Question 1

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 D

Question 2

Glamorous Gold Inc. opened for business on April 1, 2018 selling unique jewellery, which it purchases from local artisans. During April, the company made the following purchases:   On April 30, only inventory items 006, 008, and 010 remained in inventory.Instructions 
a. Calculate the cost of goods sold for April using the specific identification cost formula.
b. Discuss whether or not specific identification is an appropriate cost formula for this company.

Accepted Answer

(b) Specific identification would be the preferred inventory method for this company because it provides the most accurate cost of goods sold and ending inventory values. It is appropriate because of the uniqueness of the company's inventory items. The comparatively small volume of inventory items purchased and sold makes this method practical for either a computerized or manual inventory system.

Question 3

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.)   Jun 22 Sale 40 units
-The cost of goods sold for the June 10 sale is

Accepted Answer

A)  $545.60. 
B)  $549.96. 
C)  $550.00. 
D)  $557.75. 
A)  $545.60. 
B)  $549.96. 
C)  $550.00. 
D)  $557.75. B

Question 4

Once goods leave the premises of the seller, they should never be added to the seller's physical inventory count.

Accepted Answer

A) True 
 B)False

Question 5

Hansen Corporation uses the perpetual inventory system and had the following information available:   InstructionsAnswer the following independent questions and show calculations supporting your answers: 
a. Assume that the company uses the FIFO cost formula. The cost of goods sold for the Jan 21 sale was $__________.
b. Assume that the company uses the average cost formula. The cost of goods sold for the Jan 21 sale was $__________. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
c. Assume that the company uses the average cost formula. The value of the inventory after the Nov 15 sale was $__________. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
d. Assume that the company uses the FIFO cost formula. The value of the inventory after the Oct 20 purchase is $__________.

Accepted Answer

(a) Cost of Goods Sold (FIFO): (15 units

Question 6

The inventory cost formula that results in the inventory value on the statement of financial position that is closest to its actual cost is

Accepted Answer

A)  FIFO. 
B)  specific identification. 
C)  average cost. 
D)  either FIFO or average cost. 
A)  FIFO. 
B)  specific identification. 
C)  average cost. 
D)  either FIFO or average cost.

Question 7

A system of internal control is not needed when a company regularly takes a physical inventory.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information for the month of July for questions.  
-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 9

Coucous Corp. uses the periodic inventory system. Information related to Coucous' inventory for September is given below:   Instructions 
a. Calculate the ending inventory using FIFO assuming 400 units remain on hand at September 30 (show calculations).
b. Calculate the ending inventory using average cost assuming 400 units remain on hand at September 30 (show calculations).

Accepted Answer

(a) 400 units in ending inventory Under

Question 10

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 11

The cost of goods available for sale is allocated between

Accepted Answer

A)  beginning inventory and ending inventory. 
B)  beginning inventory and cost of goods on hand. 
C)  beginning inventory and cost of goods purchased. 
D)  ending inventory and cost of goods sold. 
A)  beginning inventory and ending inventory. 
B)  beginning inventory and cost of goods on hand. 
C)  beginning inventory and cost of goods purchased. 
D)  ending inventory and cost of goods sold.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

In a period of rising prices, which of the following inventory cost formulas generally results in the lowest net income figure?

Accepted Answer

A)  average cost 
B)  FIFO 
C)  The inventory cost formula only affects the statement of financial position. 
D)  Need more information to answer. 
A)  average cost 
B)  FIFO 
C)  The inventory cost formula only affects the statement of financial position. 
D)  Need more information to answer.

Question 18

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 19

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.)   Jun 22 Sale 40 units
-XYZ Inc. has an ending inventory on June 30 of

Accepted Answer

A)  $1,370.00. 
B)  $1,418.56. 
C)  $1,429.90. 
D)  $1,450.15. 
A)  $1,370.00. 
B)  $1,418.56. 
C)  $1,429.90. 
D)  $1,450.15.

Question 20

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

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

Once goods leave the premises of the seller, they should never be added to the seller's physical inventory count.

The inventory cost formula that results in the inventory value on the statement of financial position that is closest to its actual cost is

A system of internal control is not needed when a company regularly takes a physical inventory.

Use the following information for the month of July for questions. -The cost of goods sold for the July 9 sale was

The cost of goods available for sale is allocated between

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

Goods in transit shipped

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

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

In a period of rising prices, which of the following inventory cost formulas generally results in the lowest net income figure?

An overstatement of the beginning inventory results in

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

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

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

Once goods leave the premises of the seller, they should never be added to the seller's physical inventory count.

The inventory cost formula that results in the inventory value on the statement of financial position that is closest to its actual cost is

A system of internal control is not needed when a company regularly takes a physical inventory.

Use the following information for the month of July for questions. -The cost of goods sold for the July 9 sale was

The cost of goods available for sale is allocated between

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

Goods in transit shipped

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

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

In a period of rising prices, which of the following inventory cost formulas generally results in the lowest net income figure?

An overstatement of the beginning inventory results in

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

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