Question 1

Which of the following should be included in the physical inventory of a company

Accepted Answer

A)  Goods held on consignment from another company. 
B)  Goods in transit to another company shipped FOB shipping point. 
C)  Goods in transit from another company shipped FOB shipping point. 
D)  Both b and c above. 
A)  Goods held on consignment from another company. 
B)  Goods in transit to another company shipped FOB shipping point. 
C)  Goods in transit from another company shipped FOB shipping point. 
D)  Both b and c above.

Question 2

Neighborly Industries has the following inventory information.   Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis?

Accepted Answer

A)  $3,664 
B)  $3,674 
C)  $7,696 
D)  $7,706 
A)  $3,664 
B)  $3,674 
C)  $7,696 
D)  $7,706

Question 3

A company may use more than one inventory costing method concurrently.

Accepted Answer

A) True 
 B)False

Question 4

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 5

Whitmore Company identifies the following items for possible inclusion in the physical inventory. Indicate whether each item should be included or excluded from the inventory taking.
1. Goods shipped on consignment by Whitmore to another company.
2. Goods in transit from a supplier shipped FOB destination.
3. Goods shipped via common carrier to a customer with terms FOB shipping point.
4. Goods held on consignment from another company.

Accepted Answer

1. Include

Question 6

Which of the following statements is correct with respect to inventories?

Accepted Answer

A)  The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  It is generally good business management to sell the most recently acquired goods first. 
C)  Under FIFO, the ending inventory is based on the latest units purchased. 
D)  FIFO seldom coincides with the actual physical flow of inventory. 
A)  The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  It is generally good business management to sell the most recently acquired goods first. 
C)  Under FIFO, the ending inventory is based on the latest units purchased. 
D)  FIFO seldom coincides with the actual physical flow of inventory.

Question 7

Inventory turnover is calculated as cost of goods sold divided by ending inventory.

Accepted Answer

A) True 
 B)False

Question 8

Neighborly Industries has the following inventory information.   Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis?

Accepted Answer

A)  $3,644 
B)  $3,674 
C)  $7,696 
D)  $7,706 
A)  $3,644 
B)  $3,674 
C)  $7,696 
D)  $7,706

Question 9

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Accepted Answer

A) True 
 B)False

Question 10

Tucker Department Store utilizes the retail inventory method to estimate its inventories. It calculated its cost to retail ratio during the period at 75%. Goods available for sale at retail amounted to $400,000 and goods were sold during the period for $250,000. The estimated cost of the ending inventory is

Accepted Answer

A)  $150,000. 
B)  $300,000. 
C)  $112,500. 
D)  $200,000. 
A)  $150,000. 
B)  $300,000. 
C)  $112,500. 
D)  $200,000.

Question 11

A company just starting business made the following four inventory purchases in June:   A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

Accepted Answer

A)  $653. 
B)  $1,272. 
C)  $1,447. 
D)  $1,564. 
A)  $653. 
B)  $1,272. 
C)  $1,447. 
D)  $1,564.

Question 12

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 13

In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.

Accepted Answer

A) True 
 B)False

Question 14

Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a common cost flow assumption used in costing inventory?

Accepted Answer

A)  First-in, first-out 
B)  Middle-in, first-out 
C)  Last-in, first-out 
D)  Average cost 
A)  First-in, first-out 
B)  Middle-in, first-out 
C)  Last-in, first-out 
D)  Average cost

Question 16

Holliday Company's inventory records show the following data:   A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $12 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method.
Under the FIFO method, the December 31 inventory is valued at

Accepted Answer

A)  $14,000. 
B)  $14,500. 
C)  $15,000. 
D)  $18,000. 
A)  $14,000. 
B)  $14,500. 
C)  $15,000. 
D)  $18,000.

Question 17

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows:   An end of the month (1/31/10) inventory showed that 120 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

Accepted Answer

A)  $520 
B)  $600 
C)  $656 
D)  $1,424 
A)  $520 
B)  $600 
C)  $656 
D)  $1,424

Question 18

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows:   An end of the month (1/31/10) inventory showed that 120 units were on hand. How many units did the company sell during January, 2010?

Accepted Answer

A)  80 
B)  120 
C)  200 
D)  280 
A)  80 
B)  120 
C)  200 
D)  280

Question 19

Inventoriable costs include all of the following except the

Accepted Answer

A)  freight costs incurred when buying inventory. 
B)  costs of the purchasing and warehousing departments. 
C)  cost of the beginning inventory. 
D)  cost of goods purchased. 
A)  freight costs incurred when buying inventory. 
B)  costs of the purchasing and warehousing departments. 
C)  cost of the beginning inventory. 
D)  cost of goods purchased.

Question 20

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Accepted Answer

A)  cost of goods sold of the companies will be identical. 
B)  cost of goods available for sale of the companies will be identical. 
C)  ending inventory of the companies will be identical. 
D)  net income of the companies will be identical. 
A)  cost of goods sold of the companies will be identical. 
B)  cost of goods available for sale of the companies will be identical. 
C)  ending inventory of the companies will be identical. 
D)  net income of the companies will be identical.

Exam 6: Inventories

Which of the following should be included in the physical inventory of a company

Neighborly Industries has the following inventory information. Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis?

A company may use more than one inventory costing method concurrently.

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Which of the following statements is correct with respect to inventories?

Inventory turnover is calculated as cost of goods sold divided by ending inventory.

Neighborly Industries has the following inventory information. Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis?

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

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 _______________.

In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.

Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold.

Which of the following is not a common cost flow assumption used in costing inventory?

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows: An end of the month (1/31/10) inventory showed that 120 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows: An end of the month (1/31/10) inventory showed that 120 units were on hand. How many units did the company sell during January, 2010?

Inventoriable costs include all of the following except the

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

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

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 _.