goods inventory 
D) Merchandise inventory 
A) Raw materials inventory 
B) Work in process inventory 
C) Finished goods inventory 
D) Merchandise inventory

Question 17

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

Accepted Answer

A) True 
 B)False

Question 19

The lower of cost or market LCM) rule violates the historical cost principle.

Accepted Answer

A) True 
 B)False

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Transportation-in is

The cost of goods purchased is equal to net purchases plus .

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Payment for the acquisition of inventories is shown on the statement of cash flows as

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Eversoll Inc.uses the periodic inventory system. If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

The lower of cost or market LCM) rule violates the historical cost principle.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

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Exam 5: Inventories and Cost of Goods Sold

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Transportation-in is

The cost of goods purchased is equal to net purchases plus .

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Payment for the acquisition of inventories is shown on the statement of cash flows as

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Eversoll Inc.uses the periodic inventory system. If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

The lower of cost or market LCM) rule violates the historical cost principle.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters