Question 1

Many countries prohibit the use of LIFO for tax or financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 2

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Accepted Answer

A)  As a direct reduction to the Purchases account. 
B)  In contra accounts to the Purchases account. 
C)  As operating expenses. 
D)  As miscellaneous expenses. 
A)  As a direct reduction to the Purchases account. 
B)  In contra accounts to the Purchases account. 
C)  As operating expenses. 
D)  As miscellaneous expenses.

Question 3

If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.

Accepted Answer

A) True 
 B)False

Question 4

-Baker Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true?

Accepted Answer

A)  The customer can take a $10 discount if the invoice is paid on June 30. 
B)  The customer should pay $1,000 if the invoice is paid on July 9. 
C)  The customer must pay a $10 penalty if payment is made after July 9. 
D)  The customer must pay $1,010 if payment is made after June 20. 
A)  The customer can take a $10 discount if the invoice is paid on June 30. 
B)  The customer should pay $1,000 if the invoice is paid on July 9. 
C)  The customer must pay a $10 penalty if payment is made after July 9. 
D)  The customer must pay $1,010 if payment is made after June 20.

Question 5

Zebra Company overstated its December 31, 2014 inventory by $5,200. Which statement is true concerning Zebra's financial statement amounts for 2014?

Accepted Answer

A)  Working capital is understated. 
B)  The current ratio is overstated. 
C)  Cost of goods sold is overstated. 
D)  Net income is understated. 
A)  Working capital is understated. 
B)  The current ratio is overstated. 
C)  Cost of goods sold is overstated. 
D)  Net income is understated.

Question 6

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment.
-Income taxes paid on profits earned from selling goods to customers

Accepted Answer

A) Add to inventory cost 
B) Subtract from inventory cost 
C) Not an inventory cost 
A) Add to inventory cost 
B) Subtract from inventory cost 
C) Not an inventory cost

Question 7

When would LIFO liquidation occur?

Accepted Answer

A)  As a result of selling more units than are purchased during the period. 
B)  As a result of selling less units than are purchased during the period. 
C)  As a result of selling the same number of units that are purchased during the period. 
D)  Not enough information. 
A)  As a result of selling more units than are purchased during the period. 
B)  As a result of selling less units than are purchased during the period. 
C)  As a result of selling the same number of units that are purchased during the period. 
D)  Not enough information.

Question 8

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Accepted Answer

A)  If older less costly layers are liquidated, a correspondingly lower cost of goods sold will result. 
B)  If older less costly layers are liquidated, a correspondingly higher gross profit will result. 
C)  If older less costly layers are liquidated, the company may be faced with higher taxes for those deferred in previous periods. 
D)  All of these could result. 
A)  If older less costly layers are liquidated, a correspondingly lower cost of goods sold will result. 
B)  If older less costly layers are liquidated, a correspondingly higher gross profit will result. 
C)  If older less costly layers are liquidated, the company may be faced with higher taxes for those deferred in previous periods. 
D)  All of these could result.

Question 9

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Specific Identification 
D)  Weighted Average Cost 
A)  FIFO 
B)  LIFO 
C)  Specific Identification 
D)  Weighted Average Cost

Question 10

Identify which inventory costing method LIFO or FIFO achieves the effect listed in the following items:
-Prices are declining; gross margin is higher with this method

Accepted Answer

A) LIFO 
B) FIFO 
A) LIFO 
B) FIFO

Question 11

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

Accepted Answer

A)  an overstatement of inventory on the year-end balance sheet. 
B)  an understatement of gross profit in the following year. 
C)  an overstatement of retained earnings at the end of the year. 
D)  an overstatement of cost of goods sold for the current year. 
A)  an overstatement of inventory on the year-end balance sheet. 
B)  an understatement of gross profit in the following year. 
C)  an overstatement of retained earnings at the end of the year. 
D)  an overstatement of cost of goods sold for the current year.

Question 12

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

Accepted Answer

A)  The periodic inventory system 
B)  The perpetual inventory system 
C)  Both the periodic and perpetual inventory systems 
D)  Neither the periodic nor perpetual inventory systems 
A)  The periodic inventory system 
B)  The perpetual inventory system 
C)  Both the periodic and perpetual inventory systems 
D)  Neither the periodic nor perpetual inventory systems

Question 13

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Accepted Answer

A)  Raw materials inventory 
B)  Work in process inventory 
C)  Finished goods inventory 
D)  Merchandise inventory 
A)  Raw materials inventory 
B)  Work in process inventory 
C)  Finished goods inventory 
D)  Merchandise inventory

Question 14

The cost of goods sold for Johnnie, Inc. totaled $1,305,000. Sales returns and purchase returns were $3,000 and $4,000, respectively. Purchases totaled $1,300,000. Discounts taken by Johnnie totaled $7,000, while discounts taken by customers totaled $5,000. Beginning inventory was $90,000. Determine the amount of ending inventory to be reported on Johnnie, Inc.'s balance sheet.

Accepted Answer

$74,000
$90,000 Beginning Inve

Question 15

The value assigned to an asset such as inventory on the balance sheet determines the amount eventually recognized as an expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2015. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2015. Park paid the amount due on June 13, 2015. Park uses the periodic inventory system. What effect does recording the purchase of merchandise on June 5, 2015 have on Park's accounting equation?

Accepted Answer

A)  Assets and liabilities increase. 
B)  Liabilities increase and stockholders' equity decreases. 
C)  Assets and stockholders' equity increase. 
D)  Liabilities and stockholders' equity decrease. 
A)  Assets and liabilities increase. 
B)  Liabilities increase and stockholders' equity decreases. 
C)  Assets and stockholders' equity increase. 
D)  Liabilities and stockholders' equity decrease.

Question 17

If a company has a number of day's sales in inventory equal to 60, that means that it takes about two months on
average to sell its inventory.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the data for Learning Tree, Inc.
Explain why the amounts are different for LIFO under periodic and perpetual inventory systems.

Accepted Answer

The amounts for ending inventory and cos

Question 19

Giant-Mart purchased a big shipment of shoes from Right Balance, Inc. on credit near the end of its accounting period. Right Balance shipped the shoes in January and Giant-Mart received the shoes in February. Assume that Giant­Mart's accounting period ends on January 31, while Right Balance's accounting period ends on May 31.
REQUIRED: If the shoes are shipped FOB destination, who will pay the freight costs? If the shoes are shipped FOB shipping point, who will pay the freight costs?

Accepted Answer

If the shoes are shipped FOB d

Question 20

The following is from Goldman Inc.'s 2015 income statement.   How much will Goldman report as cost of goods purchased in its 2015 income statement?

Accepted Answer

A)  $184,600 
B)  $193,000 
C)  $201,400 
D)  $211,100 
A)  $184,600 
B)  $193,000 
C)  $201,400 
D)  $211,100

Many countries prohibit the use of LIFO for tax or financial reporting purposes.

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.

-Baker Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true?

Zebra Company overstated its December 31, 2014 inventory by $5,200. Which statement is true concerning Zebra's financial statement amounts for 2014?

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Income taxes paid on profits earned from selling goods to customers

When would LIFO liquidation occur?

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?

Identify which inventory costing method LIFO or FIFO achieves the effect listed in the following items: -Prices are declining; gross margin is higher with this method

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

The value assigned to an asset such as inventory on the balance sheet determines the amount eventually recognized as an expense on the income statement.

If a company has a number of day's sales in inventory equal to 60, that means that it takes about two months on average to sell its inventory.

Refer to the data for Learning Tree, Inc. Explain why the amounts are different for LIFO under periodic and perpetual inventory systems.

The following is from Goldman Inc.'s 2015 income statement. How much will Goldman report as cost of goods purchased in its 2015 income statement?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

Filters

Exam 5: Inventories and Cost of Goods Sold

Many countries prohibit the use of LIFO for tax or financial reporting purposes.

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.

-Baker Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true?

Zebra Company overstated its December 31, 2014 inventory by $5,200. Which statement is true concerning Zebra's financial statement amounts for 2014?

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Income taxes paid on profits earned from selling goods to customers

When would LIFO liquidation occur?

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?

Identify which inventory costing method LIFO or FIFO achieves the effect listed in the following items: -Prices are declining; gross margin is higher with this method

A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

The value assigned to an asset such as inventory on the balance sheet determines the amount eventually recognized as an expense on the income statement.

If a company has a number of day's sales in inventory equal to 60, that means that it takes about two months on average to sell its inventory.

Refer to the data for Learning Tree, Inc. Explain why the amounts are different for LIFO under periodic and perpetual inventory systems.

The following is from Goldman Inc.'s 2015 income statement. How much will Goldman report as cost of goods purchased in its 2015 income statement?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

Filters