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

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 3

London Co. uses a periodic inventory system. Its records show the following for the month of May, in which 75 units were sold.   
Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

Accepted Answer

The answer of London Co. uses a periodic inventory system....

Question 4

Hoyt Company's inventory records show the following data for the month of September:   
A physical inventory on September 30 shows 200 units on hand. Calculate the value of the ending inventory and cost of goods sold if the company uses weighted average inventory costing and a periodic inventory system. Round cost per unit to 2 decimal places and ending inventory and cost of goods sold to the nearest dollar.

Accepted Answer

Weighted average cost per unit:
Cost of

Question 5

If goods in transit are shipped FOB destination

Accepted Answer

A)  the seller has legal title to the goods until they are delivered. 
B)  the buyer has legal title to the goods until they are delivered. 
C)  the transportation company has legal title to the goods while the goods are in transit. 
D)  no one has legal title to the goods until they are delivered. 
A)  the seller has legal title to the goods until they are delivered. 
B)  the buyer has legal title to the goods until they are delivered. 
C)  the transportation company has legal title to the goods while the goods are in transit. 
D)  no one has legal title to the goods until they are delivered.

Question 6

In a period of inflation, the cost flow method that results in the lowest income taxes is the

Accepted Answer

A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  gross profit method. 
A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  gross profit method.

Question 7

Unitech has the following inventory information.   A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Accepted Answer

A)  $580. 
B)  $620. 
C)  $1,380. 
D)  $1,420. 
A)  $580. 
B)  $620. 
C)  $1,380. 
D)  $1,420.

Question 8

The cost of goods available for sale is allocated to the cost of goods sold and the

Accepted Answer

A)  beginning inventory. 
B)  ending inventory. 
C)  cost of goods purchased. 
D)  gross profit. 
A)  beginning inventory. 
B)  ending inventory. 
C)  cost of goods purchased. 
D)  gross profit.

Question 9

At December 31, 2010, the following information was available for Fife Company: ending inventory $22,600; beginning inventory $21,400; cost of goods sold $171,000; and sales revenue $430,000.
Calculate the inventory turnover ratio and days in inventory for Fife.

Accepted Answer

Inventory Turnover Ratio = $17

Question 10

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Accepted Answer

A) True 
 B)False

Question 11

Inventories are estimated

Accepted Answer

A)  more frequently under a periodic inventory system than a perpetual inventory system. 
B)  using the wholesale inventory method. 
C)  more frequently under a perpetual inventory system than the periodic inventory system. 
D)  using the net method. 
A)  more frequently under a periodic inventory system than a perpetual inventory system. 
B)  using the wholesale inventory method. 
C)  more frequently under a perpetual inventory system than the periodic inventory system. 
D)  using the net method.

Question 12

The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

Accepted Answer

A) True 
 B)False

Question 13

In periods of inflation, phantom or paper profits may be reported as a result of using the

Accepted Answer

A)  perpetual inventory method. 
B)  FIFO costing assumption. 
C)  LIFO costing assumption. 
D)  periodic inventory method. 
A)  perpetual inventory method. 
B)  FIFO costing assumption. 
C)  LIFO costing assumption. 
D)  periodic inventory method.

Question 14

The cost flow method that often parallels the actual physical flow of merchandise is the

Accepted Answer

A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  gross profit method. 
A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  gross profit method.

Question 15

Kegin Company sells many products. Whamo is one of its popular items. Below is an analysis of the inventory purchases and sales of Whamo for the month of March. Kegin Company uses the periodic inventory system.   
Instructions
(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the weighted average method, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Accepted Answer

@#IMG-DLM& (a) Using FIFO - the earliest units pur

Question 16

This information is available for Grant's Photo Corporation for 2010 and 2011.   
Instructions
Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2010 and 2011. Comment on any trends.

Accepted Answer

@#IMG-DLM& The inventory turnover ratio decreased

Question 17

The inventory of Pedigo Company was destroyed by fire on April 1. From an examination of the accounting records, the following data for the first three months of the year are obtained:   
Instructions
Determine the merchandise lost by fire, assuming a beginning inventory of $60,000 and a gross profit rate of 40% on net sales.

Accepted Answer

The answer of The inventory of Pedigo Company was destroyed...

Question 18

Ted's Used Cars uses the specific identification method of costing inventory. During March, Ted purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are sold for $9,000 each. Ted determines that at March 31, the $9,750 car is still on hand. What is Ted's gross profit for March?

Accepted Answer

A)  $5,250. 
B)  $4,500. 
C)  $750. 
D)  $8,250. 
A)  $5,250. 
B)  $4,500. 
C)  $750. 
D)  $8,250.

Question 19

Purdy Company is in the electronics industry and the price it pays for inventory is decreasing.
Instructions
Indicate which inventory method will:
a. provide the highest ending inventory.
b. provide the highest cost of goods sold.
c. result in the highest net income.
d. result in the lowest income tax expense.
e. produce the most stable earnings over several years.

Accepted Answer

a. LIFO
b.

Question 20

The inventory turnover ratio is computed by dividing cost of goods sold by

Accepted Answer

A)  beginning inventory. 
B)  ending inventory. 
C)  average inventory. 
D)  365 days. 
A)  beginning inventory. 
B)  ending inventory. 
C)  average inventory. 
D)  365 days.

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

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

If goods in transit are shipped FOB destination

In a period of inflation, the cost flow method that results in the lowest income taxes is the

Unitech has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

The cost of goods available for sale is allocated to the cost of goods sold and the

At December 31, 2010, the following information was available for Fife Company: ending inventory $22,600; beginning inventory $21,400; cost of goods sold $171,000; and sales revenue $430,000. Calculate the inventory turnover ratio and days in inventory for Fife.

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Inventories are estimated

The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

In periods of inflation, phantom or paper profits may be reported as a result of using the

The cost flow method that often parallels the actual physical flow of merchandise is the

This information is available for Grant's Photo Corporation for 2010 and 2011. Instructions Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2010 and 2011. Comment on any trends.

The inventory turnover ratio is computed by dividing cost of goods sold by

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

Exam 6: Inventories

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

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

If goods in transit are shipped FOB destination

In a period of inflation, the cost flow method that results in the lowest income taxes is the

Unitech has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

The cost of goods available for sale is allocated to the cost of goods sold and the

At December 31, 2010, the following information was available for Fife Company: ending inventory $22,600; beginning inventory $21,400; cost of goods sold $171,000; and sales revenue $430,000. Calculate the inventory turnover ratio and days in inventory for Fife.

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Inventories are estimated

The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

In periods of inflation, phantom or paper profits may be reported as a result of using the

The cost flow method that often parallels the actual physical flow of merchandise is the

This information is available for Grant's Photo Corporation for 2010 and 2011. Instructions Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2010 and 2011. Comment on any trends.

The inventory turnover ratio is computed by dividing cost of goods sold by

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