Question 1

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

Accepted Answer

A) debit to the Inventory account. 
B) debit to the Cost of Goods Sold account. 
C) credit to the Cost of Goods Sold account. 
D) credit to the Sales account. 
A) debit to the Inventory account. 
B) debit to the Cost of Goods Sold account. 
C) credit to the Cost of Goods Sold account. 
D) credit to the Sales account.

Question 2

The selection of an appropriate inventory cost formula for a company is made by

Accepted Answer

A) external auditors. 
B) Canada Revenue Agency (CR
A) . 
C) industry standards. 
D) management. 
A) external auditors. 
B) Canada Revenue Agency (CR
A) . 
C) industry standards. 
D) management.

Question 3

If prices never changed, there would be no need for alternative inventory cost formulas.

Accepted Answer

A) True 
 B)False

Question 4

Of the following businesses, which one would not be likely to use the specific identification formula for inventory costing?

Accepted Answer

A) piano store 
B) car dealership 
C) antique shop 
D) grocery store 
A) piano store 
B) car dealership 
C) antique shop 
D) grocery store

Question 5

Wholesome Ltd.has a days in inventory ratio of 50 and average inventory of $320,000.What is its cost of goods sold?

Accepted Answer

A) cannot be determined 
B) $16,000,000 
C) $2,336,000 
D) $2,191,780 
A) cannot be determined 
B) $16,000,000 
C) $2,336,000 
D) $2,191,780

Question 6

Which of the following statements regarding inventory cost formulas is correct?

Accepted Answer

A) A company may use more than one inventory cost formula. 
B) A company should use the method that is easiest. 
C) A company must use the method that allows them to manage net income. 
D) A company may never change its inventory cost method once it has chosen it. 
A) A company may use more than one inventory cost formula. 
B) A company should use the method that is easiest. 
C) A company must use the method that allows them to manage net income. 
D) A company may never change its inventory cost method once it has chosen it.

Question 7

The FIFO inventory cost formula agrees closely to the actual physical movement of goods in most businesses.

Accepted Answer

A) True 
 B)False

Question 8

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

Accepted Answer

A) True 
 B)False

Question 9

The specific identification formula is desirable when a company sells a large number of low-unit-cost items.

Accepted Answer

A) True 
 B)False

Question 10

If beginning inventory is understated by $10,000, the effect of this error in the current period is

Accepted Answer

The answer of If beginning inventory is understated by $10,000,...

Question 11

Use the following information for questions 
A company just starting its business made the following four inventory purchases in June:
   On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-Using the FIFO cost formula, the cost of the ending inventory on June 30 is

Accepted Answer

A) $645. 
B) $695. 
C) $1,650. 
D) $1,700. 
A) $645. 
B) $695. 
C) $1,650. 
D) $1,700.

Question 12

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost formula in a perpetual inventory system.
  
-The cost of goods sold for the July 9 sale was

Accepted Answer

A) $475. 
B) $480. 
C) $495. 
D) $500. 
A) $475. 
B) $480. 
C) $495. 
D) $500.

Question 13

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

Accepted Answer

A) average cost 
B) FIFO 
C) The figure would be the same under both FIFO and average cost. 
D) need more information to answer 
A) average cost 
B) FIFO 
C) The figure would be the same under both FIFO and average cost. 
D) need more information to answer

Question 14

The inventory turnover ratio is calculated 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.

Question 15

Use the following information for questions 
A company just starting its business made the following four inventory purchases in June:
   On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-The inventory cost formula that results in the highest gross profit for June is

Accepted Answer

A) FIFO. 
B) average. 
C) Gross profit is the same under both cost formulas. 
D) not determinable. 
A) FIFO. 
B) average. 
C) Gross profit is the same under both cost formulas. 
D) not determinable.

Question 16

Which of the following statements regarding inventories is correct?

Accepted Answer

A) FIFO 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) FIFO 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 17

Use the following information for questions 
A company just starting its business made the following four inventory purchases in June:
   On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-Using the FIFO cost formula, the amount of the cost of goods sold for June is

Accepted Answer

A) $645. 
B) $695. 
C) $1,650. 
D) $1,700. 
A) $645. 
B) $695. 
C) $1,650. 
D) $1,700.

Question 18

What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated?

Accepted Answer

A) overstated; understated; understated; understated. 
B) understated; overstated; understated; overstated. 
C) overstated; understated; overstated; overstated. 
D) understated; overstated; overstated; overstated. 
A) overstated; understated; understated; understated. 
B) understated; overstated; understated; overstated. 
C) overstated; understated; overstated; overstated. 
D) understated; overstated; overstated; overstated.

Question 19

Two companies report the same cost of goods available for sale but each employs a different inventory cost formula.If the price of goods has increased during the period, then the company using

Accepted Answer

A) FIFO will report lower ending inventory. 
B) average cost will report lower ending inventory. 
C) FIFO will report higher cost of goods sold. 
D) average cost will report lower cost of goods sold. 
A) FIFO will report lower ending inventory. 
B) average cost will report lower ending inventory. 
C) FIFO will report higher cost of goods sold. 
D) average cost will report lower cost of goods sold.

Question 20

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom'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)

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

The selection of an appropriate inventory cost formula for a company is made by

If prices never changed, there would be no need for alternative inventory cost formulas.

Of the following businesses, which one would not be likely to use the specific identification formula for inventory costing?

Wholesome Ltd.has a days in inventory ratio of 50 and average inventory of $320,000.What is its cost of goods sold?

Which of the following statements regarding inventory cost formulas is correct?

The FIFO inventory cost formula agrees closely to the actual physical movement of goods in most businesses.

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

The specific identification formula is desirable when a company sells a large number of low-unit-cost items.

If beginning inventory is understated by $10,000, the effect of this error in the current period is

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost formula in a perpetual inventory system. -The cost of goods sold for the July 9 sale was

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

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

Which of the following statements regarding inventories is correct?

What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated?

Two companies report the same cost of goods available for sale but each employs a different inventory cost formula.If the price of goods has increased during the period, then the company using

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom's inventory at December 31?

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters

Exam 6: Reporting and Analyzing Inventory

Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a

The selection of an appropriate inventory cost formula for a company is made by

If prices never changed, there would be no need for alternative inventory cost formulas.

Of the following businesses, which one would not be likely to use the specific identification formula for inventory costing?

Wholesome Ltd.has a days in inventory ratio of 50 and average inventory of $320,000.What is its cost of goods sold?

Which of the following statements regarding inventory cost formulas is correct?

The FIFO inventory cost formula agrees closely to the actual physical movement of goods in most businesses.

The lower of cost and net realizable value should be applied to the total inventory, rather than to individual inventory items.

The specific identification formula is desirable when a company sells a large number of low-unit-cost items.

If beginning inventory is understated by $10,000, the effect of this error in the current period is

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost formula in a perpetual inventory system. -The cost of goods sold for the July 9 sale was

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

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

Which of the following statements regarding inventories is correct?

What is the impact on cost of goods sold, gross profit, net income before taxes and retained earnings, respectively, if inventory is understated?

Two companies report the same cost of goods available for sale but each employs a different inventory cost formula.If the price of goods has increased during the period, then the company using

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom's inventory at December 31?

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters