Question 1

Inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

Accepted Answer

A) net income is understated 
B) net income is overstated 
C) cost of goods sold is understated 
D) inventory reported on the balance sheet is overstated 
A) net income is understated 
B) net income is overstated 
C) cost of goods sold is understated 
D) inventory reported on the balance sheet is overstated

Question 2

The weighted average cost method will always yield results between FIFO and LIFO.

Accepted Answer

A) True 
 B)False

Question 3

Match each description to the appropriate cost flow assumption (a-d).
-Cost flow is in the order in which the costs were incurred.
A)Weighted average
B)First-in, first-out (FIFO)c.Last-in, first-out (LIFO)d.Specific identification

Accepted Answer

The answer of Match each description to the appropriate cost...

Question 4

The following data were taken from Castle, Inc.Cost of goods sold $894,000
Inventory, end of year
78,000
Inventory, beginning of the year
92,000
What is (1) the inventory turnover ratio and (2) the number of days' sales in inventory for Castle Inc.

Accepted Answer

A) (1) 11.46 times (2) 31.85 days 
B) (1) 10.52 times (2) 34.70 days 
C) (1) 9.72 times (2) 37.56 days 
D) (1) 10.53 times (2) 34.56 days 
A) (1) 11.46 times (2) 31.85 days 
B) (1) 10.52 times (2) 34.70 days 
C) (1) 9.72 times (2) 37.56 days 
D) (1) 10.53 times (2) 34.56 days

Question 5

1. Explain the effect of the following on the financial statements:
Goods held on consignment were included in the ending inventory count.​
Goods purchased FOB shipping point were in transit on the last day of the year.The goods were not counted as part of ending inventory.​
Goods sold FOB shipping point were in transit on the last day of the year.These goods were not counted as part of ending inventory.​
2. What happens if inventory errors are not found and corrected?

Accepted Answer

1. Goods held on consignment were includ

Question 6

Match each description to the appropriate cost flow assumption (a-c).
-Never results in either the highest or lowest possible net income
A)FIFO
B)LIFO
C)Weighted average

Accepted Answer

The answer of Match each description to the appropriate cost...

Question 7

The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow.   The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year.​
-What is the ending inventory balance at the end of the year using the LIFO method?

Accepted Answer

A) $1,685 
B) $1,575 
C) $1,805 
D) $3,815 
A) $1,685 
B) $1,575 
C) $1,805 
D) $3,815

Question 8

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is

Accepted Answer

A) FIFO 
B) LIFO 
C) average cost 
D) weighted average 
A) FIFO 
B) LIFO 
C) average cost 
D) weighted average

Question 9

Applying the lower of cost or market to each item of inventory, what should the total inventory value be for the following items?

Accepted Answer

A) $8,850 
B) $9,000 
C) $9,100 
D) $9,250 
A) $8,850 
B) $9,000 
C) $9,100 
D) $9,250

Question 10

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Accepted Answer

A) True 
 B)False

Question 11

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations.  
-Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the LIFO periodic inventory method.

Accepted Answer

A) Total sales: $56,975.00 Cost of goods sold: $36,431.25
Gross profit: $20,543.75
Ending inventory: $19,981.2 
B) Total sales: $56,975.00 Cost of goods sold: $36,587.50
Gross profit: $20,387.50
Ending inventory: $19,825.00 
C) Total sales: $56,975.00 Cost of goods sold: $37,312.50
Gross profit: $19,662.50
Ending inventory: $19,573.25 
D) Total sales: $56,975.00 Cost of goods sold: $37,401.75
Gross profit: $19,573.25
Ending inventory: $19,010.75 
A) Total sales: $56,975.00 Cost of goods sold: $36,431.25
Gross profit: $20,543.75
Ending inventory: $19,981.2 
B) Total sales: $56,975.00 Cost of goods sold: $36,587.50
Gross profit: $20,387.50
Ending inventory: $19,825.00 
C) Total sales: $56,975.00 Cost of goods sold: $37,312.50
Gross profit: $19,662.50
Ending inventory: $19,573.25 
D) Total sales: $56,975.00 Cost of goods sold: $37,401.75
Gross profit: $19,573.25
Ending inventory: $19,010.75

Question 12

The following lots of a Commodity P were available for sale during the year. Use this information to answer the questions that follow.​
Beginning inventory
5 units at $61
First purchase
15 units at $63
Second purchase
10 units at $74
Third purchase
10 units at $77
The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year.
-What is the year-end inventory balance using the LIFO method? Use the information provided in the table to answer this question

Accepted Answer

A) $1,380 
B) $1,375 
C) $1,510 
D) $1,250 
A) $1,380 
B) $1,375 
C) $1,510 
D) $1,250

Question 13

Match each situation to its impact (a-c) on the current year's net income.
a.Net income for the current year will be overstated.b.Net income for the current year will be understated.c.There will be no error effect on net income.
-Merchandise that was sold and shipped FOB destination on the last day of the year was not included in the seller's ending inventory.

Accepted Answer

The answer of Match each situation to its impact (a-c)...

Question 14

Match each description to the appropriate cost flow assumption (a-c).
-Produces the same cost of goods sold under both the periodic and the perpetual inventory systems
A)FIFO
B)LIFO
C)Weighted average

Accepted Answer

The answer of Match each description to the appropriate cost...

Question 15

A physical inventory should be taken at the end of every month.

Accepted Answer

A) True 
 B)False

Question 16

Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the goods sold.

Accepted Answer

A) True 
 B)False

Question 17

The lower of cost or market is a method of inventory valuation.

Accepted Answer

A) True 
 B)False

Question 18

Match each description to the appropriate cost flow assumption (a-d).
-Cost flow is assumed to be in the reverse order of costs incurred.
A)Weighted average
B)First-in, first-out (FIFO)c.Last-in, first-out (LIFO)d.Specific identification

Accepted Answer

The answer of Match each description to the appropriate cost...

Question 19

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

Accepted Answer

A) consignee 
B) retailer 
C) manufacturer 
D) shipper 
A) consignee 
B) retailer 
C) manufacturer 
D) shipper

Question 20

Beginning inventory, purchases, and sales for an inventory item are as follows:   The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO?

Accepted Answer

($755 × 30 units) +

Exam 6: Inventories

Inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

The weighted average cost method will always yield results between FIFO and LIFO.

Match each description to the appropriate cost flow assumption (a-d). -Cost flow is in the order in which the costs were incurred. A)Weighted average B)First-in, first-out (FIFO)c.Last-in, first-out (LIFO)d.Specific identification

The following data were taken from Castle, Inc.Cost of goods sold $894,000 Inventory, end of year 78,000 Inventory, beginning of the year 92,000 What is (1) the inventory turnover ratio and (2) the number of days' sales in inventory for Castle Inc.

Match each description to the appropriate cost flow assumption (a-c). -Never results in either the highest or lowest possible net income A)FIFO B)LIFO C)Weighted average

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is

Applying the lower of cost or market to each item of inventory, what should the total inventory value be for the following items?

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. -Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the LIFO periodic inventory method.

Match each description to the appropriate cost flow assumption (a-c). -Produces the same cost of goods sold under both the periodic and the perpetual inventory systems A)FIFO B)LIFO C)Weighted average

A physical inventory should be taken at the end of every month.

Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the goods sold.

The lower of cost or market is a method of inventory valuation.

Match each description to the appropriate cost flow assumption (a-d). -Cost flow is assumed to be in the reverse order of costs incurred. A)Weighted average B)First-in, first-out (FIFO)c.Last-in, first-out (LIFO)d.Specific identification

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

Beginning inventory, purchases, and sales for an inventory item are as follows: The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

The Accounting Cycle

Accounting for Retail Businesses

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Support Department and Joint Cost Allocation

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

The Balanced Scorecard and Corporate Social Responsibility

Investments

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