Question 1

Inventory turnover and days to sell inventory

Accepted Answer

A)  are different names for the same metric. 
B)  are inversely related. 
C)  are interpreted to be as the higher the better. 
D)  none of the above 
A)  are different names for the same metric. 
B)  are inversely related. 
C)  are interpreted to be as the higher the better. 
D)  none of the above

Question 2

Which of the following statements about the FIFO cost formula is true?

Accepted Answer

A)  The same costs per unit are assigned to the ending inventory and the cost of goods sold. 
B)  Companies prefer to use FIFO because it lowers their tax liability. 
C)  In times of rising prices FIFO will produce a higher net income than weighted-average. 
D)  In time of rising prices FIFO produces an inventory cost per unit that is lower than the cost per unit of cost of goods sold. 
A)  The same costs per unit are assigned to the ending inventory and the cost of goods sold. 
B)  Companies prefer to use FIFO because it lowers their tax liability. 
C)  In times of rising prices FIFO will produce a higher net income than weighted-average. 
D)  In time of rising prices FIFO produces an inventory cost per unit that is lower than the cost per unit of cost of goods sold.

Question 3

Listed below are the various inventory cost formulas, followed by a series of descriptive statements. Match the inventory cost formulas to the descriptive statements by placing the appropriate letter in the space provided.

Accepted Answer

The answer of Listed below are the various inventory cost...

Question 4

Explain how the choice of inventory cost formula, FIFO or weighted-average, would affect the analysis of a company's financial statements by a potential user. Identify what ratios are affected and how they are affected.

Accepted Answer

The choice of cost formula affects both

Question 5

The gross margin estimation method estimates the cost of goods sold by

Accepted Answer

A)  multiplying the sales revenue by cost-to-sales ratio. 
B)  multiplying the cost of goods available by the gross margin percentage. 
C)  multiplying the costs to sales ratio by purchases. 
D)  multiplying the sales revenue by the inventory turnover ratio. 
A)  multiplying the sales revenue by cost-to-sales ratio. 
B)  multiplying the cost of goods available by the gross margin percentage. 
C)  multiplying the costs to sales ratio by purchases. 
D)  multiplying the sales revenue by the inventory turnover ratio.

Question 6

All of the following are manufacturing accounts EXCEPT for

Accepted Answer

A)  Cost of Goods Available for Sale. 
B)  Raw Materials. 
C)  Finished Goods. 
D)  Work-in-Process. 
A)  Cost of Goods Available for Sale. 
B)  Raw Materials. 
C)  Finished Goods. 
D)  Work-in-Process.

Question 7

Listed below are characteristics relating to inventory costing systems. Place a check mark under the appropriate column that matches the characteristic to the inventory system.

Accepted Answer

The answer of Listed below are characteristics relating to inventory...

Question 8

When a periodic inventory system is used

Accepted Answer

A)  inventory shrinkage is impossible to calculate. 
B)  timely data is of utmost importance. 
C)  cost of goods sold is always known. 
D)  every inventory transaction is reflected in the inventory account. 
A)  inventory shrinkage is impossible to calculate. 
B)  timely data is of utmost importance. 
C)  cost of goods sold is always known. 
D)  every inventory transaction is reflected in the inventory account.

Question 9

Physical inventory counts are

Accepted Answer

A)  only necessary for periodic systems. 
B)  only necessary for perpetual systems. 
C)  necessary for periodic and perpetual systems as part of internal control. 
D)  not necessary at all if a company has an appropriate accounting system. 
A)  only necessary for periodic systems. 
B)  only necessary for perpetual systems. 
C)  necessary for periodic and perpetual systems as part of internal control. 
D)  not necessary at all if a company has an appropriate accounting system.

Question 10

Explain the importance of inventory for retailer and manufacturers? What is management's objective in managing inventory? Explain how this objective is achieved.

Accepted Answer

Inventory is often the most significant

Question 11

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period. Assuming no other inventory errors, the effect on the current period is

Accepted Answer

A)  an overstatement of gross profit. 
B)  an understatement of COGS. 
C)  an overstatement of ending inventory. 
D)  an understatement of net income. 
A)  an overstatement of gross profit. 
B)  an understatement of COGS. 
C)  an overstatement of ending inventory. 
D)  an understatement of net income.

Question 12

Customers become frustrated if a company does not have a product available when they order it. This is called

Accepted Answer

A)  a sell out. 
B)  spoilage. 
C)  obsolescence. 
D)  a stockout. 
A)  a sell out. 
B)  spoilage. 
C)  obsolescence. 
D)  a stockout.

Question 13

The inventory writedown incurred from applying the LCM rule to inventory is

Accepted Answer

A)  not reflected on the Statement of Financial Position. 
B)  an adjustment to cost of goods sold. 
C)  not reflected on the Statement of Income. 
D)  not considered a permanent loss. 
A)  not reflected on the Statement of Financial Position. 
B)  an adjustment to cost of goods sold. 
C)  not reflected on the Statement of Income. 
D)  not considered a permanent loss.

Question 14

Goods available for sale are found in

Accepted Answer

A)  work-in-process inventory. 
B)  raw materials inventory. 
C)  finished goods inventory. 
D)  cost of goods sold. 
A)  work-in-process inventory. 
B)  raw materials inventory. 
C)  finished goods inventory. 
D)  cost of goods sold.

Question 15

A friend of your works for a local electric products distributor and has been put in charge of the inventory count at year end. He has been told that he needs to make sure that he includes all of the inventory the company owns in his count, even those items that are not physically on the premises. He is confused by this. He knows that you are studying accounting and business and asks for your help. What explanation do you provide?

Accepted Answer

There are items that must be included in

Question 16

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Accepted Answer

A) True 
 B)False

Question 17

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

Accepted Answer

A) True 
 B)False

Question 18

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Accepted Answer

A) True 
 B)False

Question 19

Bertin's Boutique Inc., a furniture store, uses a periodic inventory system. The company president has heard that a perpetual inventory system would help him make better decisions in the day-to-day management of his business. He has come to you, the company accountant, for more information.
Instructions
Prepare a reply to the president that includes a brief description of the perpetual inventory system. Identify three disadvantages and three advantages associated with implementing such a system.

Accepted Answer

Perpetual inventory systems keep track o

Question 20

Very high turnovers

Accepted Answer

A)  are always the goal of management. 
B)  may create stockouts. 
C)  are a measurement of profitability. 
D)  are unaffected by inventory writedowns. 
A)  are always the goal of management. 
B)  may create stockouts. 
C)  are a measurement of profitability. 
D)  are unaffected by inventory writedowns.

Inventory turnover and days to sell inventory

Which of the following statements about the FIFO cost formula is true?

Listed below are the various inventory cost formulas, followed by a series of descriptive statements. Match the inventory cost formulas to the descriptive statements by placing the appropriate letter in the space provided.

Explain how the choice of inventory cost formula, FIFO or weighted-average, would affect the analysis of a company's financial statements by a potential user. Identify what ratios are affected and how they are affected.

The gross margin estimation method estimates the cost of goods sold by

All of the following are manufacturing accounts EXCEPT for

Listed below are characteristics relating to inventory costing systems. Place a check mark under the appropriate column that matches the characteristic to the inventory system.

When a periodic inventory system is used

Physical inventory counts are

Explain the importance of inventory for retailer and manufacturers? What is management's objective in managing inventory? Explain how this objective is achieved.

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period. Assuming no other inventory errors, the effect on the current period is

Customers become frustrated if a company does not have a product available when they order it. This is called

The inventory writedown incurred from applying the LCM rule to inventory is

Goods available for sale are found in

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Very high turnovers

Overview of Corporate Financial Reporting

Analyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

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Exam 7: Inventory

Inventory turnover and days to sell inventory

Which of the following statements about the FIFO cost formula is true?

Listed below are the various inventory cost formulas, followed by a series of descriptive statements. Match the inventory cost formulas to the descriptive statements by placing the appropriate letter in the space provided.

Explain how the choice of inventory cost formula, FIFO or weighted-average, would affect the analysis of a company's financial statements by a potential user. Identify what ratios are affected and how they are affected.

The gross margin estimation method estimates the cost of goods sold by

All of the following are manufacturing accounts EXCEPT for

Listed below are characteristics relating to inventory costing systems. Place a check mark under the appropriate column that matches the characteristic to the inventory system.

When a periodic inventory system is used

Physical inventory counts are

Explain the importance of inventory for retailer and manufacturers? What is management's objective in managing inventory? Explain how this objective is achieved.

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period. Assuming no other inventory errors, the effect on the current period is

Customers become frustrated if a company does not have a product available when they order it. This is called

The inventory writedown incurred from applying the LCM rule to inventory is

Goods available for sale are found in

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Very high turnovers

Overview of Corporate Financial Reporting

Analyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Filters