Question 1

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 2

An error

Accepted Answer

A)  in the ending inventory of the current period will have no effect on net income of the next accounting period. 
B)  that understates the ending inventory will cause net income for the period to be overstated. 
C)  that understates the ending inventory will cause assets to be understated. 
D)  that understates the ending inventory will cause the cost of goods sold for the period to be understated. 
A)  in the ending inventory of the current period will have no effect on net income of the next accounting period. 
B)  that understates the ending inventory will cause net income for the period to be overstated. 
C)  that understates the ending inventory will cause assets to be understated. 
D)  that understates the ending inventory will cause the cost of goods sold for the period to be understated.

Question 3

A company just starting a business purchased three inventory items at the following prices: March 2, $150; March 7, $160; and March 15, $180. If the company sold one unit for $230 on March 10 and one unit for $250 on March 20 and uses the average cost formula in a perpetual inventory system, what is the cost of ending inventory?

Accepted Answer

A)  $163.34 
B)  $167.50 
C)  $180.00 
D)  $250.00 
A)  $163.34 
B)  $167.50 
C)  $180.00 
D)  $250.00

Question 4

The consistent application of an inventory cost formula is essential for

Accepted Answer

A)  neutrality. 
B)  accuracy. 
C)  comparability. 
D)  relevance. 
A)  neutrality. 
B)  accuracy. 
C)  comparability. 
D)  relevance.

Question 5

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 6

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

Accepted Answer

A)  whether the method closely follows the physical flow of goods 
B)  whether the method reports an inventory cost that approximates recent cost 
C)  using the same method for inventory of similar nature and use 
D)  all of the above. 
A)  whether the method closely follows the physical flow of goods 
B)  whether the method reports an inventory cost that approximates recent cost 
C)  using the same method for inventory of similar nature and use 
D)  all of the above.

Question 7

The following information is available from recent financial statements of Competitor A and Competitor B:   Instructions 
a. Calculate the inventory turnover and days in inventory for both companies.
b. What conclusions concerning the management of inventory can be drawn from these data?

Accepted Answer

@#IMG-DLM& (b) Competitor B's inventory turnover i

Question 8

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 9

Which cost formula provides the better (1) income statement and (2) statement of financial position valuations, respectively?

Accepted Answer

A)  (1) average and (2) FIFO 
B)  (1) FIFO and (2) average 
C)  (1) FIFO and (2) FIFO 
D)  (1) average and (2) average 
A)  (1) average and (2) FIFO 
B)  (1) FIFO and (2) average 
C)  (1) FIFO and (2) FIFO 
D)  (1) average and (2) average

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 average cost formula, the cost of the ending inventory on June 30 is

Accepted Answer

A)  $670.00. 
B)  $690.50. 
C)  $1,645.55. 
D)  $1,675.00. 
A)  $670.00. 
B)  $690.50. 
C)  $1,645.55. 
D)  $1,675.00.

Question 11

The specific identification formula of inventory costing

Accepted Answer

A)  always maximizes a company's net income. 
B)  always minimizes a company's net income. 
C)  has no effect on a company's net income. 
D)  may enable management to manipulate net income. 
A)  always maximizes a company's net income. 
B)  always minimizes a company's net income. 
C)  has no effect on a company's net income. 
D)  may enable management to manipulate net income.

Question 12

The following information is available for Omari Corporation for 2018:   InstructionsCalculate the inventory turnover and days in inventory for Omari Corporation.

Accepted Answer

Inventory turnover = $6,000,00

Question 13

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 14

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the income statement will be reduced.

Accepted Answer

A) True 
 B)False

Question 15

All three methods of inventory cost formula will produce the same cumulative cost of goods sold over the life cycle of the business.

Accepted Answer

A) True 
 B)False

Question 16

Breaker Corp. uses the periodic inventory system, and has the following information about purchases and sales during the year:   InstructionsCalculate the cost to be assigned to ending inventory for each of the cost formula below: 
a. Average $____________
b. FIFO $____________

Accepted Answer

(a) $5,400 ($10,800

Question 17

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 18

Alto Ltd. uses the periodic inventory system and had the following inventory information available:   A physical count of inventory on December 31 showed that there were 700 units on hand.InstructionsAnswer the following independent questions and show calculations supporting your answers. 
a. Assume that the company uses FIFO. The value of the ending inventory at December 31 is $__________.
b. Assume that the company uses average cost. The value of the ending inventory on December 31 is $__________.
c. Determine the difference in the amount of net income that the company would have reported if it had used FIFO instead of average cost. Would net income have been greater or less?

Accepted Answer

@#IMG-DLM& (b) Average Cost: Ending inventory $7,8

Question 19

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 20

Kiwi Ltd., which uses a perpetual inventory system, recorded the following inventory transactions for this year:   Instructions 
a. Using the FIFO cost formula, calculate the cost of goods sold for the quarter ended June 30. Show calculations.
b. Using the average cost formula, calculate the ending inventory at June 30. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.

Accepted Answer

The answer of Kiwi Ltd., which uses a perpetual inventory...

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

An error

The consistent application of an inventory cost formula is essential for

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

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

The following information is available from recent financial statements of Competitor A and Competitor B: Instructions a. Calculate the inventory turnover and days in inventory for both companies. b. What conclusions concerning the management of inventory can be drawn from these data?

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

Which cost formula provides the better (1) income statement and (2) statement of financial position valuations, respectively?

The specific identification formula of inventory costing

The following information is available for Omari Corporation for 2018: InstructionsCalculate the inventory turnover and days in inventory for Omari Corporation.

Management may be able to manipulate net income using

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the income statement will be reduced.

All three methods of inventory cost formula will produce the same cumulative cost of goods sold over the life cycle of the business.

Breaker Corp. uses the periodic inventory system, and has the following information about purchases and sales during the year: InstructionsCalculate the cost to be assigned to ending inventory for each of the cost formula below: a. Average $ b. FIFO $

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

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

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

An error

The consistent application of an inventory cost formula is essential for

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

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

The following information is available from recent financial statements of Competitor A and Competitor B: Instructions a. Calculate the inventory turnover and days in inventory for both companies. b. What conclusions concerning the management of inventory can be drawn from these data?

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

Which cost formula provides the better (1) income statement and (2) statement of financial position valuations, respectively?

The specific identification formula of inventory costing

The following information is available for Omari Corporation for 2018: InstructionsCalculate the inventory turnover and days in inventory for Omari Corporation.

Management may be able to manipulate net income using

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the income statement will be reduced.

All three methods of inventory cost formula will produce the same cumulative cost of goods sold over the life cycle of the business.

Breaker Corp. uses the periodic inventory system, and has the following information about purchases and sales during the year: InstructionsCalculate the cost to be assigned to ending inventory for each of the cost formula below: a. Average $____________ b. FIFO $____________

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

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

Breaker Corp. uses the periodic inventory system, and has the following information about purchases and sales during the year: InstructionsCalculate the cost to be assigned to ending inventory for each of the cost formula below: a. Average $ b. FIFO $