Question 1

The understatement of the beginning inventory balance causes:

Accepted Answer

A) Cost of goods sold to be overstated and net income to be correct. 
B) Cost of goods sold to be overstated and net income to be overstated. 
C) Cost of goods sold to be understated and net income to be overstated. 
D) Cost of goods sold to be understated and net income to be understated. 
E) Cost of goods sold to be overstated and net income to be understated. 
A) Cost of goods sold to be overstated and net income to be correct. 
B) Cost of goods sold to be overstated and net income to be overstated. 
C) Cost of goods sold to be understated and net income to be overstated. 
D) Cost of goods sold to be understated and net income to be understated. 
E) Cost of goods sold to be overstated and net income to be understated.

Question 2

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

Accepted Answer

A) True 
 B)False

Question 3

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Accepted Answer

A) True 
 B)False

Question 4

Use the following information for Shafer Company to compute inventory turnover for year 2. $$\begin{array} { | l | r | r | } 
\hline & \text { Y ear } 2 & \text { Y ear } 1 \
\hline \text { Net sales } & \$ 647,500 & \$ 582,000 \
\hline \text { Cost of goods sold } & 389,500 & 360,840 \
\hline \text { Ending inventory } & 76,700 & 79,380 \
\hline
\end{array}$$

Accepted Answer

A) 8.44 
B) 9.98 
C) 5.08 
D) 4.99 
E) 8.30 
A) 8.44 
B) 9.98 
C) 5.08 
D) 4.99 
E) 8.30

Question 5

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

Accepted Answer

A) True 
 B)False

Question 6

A company had the following purchases and sales during its first year of operations: $$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sales } \
\hline \text { January: } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February: } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May: } & 15 \text { units at } \$ 130 & 9 \text { units } \
\hline \text { September: } & 12 \text { units at } \$ 135 & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$ On December 31, there were 26 units remaining in ending inventory. Using the Periodic FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A) $5,400. 
B) $8,670. 
C) $3,540. 
D) $3,270. 
E) $5,130. 
A) $5,400. 
B) $8,670. 
C) $3,540. 
D) $3,270. 
E) $5,130.

Question 7

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is  $145,000, then estimated ending inventory at cost is $207,143.

Accepted Answer

A) True 
 B)False

Question 9

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. What is the amount of the lower cost of market adjustment the company must make as a result of this decline in value?

Accepted Answer

A) $400. 
B) $600. 
C) $800. 
D) $1,400. 
E) $1,000. 
A) $400. 
B) $600. 
C) $800. 
D) $1,400. 
E) $1,000.

Question 10

A company had the following purchases and sales during its first month of operations: $\begin{array}{|l|l|}
\hline \text { January 1 } & \text { Purchased } 10 \text { units at } \$ 4.00 \text { per unit } \
\hline \text { January } 9 & \text { Sold } 6 \text { units at } \$ 12.00 \text { per unit } \
\hline \text { January 17 } & \text { Purchased } 8 \text { units at } \$ 5.50 \text { per unit } \
\hline \text { January 27 } & \text { Sold } 7 \text { units at } \$ 12.00 \text { per unit } \
\hline
\end{array}$ Using the Periodic weighted average method, what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places.)

Accepted Answer

A) $23. 
B) $5. 
C) $27. 
D) $61. 
E) $84. 
A) $23. 
B) $5. 
C) $27. 
D) $61. 
E) $84.

Question 11

The company's inventory manager receives compensation that includes a bonus based on gross profit. You discover that the inventory manager has knowingly overstated ending inventory by $2 million. What effect does this error have on the financial statements of the company and specifically gross profit? Why would the manager knowingly overstate ending inventory? Would this be considered an ethics violation?

Accepted Answer

By overstating ending inventory, the cos

Question 12

A company's total cost of inventory was $329,000 and its current replacement cost is $307,000. Under the lower cost or market, the amount reported should be $329,000.

Accepted Answer

A) True 
 B)False

Question 13

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales: $$\begin{array} { | l | l | } 
\hline \text { August 2 } & 10 \text { units were purchased at } \$ 12 \text { per unit. } \
\hline \text { August 18 } & 15 \text { units were purchased at } \$ 14 \text { per unit. } \
\hline \text { August } 29 & 12 \text { units were sold. } \
\hline
\end{array}$$ What is the amount of the cost of goods sold for this sale? (Round average cost per unit to 2 decimal places.)

Accepted Answer

A) $158.40 
B) $150.50 
C) $210.00 
D) $148.00 
E) $330.00 
A) $158.40 
B) $150.50 
C) $210.00 
D) $148.00 
E) $330.00

Question 14

A company's normal selling price for its product is $20 per unit. However, due to market competition, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Accepted Answer

A) $3,200. 
B) $2,700. 
C) $2,550. 
D) $2,600. 
E) $3,000. 
A) $3,200. 
B) $2,700. 
C) $2,550. 
D) $2,600. 
E) $3,000.

Question 15

A company had the following purchases and sales during its first year of operations: $$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sales } \
\hline \text { January: } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February: } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May: } & 15 \text { units at } \$ 130 & 9 \text { units } \
\hline \text { September: } & 12 \text { units at } \$ 135 & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$ On December 31, there were 26 units remaining in ending inventory. Using the Perpetual FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A) $5,400. 
B) $3,540. 
C) $5,130. 
D) $8,670. 
E) $3,270. 
A) $5,400. 
B) $3,540. 
C) $5,130. 
D) $8,670. 
E) $3,270.

Question 16

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

In applying the lower of cost or market method to inventory valuation, market is defined as the current selling price.

Accepted Answer

A) True 
 B)False

Question 18

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Accepted Answer

A) True 
 B)False

Question 19

A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3, it purchases 20 units at $12 each. 12 units are sold on February 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that are sold?

Accepted Answer

A) $140 
B) $128 
C) $124 
D) $120 
E) $130 
A) $140 
B) $128 
C) $124 
D) $120 
E) $130

Question 20

During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:

Accepted Answer

A) FIFO method. 
B) LIFO method. 
C) Weighted-average method. 
D) Average cost method. 
E) Specific identification method. 
A) FIFO method. 
B) LIFO method. 
C) Weighted-average method. 
D) Average cost method. 
E) Specific identification method.

The understatement of the beginning inventory balance causes:

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Use the following information for Shafer Company to compute inventory turnover for year 2. Y ear 2 Y ear 1 Net sales \ 647,500 \ 582,000 Cost of goods sold 389,500 360,840 Ending inventory 76,700 79,380

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $145,000, then estimated ending inventory at cost is $207,143.

A company's total cost of inventory was $329,000 and its current replacement cost is $307,000. Under the lower cost or market, the amount reported should be $329,000.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

In applying the lower of cost or market method to inventory valuation, market is defined as the current selling price.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3, it purchases 20 units at $12 each. 12 units are sold on February 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that are sold?

During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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Exam 6: Inventories and Cost of Sales

The understatement of the beginning inventory balance causes:

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Use the following information for Shafer Company to compute inventory turnover for year 2. Y ear 2 Y ear 1 Net sales \ 647,500 \ 582,000 Cost of goods sold 389,500 360,840 Ending inventory 76,700 79,380

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $145,000, then estimated ending inventory at cost is $207,143.

A company's total cost of inventory was $329,000 and its current replacement cost is $307,000. Under the lower cost or market, the amount reported should be $329,000.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

In applying the lower of cost or market method to inventory valuation, market is defined as the current selling price.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3, it purchases 20 units at $12 each. 12 units are sold on February 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that are sold?

During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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