Question 1

A high inventory turnover ratio indicates that minimal funds are tied up in inventory.

Accepted Answer

A) True 
 B)False

Question 2

The specific identification formula of costing inventories is used when the

Accepted Answer

A)  physical flow of units cannot be determined. 
B)  company sells large quantities of relatively homogeneous items. 
C)  company has sophisticated technology to account for its inventory. 
D)  company sells a small number of expensive, easily distinguishable items. 
A)  physical flow of units cannot be determined. 
B)  company sells large quantities of relatively homogeneous items. 
C)  company has sophisticated technology to account for its inventory. 
D)  company sells a small number of expensive, easily distinguishable items.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 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

Copper Mining Inc. has been stock-piling copper inventory in anticipation of better prices. Unfortunately, the market has not improved and at year end, December 31, 2017, inventory with a cost of $4.5 million would only be worth $3.5 million if it could be sold.During the next year, the prices start to recover, but the company still has not sold the inventory. At December 31, 2018, the market value of the same copper inventory has increased and would be worth $4.6 million.Instructions
a. Prepare the adjusting entry required at December 31, 2017 to record the decline in the value of the inventory, assuming Copper Mining uses a perpetual inventory system.
b. Prepare the adjusting entry required at December 31, 2018, if any.

Accepted Answer

The answer of Copper Mining Inc. has been stock-piling copper...

Question 7

A problem with the specific identification formula is that

Accepted Answer

A)  inventories can be reported at actual costs. 
B)  management can manipulate net income. 
C)  matching is not achieved. 
D)  lower of cost and net realizable value cannot be applied. 
A)  inventories can be reported at actual costs. 
B)  management can manipulate net income. 
C)  matching is not achieved. 
D)  lower of cost and net realizable value cannot be applied.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Anderson's Used Cars uses the specific identification formula of costing inventory. During March, Anderson purchased three cars: a Honda Civic for $6,200, a Chevy Malibu for $7,300, and a Ford Pinto $8,400, respectively. During March, two cars are sold for $8,600 each. Anderson determines that at March 31, the Ford Pinto is still on hand. What is Anderson's cost of goods sold for March?

Accepted Answer

A)  $8,400 
B)  $13,500 
C)  $15,700 
D)  $17,200 
A)  $8,400 
B)  $13,500 
C)  $15,700 
D)  $17,200

Question 10

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 11

In order to remove the cost of items sold from inventory, a unit cost must be determined.

Accepted Answer

A) True 
 B)False

Question 12

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 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 13

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.)   If XYZ Inc. was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be

Accepted Answer

A)  higher. 
B)  lower. 
C)  the same. 
D)  cannot be determined. 
A)  higher. 
B)  lower. 
C)  the same. 
D)  cannot be determined.

Question 14

Consigned goods are held for sale by one party, although ownership of the goods is retained by another party.

Accepted Answer

A) True 
 B)False

Question 15

To accurately determine inventory quantities, a company must

Accepted Answer

A)  use the perpetual inventory system. 
B)  employ an independent company to conduct inventory counts. 
C)  rely on the warehouse records. 
D)  take a physical inventory. 
A)  use the perpetual inventory system. 
B)  employ an independent company to conduct inventory counts. 
C)  rely on the warehouse records. 
D)  take a physical inventory.

Question 16

Use the following information for the month of July for questions.  
-Total cost of goods sold for the month of July is

Accepted Answer

A)  $2,330. 
B)  $2,530. 
C)  $2,830. 
D)  $2,880. 
A)  $2,330. 
B)  $2,530. 
C)  $2,830. 
D)  $2,880.

Question 17

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is

Accepted Answer

The answer of An error in the physical count of...

Question 18

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 19

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the unit cost assigned to the cost of goods sold will be the same under FIFO and average cost formulas.

Accepted Answer

A) True 
 B)False

Question 20

Rayleigh Corporation, which uses a perpetual inventory system, recorded the following inventory transactions during the last two months of 2018:   Instructions 
a. Using the FIFO cost formula, calculate the cost of goods sold for the two months of November and December. Show calculations.
b. Using the average cost formula, calculate the ending inventory at December 31. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.

Accepted Answer

@#IMG-DLM& Please note that di

A high inventory turnover ratio indicates that minimal funds are tied up in inventory.

The specific identification formula of costing inventories is used when the

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

Cost of goods available for sale consists of the

A problem with the specific identification formula is that

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

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

In order to remove the cost of items sold from inventory, a unit cost must be determined.

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.) If XYZ Inc. was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be

Consigned goods are held for sale by one party, although ownership of the goods is retained by another party.

To accurately determine inventory quantities, a company must

Use the following information for the month of July for questions. -Total cost of goods sold for the month of July is

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is

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

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the unit cost assigned to the cost of goods sold will be the same under FIFO and average cost formulas.

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

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Exam 6: Reporting and Analyzing Inventory

A high inventory turnover ratio indicates that minimal funds are tied up in inventory.

The specific identification formula of costing inventories is used when the

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

Cost of goods available for sale consists of the

A problem with the specific identification formula is that

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

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

In order to remove the cost of items sold from inventory, a unit cost must be determined.

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.) If XYZ Inc. was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be

Consigned goods are held for sale by one party, although ownership of the goods is retained by another party.

To accurately determine inventory quantities, a company must

Use the following information for the month of July for questions. -Total cost of goods sold for the month of July is

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is

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

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the unit cost assigned to the cost of goods sold will be the same under FIFO and average cost formulas.

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