Question 1

In all cases when average-costing is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

Accepted Answer

A) True 
 B)False

Question 2

Use the following information for questions. $\text { Following information was available from the inventory records of Queen Company for July: }$
$\begin{array}{lrrr}&\text { Units }& \text { Unit Cost }& \text { Total.Cost }\
\text { Balance at July 1 } & 30,000 & £ 9.00 & £ 270,000 \
\text { Purchases: } & & & \
\quad \text { July 6 } & 20,000 & 10.20 & 204,000 \
\text { January 26 } & 27,000 & 10.40 & 280,800
\end{array}$

$\begin{array}{cc}\text { Sales: }\
\text { July } 7 &(25,000) \
\text { July } 31 &\underline{(40,000)} \
\text { Balance at July } 31 &\underline{\underline{ 12,000}}
\end{array}$
-What should be the inventory reported on Queen's July 31 statement of financial position using the average-cost inventory method (round per unit amounts to two decimal places)?

Accepted Answer

A)  $ £ 108,000 $. 
B)  $ £ 117,600 $. 
C)  $  £ 118,440 $. 
D)  $ £ 126,000 $. 
A)  $ £ 108,000 $. 
B)  $ £ 117,600 $. 
C)  $  £ 118,440 $. 
D)  $ £ 126,000 $.

Question 3

At May 1, 2011, Deitrich Company had beginning inventory consisting of 100 units with a unit cost of $€ 3.50$. During May, the company purchased inventory as follows:

200 units at $€ 3.50$
300 units at $€ 4.00$

The company sold 500 units during the month for $€ 6$ per unit. Deitrich uses the average cost method. The value of Deitrich's inventory at May 31, 2011 is

Accepted Answer

A) € 350 . 
B)  € 375 . 
C)  € 400 . 
D)  € 2,250 . 
A) € 350 . 
B)  € 375 . 
C)  € 400 . 
D)  € 2,250 .

Question 4

A company just starting business made the following four inventory purchases in June: $$\begin{array} { r r r r } 
\text { June } & 1 & 150 \text { units } & ¥ 5,200 \
\text { June } & 10 & 200 \text { units } & 7,800 \
\text { June } & 15 & 200 \text { units } & 8,400 \
\text { June } & 28 & 150 \text { units } & \underline{6,600} \
& & & \underline { ¥ 28,000 }
\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.Using the average-cost method, the amount allocated to the ending inventory on June 30 is

Accepted Answer

A)  $ ¥ 28,000 $. 
B)  $ ¥ 20,000 $. 
C)  $ ¥ 7,670 $. 
D)  $ ¥  8,000 $. 
A)  $ ¥ 28,000 $. 
B)  $ ¥ 20,000 $. 
C)  $ ¥ 7,670 $. 
D)  $ ¥  8,000 $.

Question 5

If beginning inventory is understated by $10,000, the effect of this error in the current period is 
$\begin{array}{ll}\text { Cost of Goods Sold }&\text { Net Income }\\end{array}$

Accepted Answer

A) $\begin{array}{ll}\text { Understated } & \text {\quad\quad Understated } \\end{array}$ 
B) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
C) $\begin{array}{ll}\text { Understated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
D) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Understated }
\end{array}$ 
A) $\begin{array}{ll}\text { Understated } & \text {\quad\quad Understated } \\end{array}$ 
B) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
C) $\begin{array}{ll}\text { Understated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
D) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Understated }
\end{array}$

Question 6

Inventory turnover is calculated as cost of goods sold divided by ending inventory.

Accepted Answer

A) True 
 B)False

Question 7

Widner Company understated its inventory by $10,000 at December 31, 2010.It did not correct the error in 2010 or 2011.As a result, Widner's equity was:

Accepted Answer

A) understated at December 31, 2010, and overstated at December 31, 2011. 
B) understated at December 31, 2010, and properly stated at December 31, 2011. 
C) overstated at December 31, 2010, and overstated at December 31, 2011. 
D) understated at December 31, 2010, and understated at December 31, 2011. 
A) understated at December 31, 2010, and overstated at December 31, 2011. 
B) understated at December 31, 2010, and properly stated at December 31, 2011. 
C) overstated at December 31, 2010, and overstated at December 31, 2011. 
D) understated at December 31, 2010, and understated at December 31, 2011.

Question 8

Transactions that affect inventories on hand have an effect on both the statement of financial position and the income statement.

Accepted Answer

A) True 
 B)False

Question 9

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

Accepted Answer

A) True 
 B)False

Question 10

A company just starting business made the following four inventory purchases in June: $$\begin{array} { r r r r } 
\text { June } & 1 & 150 \text { units } & ¥ 5,200 \
\text { June } & 10 & 200 \text { units } & 7,800 \
\text { June } & 15 & 200 \text { units } & 8,400 \
\text { June } & 28 & 150 \text { units } &\underline{ 6,600} \
& & & \underline { ¥ 28,000 }
\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. The inventory method which results in the highest gross profit for June is

Accepted Answer

A) the FIFO method. 
B) the specific identification method. 
C) the average-cost method. 
D) not determinable. 
A) the FIFO method. 
B) the specific identification method. 
C) the average-cost method. 
D) not determinable.

Question 11

A company purchased inventory as follows:

200 units at $\$ 10$
300 units at $\$ 12$

The average unit cost for inventory is

Accepted Answer

A) $10.00. 
B) $11.00. 
C) $11.20. 
D) $12.00. 
A) $10.00. 
B) $11.00. 
C) $11.20. 
D) $12.00.

Question 12

Use the following information for questions. $\text { Following information was available from the inventory records of Queen Company for July: }$
$\begin{array}{lrrr}&\text { Units }& \text { Unit Cost }& \text { Total.Cost }\
\text { Balance at July 1 } & 30,000 & £ 9.00 & £ 270,000 \
\text { Purchases: } & & & \
\quad \text { July 6 } & 20,000 & 10.20 & 204,000 \
\text { January 26 } & 27,000 & 10.40 & 280,800
\end{array}$

$\begin{array}{cc}\text { Sales: }\
\text { July } 7 &(25,000) \
\text { July } 31 &\underline{(40,000)} \
\text { Balance at July } 31 &\underline{\underline{ 12,000}}
\end{array}$
-What is Queen's cost of goods available for sale?

Accepted Answer

A)  $ £ 77,000 $. 
B)  $ £ 284,800 $. 
C)  $ £ 754,800 $. 
D)  cannot be determined. 
A)  $ £ 77,000 $. 
B)  $ £ 284,800 $. 
C)  $ £ 754,800 $. 
D)  cannot be determined.

Question 13

Use the following information for questions . $\text { Brocken Co. has the following data related to an item of inventory. }$
$\begin{array}{ll}
\text { Inventory, May } 1 & 1,000 \text { units } @ £ 4.20 \
\text { Purchase, May 7 } & 3,500 \text { units } @ £ 4.40 \
\text { Purchase, May } 16 & 700 \text { units } @ £ 4.50 \
\text { Inventory May } 31 & 1,300 \text { units }
\end{array}$
-The value assigned to cost of goods sold if Brocken uses average-cost is

Accepted Answer

A)  $ £ 17,062 $. 
B)  $ £ 16,900 $. 
C)  $ £ 16,961 $ 
D)  $ £ 17,520 $. 
A)  $ £ 17,062 $. 
B)  $ £ 16,900 $. 
C)  $ £ 16,961 $ 
D)  $ £ 17,520 $.

Question 14

Ching Inc. took a physical inventory at December 31,2010 and determined that $ ¥ 4,270,000 $ of goods were on hand. On December 29 , the company had ordered $ ¥ 1,010,000 $ of goods which were in transit. The goods were shipped f.o.b. shipping point and arrived on January 2,2011. The company had also sold and shipped f.o.b. destination $ ¥ 950,000 $ worth of inventory on December 28 . The goods arrived at the buyer's place of business on January 4, 2011. Ching's December 31, 2010 statement of financial position will report inventory of

Accepted Answer

A)  $ ¥  3,260,000 $. 
B)  $ ¥  4,270,000 $. 
C)  $ ¥ 5,280,000 $. 
D)  $ ¥  6,230,000 $. 
A)  $ ¥  3,260,000 $. 
B)  $ ¥  4,270,000 $. 
C)  $ ¥ 5,280,000 $. 
D)  $ ¥  6,230,000 $.

Question 15

Graham Company uses a periodic inventory system.Details for the inventory account for the month of January, 2011 are as follows: 
$\begin{array}{llrr}&\text { Units } &\text { Per unit price }&\text { Total }\
\text { Balance, } 1 / 1 / 11 & 300 & \$ 5.00 & \$ 1500 \
\text { Purchase, } 1 / 15 / 11 & 150 & 5.30 & 795 \
\text { Purchase, } 1 / 28 / 11 & 150 & 5.50 & 825
\end{array}$

An end of the month (1/31/11) inventory showed that 180 units were on hand.If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

Accepted Answer

A) $2,064 
B) $2,136 
C) $4,200 
D) $4,500 
A) $2,064 
B) $2,136 
C) $4,200 
D) $4,500

Question 16

In a period of rising prices, if a company uses the FIFO cost flow assumption, income tax expense will be lower than if they used average-costing.

Accepted Answer

A) True 
 B)False

Question 17

Inventories affect

Accepted Answer

A) only the statement of financial position. 
B) only the income statement. 
C) both the statement of financial position and the income statement. 
D) neither the statement of financial position nor the income statement. 
A) only the statement of financial position. 
B) only the income statement. 
C) both the statement of financial position and the income statement. 
D) neither the statement of financial position nor the income statement.

Question 18

Franco Company uses the FIFO inventory method.Its 2010, the company reported net income of €840,000.Had average-cost been used, the company would have reported net income of €760,000.Assuming a 40% tax rate, what is the impact of the inventory cost flow assumption on Franco's taxes for 2010?

Accepted Answer

A) Franco would pay €32,000 more in taxes for 2010 as a result of using FIFO inventory method rather than average-cost. 
B) Franco would pay €48,000 less in taxes for 2010 as a result of using FIFO inventory method rather than average-cost. 
C) the inventory method does not impact the amount of income tax paid. 
D) not determinable without income before taxes. 
A) Franco would pay €32,000 more in taxes for 2010 as a result of using FIFO inventory method rather than average-cost. 
B) Franco would pay €48,000 less in taxes for 2010 as a result of using FIFO inventory method rather than average-cost. 
C) the inventory method does not impact the amount of income tax paid. 
D) not determinable without income before taxes.

Question 19

If the inventory reported on a Gottleib Company's statement of financial position at December 31,2010 is overstated by $€ 1,200,000$, the company's retained earnings balance at December 31, 2011 will be

Accepted Answer

A)  understated by $€ 1,200,000$. 
B)  correct. 
C)  overstated by $€ 1,200,000$. 
D)  need more information to determine. 
A)  understated by $€ 1,200,000$. 
B)  correct. 
C)  overstated by $€ 1,200,000$. 
D)  need more information to determine.

Question 20

If goods in transit are shipped FOB destination

Accepted Answer

A) the seller has legal title to the goods until they are delivered. 
B) the buyer has legal title to the goods until they are delivered. 
C) the transportation company has legal title to the goods while the goods are in transit. 
D) no one has legal title to the goods until they are delivered. 
A) the seller has legal title to the goods until they are delivered. 
B) the buyer has legal title to the goods until they are delivered. 
C) the transportation company has legal title to the goods while the goods are in transit. 
D) no one has legal title to the goods until they are delivered.

In all cases when average-costing is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of Goods Sold Net Income

Inventory turnover is calculated as cost of goods sold divided by ending inventory.

Widner Company understated its inventory by $10,000 at December 31, 2010.It did not correct the error in 2010 or 2011.As a result, Widner's equity was:

Transactions that affect inventories on hand have an effect on both the statement of financial position and the income statement.

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

A company purchased inventory as follows: 200 units at $\$ 10$ 300 units at $\$ 12$ The average unit cost for inventory is

In a period of rising prices, if a company uses the FIFO cost flow assumption, income tax expense will be lower than if they used average-costing.

Inventories affect

Franco Company uses the FIFO inventory method.Its 2010, the company reported net income of €840,000.Had average-cost been used, the company would have reported net income of €760,000.Assuming a 40% tax rate, what is the impact of the inventory cost flow assumption on Franco's taxes for 2010?

If the inventory reported on a Gottleib Company's statement of financial position at December 31,2010 is overstated by $€ 1,200,000$ , the company's retained earnings balance at December 31, 2011 will be

If goods in transit are shipped FOB destination

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 6: Inventories

In all cases when average-costing is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of Goods Sold Net Income

Inventory turnover is calculated as cost of goods sold divided by ending inventory.

Widner Company understated its inventory by $10,000 at December 31, 2010.It did not correct the error in 2010 or 2011.As a result, Widner's equity was:

Transactions that affect inventories on hand have an effect on both the statement of financial position and the income statement.

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

A company purchased inventory as follows: 200 units at $10\$ 10$10 300 units at $12\$ 12$12 The average unit cost for inventory is

In a period of rising prices, if a company uses the FIFO cost flow assumption, income tax expense will be lower than if they used average-costing.

Inventories affect

Franco Company uses the FIFO inventory method.Its 2010, the company reported net income of €840,000.Had average-cost been used, the company would have reported net income of €760,000.Assuming a 40% tax rate, what is the impact of the inventory cost flow assumption on Franco's taxes for 2010?

If the inventory reported on a Gottleib Company's statement of financial position at December 31,2010 is overstated by €1,200,000€ 1,200,000€1,200,000 , the company's retained earnings balance at December 31, 2011 will be

If goods in transit are shipped FOB destination

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

A company purchased inventory as follows: 200 units at $\$ 10$ 300 units at $\$ 12$ The average unit cost for inventory is

If the inventory reported on a Gottleib Company's statement of financial position at December 31,2010 is overstated by $€ 1,200,000$ , the company's retained earnings balance at December 31, 2011 will be