Question 1

Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement.

Accepted Answer

A) True 
 B)False  True

Question 2

The matching 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  False

Question 3

Lumley Company uses the perpetual inventory system and had the following purchases and sales during March.
Instructions
Using the inventory and sales data above, calculate the value assigned to cost of goods sold in March and to the ending inventory at March 31 using (a) FIFO and (b) LIFO.

Accepted Answer

a) FIFO
   b) LIFO
   March cost of goods sold = $14,600 ($3,400 + $4,400 + $6,800)
March 31 inventory = $5,800

Question 4

Toso Company uses the periodic inventory system to account for inventories. Information related to Toso Company's inventory at October 31 is given below:   
Instructions
1. Show computations to value the ending inventory using the FIFO cost assumption if 550 units remain on hand at October 31.
2. Show computations to value the ending inventory using the weighted-average cost method if 550 units remain on hand at October 31.
3. Show computations to value the ending inventory using the LIFO cost assumption if 550 units remain on hand at October 31.

Accepted Answer

1. 550 units in ending inventory.
Under

Question 5

Quigley Company's records indicate the following information for the year:   On December 31, a physical inventory determined that ending inventory of $600,000 was in the warehouse. Quigley's gross profit on sales has remained constant at 30%. Quigley suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory?

Accepted Answer

A)  $100,000 
B)  $200,000 
C)  $300,000 
D)  $700,000 
A)  $100,000 
B)  $200,000 
C)  $300,000 
D)  $700,000

Question 6

The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.

Accepted Answer

A) True 
 B)False

Question 7

An auto manufacturer would classify vehicles in various stages of production as

Accepted Answer

A)  finished goods. 
B)  merchandise inventory. 
C)  raw materials. 
D)  work in process. 
A)  finished goods. 
B)  merchandise inventory. 
C)  raw materials. 
D)  work in process.

Question 8

Wilco Company reports the following for the month of June.   
Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO.
(b) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method.

Accepted Answer

The answer of Wilco Company reports the following for the...

Question 9

In a perpetual inventory system, the cost of goods sold under the FIFO method is based on the cost of the latest goods on hand during the period.

Accepted Answer

A) True 
 B)False

Question 10

Stark Department Store estimates inventory by using the retail inventory method. The following information was developed:   The estimated cost of the ending inventory is

Accepted Answer

A)  $696,000. 
B)  $522,000. 
C)  $882,000. 
D)  $900,000. 
A)  $696,000. 
B)  $522,000. 
C)  $882,000. 
D)  $900,000.

Question 11

The following information is available for Massey Company:   
Assume that Massey uses a periodic inventory system and that there are 700 units left at the end of the month.
Instructions
Compute each of the following under the average-cost method:
(a) Cost of ending inventory.
(b) Cost of goods sold.

Accepted Answer

Average cost/unit = $5.95 ($11

Question 12

Blosser Company's goods in transit at December 31 include:
Sales made purchases made
(1) FOB destination (3) FOB destination
(2) FOB shipping point (4) FOB shipping point
Which items should be included in Blosser's inventory at December 31?

Accepted Answer

A)  (2) and (3) 
B)  (1) and (4) 
C)  (1) and (3) 
D)  (2) and (4) 
A)  (2) and (3) 
B)  (1) and (4) 
C)  (1) and (3) 
D)  (2) and (4)

Question 13

In a manufacturing business, inventory that is ready for sale is called

Accepted Answer

A)  raw materials inventory. 
B)  work in process inventory. 
C)  finished goods inventory. 
D)  store supplies inventory. 
A)  raw materials inventory. 
B)  work in process inventory. 
C)  finished goods inventory. 
D)  store supplies inventory.

Question 14

In a period of rising prices, FIFO will have

Accepted Answer

A)  lower net income than LIFO. 
B)  lower cost of goods sold than LIFO. 
C)  lower income tax expense than LIFO. 
D)  lower net purchases than LIFO. 
A)  lower net income than LIFO. 
B)  lower cost of goods sold than LIFO. 
C)  lower income tax expense than LIFO. 
D)  lower net purchases than LIFO.

Question 15

Inventoriable costs are allocated to ______________ and cost of goods ____________.

Accepted Answer

ending inv

Question 16

Never Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories:   If Never applies the LCM basis, the value of the inventory reported on the balance sheet would be

Accepted Answer

A)  $350,000. 
B)  $342,000. 
C)  $346,000. 
D)  $362,000. 
A)  $350,000. 
B)  $342,000. 
C)  $346,000. 
D)  $362,000.

Question 17

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Average Cost 
D)  Income tax expense for the period will be the same under all assumptions. 
A)  FIFO 
B)  LIFO 
C)  Average Cost 
D)  Income tax expense for the period will be the same under all assumptions.

Question 18

Clarke Company uses the periodic inventory method and had the following inventory information available:   
A physical count of inventory on December 31 revealed that there were 400 units on hand.
Instructions
Answer the following independent questions and show computations supporting your answers.
1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $__________.
2. Assume that the company uses the Average-Cost method. The value of the ending inventory on December 31 is $__________.
3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $__________.
4. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

Accepted Answer

1. FIFO: Ending inventory $3,100
 @#IMG-DLM& 
2. A

Question 19

Inventories affect

Accepted Answer

A)  only the balance sheet. 
B)  only the income statement. 
C)  both the balance sheet and the income statement. 
D)  neither the balance sheet nor the income statement. 
A)  only the balance sheet. 
B)  only the income statement. 
C)  both the balance sheet and the income statement. 
D)  neither the balance sheet nor the income statement.

Question 20

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $825. At the statement date, each computer has a current replacement cost of $350. How much loss should Paulson, Inc., record for the year?

Accepted Answer

A)  $1,125. 
B)  $1,250. 
C)  $1,500. 
D)  $1,750. 
A)  $1,125. 
B)  $1,250. 
C)  $1,500. 
D)  $1,750.

Exam 6: Inventories

Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement.

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

Lumley Company uses the perpetual inventory system and had the following purchases and sales during March. Instructions Using the inventory and sales data above, calculate the value assigned to cost of goods sold in March and to the ending inventory at March 31 using (a) FIFO and (b) LIFO.

The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.

An auto manufacturer would classify vehicles in various stages of production as

Wilco Company reports the following for the month of June. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO. (b) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method.

In a perpetual inventory system, the cost of goods sold under the FIFO method is based on the cost of the latest goods on hand during the period.

Stark Department Store estimates inventory by using the retail inventory method. The following information was developed: The estimated cost of the ending inventory is

The following information is available for Massey Company: Assume that Massey uses a periodic inventory system and that there are 700 units left at the end of the month. Instructions Compute each of the following under the average-cost method: (a) Cost of ending inventory. (b) Cost of goods sold.

Blosser Company's goods in transit at December 31 include: Sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Blosser's inventory at December 31?

In a manufacturing business, inventory that is ready for sale is called

In a period of rising prices, FIFO will have

Inventoriable costs are allocated to ______________ and cost of goods ____________.

Never Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: If Never applies the LCM basis, the value of the inventory reported on the balance sheet would be

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

Inventories affect

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $825. At the statement date, each computer has a current replacement cost of $350. How much loss should Paulson, Inc., record for the year?

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

Inventoriable costs are allocated to __ and cost of goods .