Question 1

During a period of steadily rising prices, which inventory cost flow assumption results in reporting the highest inventory value?

Accepted Answer

A) FIFO. 
B) Average cost. 
C) Moving weighted average. 
D) Specific identification. 
E) Any of the above. 
A) FIFO. 
B) Average cost. 
C) Moving weighted average. 
D) Specific identification. 
E) Any of the above. A

Question 2

Because an inventory error causes an offsetting error in the next period, it is sometimes said to be self-correcting.

Accepted Answer

A) True 
 B)False  True

Question 3

Understatement of beginning inventory causes:

Accepted Answer

A) Cost of goods sold to be overstated and net income to be overstated. 
B) Cost of goods sold to be overstated and net income to be accurate. 
C) Cost of goods sold to be understated and net income to be understated. 
D) Cost of goods sold to be understated and net income to be overstated. 
E) Cost of goods sold to be overstated and net income to be understated. 
A) Cost of goods sold to be overstated and net income to be overstated. 
B) Cost of goods sold to be overstated and net income to be accurate. 
C) Cost of goods sold to be understated and net income to be understated. 
D) Cost of goods sold to be understated and net income to be overstated. 
E) Cost of goods sold to be overstated and net income to be understated. D

Question 4

When purchase prices do not change, the choice of an inventory costing method is unimportant.

Accepted Answer

A) True 
 B)False

Question 5

DVDs usually sell for $14 per unit, and have a profit margin of 25%. However, theexpected selling price has fallen to $7 per unit. The Movie Company's current inventory includes 200 units purchased at $10 per unit. Calculate the value of the inventory at the lower of cost and net realizable value.

Accepted Answer

A) $1,350. 
B) $1,800. 
C) $2,000. 
D) $1,400. 
E) $1,500. 
A) $1,350. 
B) $1,800. 
C) $2,000. 
D) $1,400. 
E) $1,500.

Question 6

Days' sales in inventory:

Accepted Answer

A) Is a ratio that tells us how much inventory a firm has on hand in terms of days' sales. 
B) Is the number of days we can sell from inventory if no new items are purchased. 
C) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash. 
D) All of these answers are correct. 
E) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash and is a ratio that tells us how much inventory a firm has on hand in terms of days' sales. 
A) Is a ratio that tells us how much inventory a firm has on hand in terms of days' sales. 
B) Is the number of days we can sell from inventory if no new items are purchased. 
C) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash. 
D) All of these answers are correct. 
E) Is a ratio that estimates how many days it will take to convert inventory on hand to accounts receivable or cash and is a ratio that tells us how much inventory a firm has on hand in terms of days' sales.

Question 7

If an inventory amount is reported in error, it can cause a misstatement in:

Accepted Answer

A) Cost of goods sold. 
B) Gross profit. 
C) Current assets. 
D) Net income. 
E) All of these answers are correct. 
A) Cost of goods sold. 
B) Gross profit. 
C) Current assets. 
D) Net income. 
E) All of these answers are correct.

Question 8

The advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and better matches current costs with revenues on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

During a period of steadily falling prices, which inventory cost flow assumption results in reporting the lowest net income?

Accepted Answer

A) Retail method. 
B) FIFO. 
C) Average cost. 
D) Weighted-average. 
E) Specific identification. 
A) Retail method. 
B) FIFO. 
C) Average cost. 
D) Weighted-average. 
E) Specific identification.

Question 10

Calculate the cost of goods sold for June and the ending inventory balance atJune 30, 2017.

Accepted Answer

The answer of Calculate the cost of goods sold for...

Question 11

What types of costs are assigned to merchandise inventory?

Accepted Answer

Costs of merchandise inventory

Question 12

The accepted method for valuing inventory includes:

Accepted Answer

A) Adding the costs for all products. 
B) Multiplying the count for each product by its cost per unit. 
C) Counting the units of each product on hand. 
D) Counting the units of each product on hand and multiplying the count for each product by its cost per unit. 
E) All of these answers are correct. 
A) Adding the costs for all products. 
B) Multiplying the count for each product by its cost per unit. 
C) Counting the units of each product on hand. 
D) Counting the units of each product on hand and multiplying the count for each product by its cost per unit. 
E) All of these answers are correct.

Question 13

An understatement of ending inventory will understate cost of goods sold and overstate net income.

Accepted Answer

A) True 
 B)False

Question 14

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

Accepted Answer

A) True 
 B)False

Question 15

There is no difference in the amount of inventory calculated by the periodic and perpetual inventory systems when using FIFO or weighted average cost flowassumptions.

Accepted Answer

A) True 
 B)False

Question 16

Bakstreet Company wants to estimate inventory destroyed by flood. Its average gross profit percentage is 37%. The following information is available:   Instructions: Calculate the value of the destroyed ending inventory using the gross profit method. Round numbers to the nearest dollar, if necessary.

Accepted Answer

Net sales:

Question 17

The inventory cost flow assumption that assigns the highest cost to ending inventory in a period of rising prices is moving weighted average.

Accepted Answer

A) True 
 B)False

Question 18

Incidental costs added to the value of inventory include import duties, transportation-in, storage, and insurance.

Accepted Answer

A) True 
 B)False

Question 19

When taking a physical count of inventory, the use of pre-numbered inventory tickets assists in the control process.

Accepted Answer

A) True 
 B)False

Question 20

Isaiah's Gear had the following ending inventory costs:   Calculate the lower of cost and net realizable value (LCNRV)on an item by item basis.

Accepted Answer

The answer of Isaiah's Gear had the following ending inventory...

During a period of steadily rising prices, which inventory cost flow assumption results in reporting the highest inventory value?

Because an inventory error causes an offsetting error in the next period, it is sometimes said to be self-correcting.

Understatement of beginning inventory causes:

When purchase prices do not change, the choice of an inventory costing method is unimportant.

DVDs usually sell for $14 per unit, and have a profit margin of 25%. However, theexpected selling price has fallen to $7 per unit. The Movie Company's current inventory includes 200 units purchased at $10 per unit. Calculate the value of the inventory at the lower of cost and net realizable value.

Days' sales in inventory:

If an inventory amount is reported in error, it can cause a misstatement in:

The advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and better matches current costs with revenues on the income statement.

During a period of steadily falling prices, which inventory cost flow assumption results in reporting the lowest net income?

Calculate the cost of goods sold for June and the ending inventory balance atJune 30, 2017.

What types of costs are assigned to merchandise inventory?

The accepted method for valuing inventory includes:

An understatement of ending inventory will understate cost of goods sold and overstate net income.

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

There is no difference in the amount of inventory calculated by the periodic and perpetual inventory systems when using FIFO or weighted average cost flowassumptions.

Bakstreet Company wants to estimate inventory destroyed by flood. Its average gross profit percentage is 37%. The following information is available: Instructions: Calculate the value of the destroyed ending inventory using the gross profit method. Round numbers to the nearest dollar, if necessary.

The inventory cost flow assumption that assigns the highest cost to ending inventory in a period of rising prices is moving weighted average.

Incidental costs added to the value of inventory include import duties, transportation-in, storage, and insurance.

When taking a physical count of inventory, the use of pre-numbered inventory tickets assists in the control process.

Isaiah's Gear had the following ending inventory costs: Calculate the lower of cost and net realizable value (LCNRV)on an item by item basis.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Internal Control and Cash

Receivables

Appendix

Filters

Exam 6: Inventory Costing and Valuation

During a period of steadily rising prices, which inventory cost flow assumption results in reporting the highest inventory value?

Because an inventory error causes an offsetting error in the next period, it is sometimes said to be self-correcting.

Understatement of beginning inventory causes:

When purchase prices do not change, the choice of an inventory costing method is unimportant.

DVDs usually sell for $14 per unit, and have a profit margin of 25%. However, theexpected selling price has fallen to $7 per unit. The Movie Company's current inventory includes 200 units purchased at $10 per unit. Calculate the value of the inventory at the lower of cost and net realizable value.

Days' sales in inventory:

If an inventory amount is reported in error, it can cause a misstatement in:

The advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and better matches current costs with revenues on the income statement.

During a period of steadily falling prices, which inventory cost flow assumption results in reporting the lowest net income?

Calculate the cost of goods sold for June and the ending inventory balance atJune 30, 2017.

What types of costs are assigned to merchandise inventory?

The accepted method for valuing inventory includes:

An understatement of ending inventory will understate cost of goods sold and overstate net income.

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

There is no difference in the amount of inventory calculated by the periodic and perpetual inventory systems when using FIFO or weighted average cost flowassumptions.

Bakstreet Company wants to estimate inventory destroyed by flood. Its average gross profit percentage is 37%. The following information is available: Instructions: Calculate the value of the destroyed ending inventory using the gross profit method. Round numbers to the nearest dollar, if necessary.

The inventory cost flow assumption that assigns the highest cost to ending inventory in a period of rising prices is moving weighted average.

Incidental costs added to the value of inventory include import duties, transportation-in, storage, and insurance.

When taking a physical count of inventory, the use of pre-numbered inventory tickets assists in the control process.

Isaiah's Gear had the following ending inventory costs: Calculate the lower of cost and net realizable value (LCNRV)on an item by item basis.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Internal Control and Cash

Receivables

Appendix

Filters