Question 1

An overstatement of ending inventory in one period results in

Accepted Answer

A) no effect on net income of the next period. 
B) an overstatement of net income of the next period. 
C) an understatement of net income of the next period. 
D) an overstatement of the ending inventory of the next period. 
A) no effect on net income of the next period. 
B) an overstatement of net income of the next period. 
C) an understatement of net income of the next period. 
D) an overstatement of the ending inventory of the next period.

Question 2

Selection of an inventory cost formula by management should be influenced most by the

Accepted Answer

A) fiscal year end. 
B) physical flow of goods. 
C) goal of reporting inventory at its lowest cost. 
D) income tax effects. 
A) fiscal year end. 
B) physical flow of goods. 
C) goal of reporting inventory at its lowest cost. 
D) income tax effects.

Question 3

An overstatement of the beginning inventory results in

Accepted Answer

A) an overstatement of net income. 
B) an understatement of net income. 
C) no effect on the period's net income. 
D) a need to adjust purchases. 
A) an overstatement of net income. 
B) an understatement of net income. 
C) no effect on the period's net income. 
D) a need to adjust purchases.

Question 4

In a period of inflation (prices are rising), which inventory cost formula will result in higher net income?

Accepted Answer

A) FIFO 
B) average cost 
C) Cost of goods sold for the period will be the same under both formulas. 
D) There would be no effect on net income. 
A) FIFO 
B) average cost 
C) Cost of goods sold for the period will be the same under both formulas. 
D) There would be no effect on net income.

Question 5

Cost of goods available for sale consists of the

Accepted Answer

A) cost of beginning inventory plus the cost of ending inventory. 
B) cost of ending inventory plus the cost of goods purchased during the year. 
C) cost of beginning inventory plus the cost of goods purchased during the year. 
D) difference between the cost of goods purchased and the cost of goods sold during the year. 
A) cost of beginning inventory plus the cost of ending inventory. 
B) cost of ending inventory plus the cost of goods purchased during the year. 
C) cost of beginning inventory plus the cost of goods purchased during the year. 
D) difference between the cost of goods purchased and the cost of goods sold during the year.

Question 6

A change in the method of cost formula for inventory must be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Accepted Answer

A) True 
 B)False

Question 8

A company just starting in business purchased three merchandise inventory items at the following prices.March 2, $150; March 7, $160; and March 15, $180.If the company sold two units for $250 each on March 10 and March 20, and used the FIFO cost formula in a perpetual inventory system, the gross profit for March would be

Accepted Answer

A) $200. 
B) $190. 
C) $180. 
D) $150. 
A) $200. 
B) $190. 
C) $180. 
D) $150.

Question 9

Use the following information to answer questions 
Abalone Corp.uses a periodic inventory system.
   A physical count of merchandise inventory on July 31 shows that 25 units are on hand.
-Under the FIFO cost method, ending inventory at July 31 was

Accepted Answer

A) $1,500. 
B) $1,480. 
C) $500. 
A) $1,500. 
B) $1,480. 
C) $500.

Question 10

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

Accepted Answer

A) True 
 B)False

Question 11

Which cost formula smooths the effects of price changes?

Accepted Answer

A) specific identification 
B) FIFO 
C) average cost 
D) lower of cost and net realizable value 
A) specific identification 
B) FIFO 
C) average cost 
D) lower of cost and net realizable value

Question 12

The results under FIFO in a perpetual inventory system are the same as in a periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 13

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Accepted Answer

A) valued at their current cost. 
B) valued at their selling price. 
C) not under-valued. 
D) not over-valued. 
A) valued at their current cost. 
B) valued at their selling price. 
C) not under-valued. 
D) not over-valued.

Question 14

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 during transit. 
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 during transit. 
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 15

In order to determine cost of goods sold in a periodic inventory system we

Accepted Answer

A) add purchases to beginning inventory. 
B) subtract ending inventory from beginning inventory. 
C) subtract ending inventory from cost of goods available for sale. 
D) subtract purchases from ending inventory. 
A) add purchases to beginning inventory. 
B) subtract ending inventory from beginning inventory. 
C) subtract ending inventory from cost of goods available for sale. 
D) subtract purchases from ending inventory.

Question 16

Goods in transit shipped

Accepted Answer

A) FOB shipping point should be included in the buyer's ending inventory. 
B) FOB destination should not be excluded from the buyer's ending inventory. 
C) FOB shipping point should not be included in the buyer's ending inventory. 
D) FOB destination should not be included in the seller's ending inventory. 
A) FOB shipping point should be included in the buyer's ending inventory. 
B) FOB destination should not be excluded from the buyer's ending inventory. 
C) FOB shipping point should not be included in the buyer's ending inventory. 
D) FOB destination should not be included in the seller's ending inventory.

Question 17

A company may use more than one inventory cost formula if it has different types of inventory.

Accepted Answer

A) True 
 B)False

Question 18

Use the following information for the month of June for questions 
XYZ Inc.uses the average cost formula in a perpetual inventory system.
(Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
  
-The cost of goods sold for the June 8 sale is

Accepted Answer

A) $1,480.00. 
B) $1,505.00. 
C) $1,527.68. 
D) $1,540.00. 
A) $1,480.00. 
B) $1,505.00. 
C) $1,527.68. 
D) $1,540.00.

Question 19

Management may be able to manipulate net income using

Accepted Answer

A) the FIFO cost formula. 
B) specific identification. 
C) the average cost formula. 
D) need more information to answer. 
A) the FIFO cost formula. 
B) specific identification. 
C) the average cost formula. 
D) need more information to answer.

Question 20

When using the perpetual system, the average cost formula relies on a simple average calculation.

Accepted Answer

A) True 
 B)False

An overstatement of ending inventory in one period results in

Selection of an inventory cost formula by management should be influenced most by the

An overstatement of the beginning inventory results in

In a period of inflation (prices are rising), which inventory cost formula will result in higher net income?

Cost of goods available for sale consists of the

A change in the method of cost formula for inventory must be disclosed in the financial statements.

When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Use the following information to answer questions Abalone Corp.uses a periodic inventory system. A physical count of merchandise inventory on July 31 shows that 25 units are on hand. -Under the FIFO cost method, ending inventory at July 31 was

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

Which cost formula smooths the effects of price changes?

The results under FIFO in a perpetual inventory system are the same as in a periodic inventory system.

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

If goods in transit are shipped FOB destination,

In order to determine cost of goods sold in a periodic inventory system we

Goods in transit shipped

A company may use more than one inventory cost formula if it has different types of inventory.

Use the following information for the month of June for questions XYZ Inc.uses the average cost formula in a perpetual inventory system. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.) -The cost of goods sold for the June 8 sale is

Management may be able to manipulate net income using

When using the perpetual system, the average cost formula relies on a simple average calculation.

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

An overstatement of ending inventory in one period results in

Selection of an inventory cost formula by management should be influenced most by the

An overstatement of the beginning inventory results in

In a period of inflation (prices are rising), which inventory cost formula will result in higher net income?

Cost of goods available for sale consists of the

A change in the method of cost formula for inventory must be disclosed in the financial statements.

When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Use the following information to answer questions Abalone Corp.uses a periodic inventory system. A physical count of merchandise inventory on July 31 shows that 25 units are on hand. -Under the FIFO cost method, ending inventory at July 31 was

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

Which cost formula smooths the effects of price changes?

The results under FIFO in a perpetual inventory system are the same as in a periodic inventory system.

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

If goods in transit are shipped FOB destination,

In order to determine cost of goods sold in a periodic inventory system we

Goods in transit shipped

A company may use more than one inventory cost formula if it has different types of inventory.

Management may be able to manipulate net income using

When using the perpetual system, the average cost formula relies on a simple average calculation.

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