Question 1

Hawk Store counted some of its inventory twice.As a result, its operating expenses will be

Accepted Answer

A)  Understated 
B)  Correct only if Hawk Store calculates it cost of goods sold correctly 
C)  Overstated 
D)  Correct since operating expenses are not affected by inventory costs 
A)  Understated 
B)  Correct only if Hawk Store calculates it cost of goods sold correctly 
C)  Overstated 
D)  Correct since operating expenses are not affected by inventory costs

Question 2

The effect of a misstatement of the year-end inventory is limited to the net income for that year.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following terms best describes "Cost of goods available for sale"?

Accepted Answer

A)  Cost of goods available for sale is an expense account. 
B)  Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. 
C)  Cost of goods available for sale is subtracted from net sales to arrive at the gross margin 
D)  Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year 
A)  Cost of goods available for sale is an expense account. 
B)  Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. 
C)  Cost of goods available for sale is subtracted from net sales to arrive at the gross margin 
D)  Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year

Question 4

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?

Accepted Answer

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

Question 5

Which one of the following statements is false regarding the gross profit ratio?

Accepted Answer

A)  The gross profit ratio is a measure of profitability. 
B)  The gross profit ratio is calculated by dividing net sales by gross profit. 
C)  The gross profit ratio can help investors decide whether or not to buy a company's stock. 
D)  The gross profit ratio should be compared with both a company's prior years' ratios and also competitor ratios. 
A)  The gross profit ratio is a measure of profitability. 
B)  The gross profit ratio is calculated by dividing net sales by gross profit. 
C)  The gross profit ratio can help investors decide whether or not to buy a company's stock. 
D)  The gross profit ratio should be compared with both a company's prior years' ratios and also competitor ratios.

Question 6

Quan uses a periodic inventory system.At the end of April, Quan had 20 units on hand. April $\begin{array}{ll}
1&\text { On hand, } 10 \text { units } @ \$ 2 \text { each } & \$ 20 \
19&\text { Purchased } 90 \text { units } @ \$ 3 \text { each } & \$ 270 \
&\text { Goods available for sale } & \$ 290
\end{array}$ ? If Quan, Inc.uses the weighted average cost inventory method, how much is cost of goods sold for April?

Accepted Answer

A)  $240 
B)  $250 
C)  $230 
D)  $232 
A)  $240 
B)  $250 
C)  $230 
D)  $232

Question 7

Which one of the following best explains the distinction between inventory and an operating asset?

Accepted Answer

A)  ownership 
B)  cost 
C)  intent 
D)  purchase price 
A)  ownership 
B)  cost 
C)  intent 
D)  purchase price

Question 8

Blenham, Inc.sells merchandise on credit.If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation?

Accepted Answer

A)  Assets and stockholders' equity decrease. 
B)  Assets decrease and liabilities increase. 
C)  Assets and stockholders' equity increase. 
D)  No net effect. 
A)  Assets and stockholders' equity decrease. 
B)  Assets decrease and liabilities increase. 
C)  Assets and stockholders' equity increase. 
D)  No net effect.

Question 9

For which type of inventory would a company most likely use the specific identification method?

Accepted Answer

A)  Custom designed diamond rings 
B)  Barbie dolls 
C)  Cartons of milk 
D)  Gasoline in storage tanks at a gasoline station 
A)  Custom designed diamond rings 
B)  Barbie dolls 
C)  Cartons of milk 
D)  Gasoline in storage tanks at a gasoline station

Question 10

The ratio of a company's cost of goods sold to its average inventory is called its ________________________________________.

Accepted Answer

inventory

Question 11

Which one of the following statements is false?

Accepted Answer

A)  The primary determinant in selecting an inventory costing method should be the ability of the method to accurately reflect the net income of the period. 
B)  The amount of cash to acquire inventory is the same for companies that use LIFO as for those companies that use FIFO. 
C)  Differences in cash flows between LIFO and FIFO inventory methods are caused by differences in taxes. 
D)  Differences in cash flows between LIFO and FIFO inventory methods are a direct result of the differences in the purchases 
A)  The primary determinant in selecting an inventory costing method should be the ability of the method to accurately reflect the net income of the period. 
B)  The amount of cash to acquire inventory is the same for companies that use LIFO as for those companies that use FIFO. 
C)  Differences in cash flows between LIFO and FIFO inventory methods are caused by differences in taxes. 
D)  Differences in cash flows between LIFO and FIFO inventory methods are a direct result of the differences in the purchases

Question 12

A company began the year with $150,000 in inventory and ended the year with $170,000 in inventory.Cost of goods sold for the year amounted to $960,000.Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?

Accepted Answer

A)  3 days 
B)  60 days 
C)  6 days 
D)  120 days 
A)  3 days 
B)  60 days 
C)  6 days 
D)  120 days

Question 13

The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.

Accepted Answer

A) True 
 B)False

Question 14

Which method assigns the same cost to all units whether sold or left in ending inventory?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Weighted average cost 
D)  Specific identification 
A)  FIFO 
B)  LIFO 
C)  Weighted average cost 
D)  Specific identification

Question 15

Which one of the following is correct?

Accepted Answer

A)  Inventory losses can be identified and controlled better under the perpetual system. 
B)  The perpetual system eliminates the need for an annual inventory count. 
C)  There is no difference in cost to implement a perpetual as compared to a periodic system. 
D)  Inventory can only be sold at the end of an accounting period under the periodic system. 
A)  Inventory losses can be identified and controlled better under the perpetual system. 
B)  The perpetual system eliminates the need for an annual inventory count. 
C)  There is no difference in cost to implement a perpetual as compared to a periodic system. 
D)  Inventory can only be sold at the end of an accounting period under the periodic system.

Question 16

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment.
-Cost of storing the goods before they are sold 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 17

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment.
-Sales taxes paid on goods acquired

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Summer, Inc.has been in business for 20 years.During that time the company has consistently used the LIFO inventory costing method.Because of inflation, prices for merchandise have increased consistently over the 20 years.The company has maintained the same inventory quantities over the 20-year period.Which one of the following statements is true?

Accepted Answer

A)  Summer, Inc.will have paid more income taxes over the past 20 years than it would have if it had used the FIFO method. 
B)  Summer, Inc.'s total net income for the past 20 years is greater than it would have reported using another inventory method. 
C)  Summer will have to continue using the LIFO method indefinitely because of generally accepted accounting principles and federal income tax rules. 
D)  The ending inventory figure reported on the balance sheet may be significantly lower than its current value. 
A)  Summer, Inc.will have paid more income taxes over the past 20 years than it would have if it had used the FIFO method. 
B)  Summer, Inc.'s total net income for the past 20 years is greater than it would have reported using another inventory method. 
C)  Summer will have to continue using the LIFO method indefinitely because of generally accepted accounting principles and federal income tax rules. 
D)  The ending inventory figure reported on the balance sheet may be significantly lower than its current value.

Question 20

Which of the following statements is true when using the indirect method of preparing the operating activities section of the statement of cash flows?

Accepted Answer

A)  Inventory decreases are subtracted from net income. 
B)  Inventory increases are subtracted from net income. 
C)  Inventory increases are added to net income. 
D)  None of the above. 
A)  Inventory decreases are subtracted from net income. 
B)  Inventory increases are subtracted from net income. 
C)  Inventory increases are added to net income. 
D)  None of the above.

Hawk Store counted some of its inventory twice.As a result, its operating expenses will be

The effect of a misstatement of the year-end inventory is limited to the net income for that year.

Which of the following terms best describes "Cost of goods available for sale"?

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?

Which one of the following statements is false regarding the gross profit ratio?

Which one of the following best explains the distinction between inventory and an operating asset?

Blenham, Inc.sells merchandise on credit.If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation?

For which type of inventory would a company most likely use the specific identification method?

The ratio of a company's cost of goods sold to its average inventory is called its ________________________________________.

Which one of the following statements is false?

A company began the year with $150,000 in inventory and ended the year with $170,000 in inventory.Cost of goods sold for the year amounted to $960,000.Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?

The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.

Which method assigns the same cost to all units whether sold or left in ending inventory?

Which one of the following is correct?

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Cost of storing the goods before they are sold to customers

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Sales taxes paid on goods acquired

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

Which of the following statements is true when using the indirect method of preparing the operating activities section of the statement of cash flows?

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 True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters

Exam 5: Inventories and Cost of Goods Sold

Hawk Store counted some of its inventory twice.As a result, its operating expenses will be

The effect of a misstatement of the year-end inventory is limited to the net income for that year.

Which of the following terms best describes "Cost of goods available for sale"?

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?

Which one of the following statements is false regarding the gross profit ratio?

Which one of the following best explains the distinction between inventory and an operating asset?

Blenham, Inc.sells merchandise on credit.If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation?

For which type of inventory would a company most likely use the specific identification method?

The ratio of a company's cost of goods sold to its average inventory is called its ________________________________________.

Which one of the following statements is false?

A company began the year with $150,000 in inventory and ended the year with $170,000 in inventory.Cost of goods sold for the year amounted to $960,000.Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?

The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.

Which method assigns the same cost to all units whether sold or left in ending inventory?

Which one of the following is correct?

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Cost of storing the goods before they are sold to customers

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Sales taxes paid on goods acquired

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

Which of the following statements is true when using the indirect method of preparing the operating activities section of the statement of cash flows?

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 True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters