Question 1

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 2

Which one of the following statements regarding changing inventory methods is true?

Accepted Answer

A)  A change in inventory methods can be justified if the change is made to better match profits with revenue. 
B)  One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity. 
C)  Changing inventory methods affects consistency. 
D)  Tax advantages are valid justification for changing inventory methods. 
A)  A change in inventory methods can be justified if the change is made to better match profits with revenue. 
B)  One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity. 
C)  Changing inventory methods affects consistency. 
D)  Tax advantages are valid justification for changing inventory methods.

Question 3

The three distinct types of cost to a manufacturer are direct materials, direct labor, and
manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 4

Selected data for Sorenta, Inc.and New World Corp., two companies in the same industry, are presented below: $$\begin{array} {l r r } 
&\text { Sorenta, Inc. } & \text { New World Corp. } \
\hline \text {Sales }& \$ 50,000 & \$ 80,000 \
\text {Cost of goods sold }&30,000 & 50,000 \
\text { Average inventory balance}&5,000 & 5,000
\end{array}$$ Based on this data, which statement below is true?

Accepted Answer

A)  New World Corp sells its inventory faster than Sorenta, Inc. 
B)  Sorenta, Inc.has a lower gross profit ratio than New World Corp. 
C)  Sorenta, Inc.has lower storage costs and a lower investment in inventory than New World Corp. 
D)  New World Corp has a higher net income than Sorenta, Inc. 
A)  New World Corp sells its inventory faster than Sorenta, Inc. 
B)  Sorenta, Inc.has a lower gross profit ratio than New World Corp. 
C)  Sorenta, Inc.has lower storage costs and a lower investment in inventory than New World Corp. 
D)  New World Corp has a higher net income than Sorenta, Inc.

Question 5

The inventory costing method is applied after each sale of merchandise to update the Inventory account.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following types of inventory accounts would be used by a wholesaler or retailer?

Accepted Answer

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

Question 7

Which method of inventory costing is not acceptable for financial accounting purposes?

Accepted Answer

A)  Specific Identification 
B)  LIFO 
C)  FIFO 
D)  Replacement Cost 
A)  Specific Identification 
B)  LIFO 
C)  FIFO 
D)  Replacement Cost

Question 8

Cost of goods available for sale is equal to beginning inventory less cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 9

The weighted average cost is calculated by adding up the units' costs from each purchase and then dividing by the number of purchases.

Accepted Answer

A) True 
 B)False

Question 10

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Costs of direct materials, overhead, and direct labor used in unfinished goods.

Accepted Answer

A) Merchandise Inventory 
B) Raw Materials 
C) Work in Process 
D) Finished Goods 
E) Cost of Goods Sold 
A) Merchandise Inventory 
B) Raw Materials 
C) Work in Process 
D) Finished Goods 
E) Cost of Goods Sold

Question 11

A departure from the cost basis of accounting may be necessary when the _________________________ of the inventory is less than its cost to the company.

Accepted Answer

The answer of A departure from the cost basis of...

Question 12

The gross profit ratio is calculated as gross profit divided by net income.

Accepted Answer

A) True 
 B)False

Question 13

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Accepted Answer

A)  Sales Returns 
B)  Purchase Returns 
C)  Accounts Receivable 
D)  Sales Revenue 
A)  Sales Returns 
B)  Purchase Returns 
C)  Accounts Receivable 
D)  Sales Revenue

Question 14

Floors, Inc.offers terms of 2/10, n/30 to credit customers.Tile Magic Corp.purchased 100 tile cutters with a list price of $20 each on August 5, 2016, on account.Tile Magic Corp.paid the invoice on August 31, 2016.How much sales discount will Floors recognize?

Accepted Answer

A)  $ 40 
B)  $ -0- 
C)  $ 200 
D)  $ 236 
A)  $ 40 
B)  $ -0- 
C)  $ 200 
D)  $ 236

Question 15

Which one of the following statements is true?

Accepted Answer

A)  Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold. 
B)  Alternative inventory cost flow assumptions have the same effect on the amount of net income reported. 
C)  Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold. 
D)  The flow of inventory costs should match the physical flow of the merchandise. 
A)  Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold. 
B)  Alternative inventory cost flow assumptions have the same effect on the amount of net income reported. 
C)  Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold. 
D)  The flow of inventory costs should match the physical flow of the merchandise.

Question 16

Xu Corp.started business at the beginning of 2016.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2016 under this method, prices must be

Accepted Answer

A)  Stable 
B)  Decreasing 
C)  Increasing 
D)  Fluctuating up and down at the same amount consistently over the year 
A)  Stable 
B)  Decreasing 
C)  Increasing 
D)  Fluctuating up and down at the same amount consistently over the year

Question 17

Maxim Company sells auto parts.The company employs a periodic inventory system.Identify all the effects on the accounting equation.
-Gave a customer a cash refund.

Accepted Answer

A) Increase in assets 
B) Decrease in assets 
C) Increase in liabilities 
D) Decrease in liabilities 
E) Increase on owners' equity
F)Decrease in owners' equity
G)Increase in assets and increase in owners' equity
H)Decrease in assets and decrease in owners' equity
I)Increase in liabilities and decrease in owners' equity
J)Decrease in liabilities and increase in owners' equity 
A) Increase in assets 
B) Decrease in assets 
C) Increase in liabilities 
D) Decrease in liabilities 
E) Increase on owners' equity
F)Decrease in owners' equity
G)Increase in assets and increase in owners' equity
H)Decrease in assets and decrease in owners' equity
I)Increase in liabilities and decrease in owners' equity
J)Decrease in liabilities and increase in owners' equity

Question 18

Ending inventory is equal to the cost of items on hand plus

Accepted Answer

A)  the cost of all inventory purchased during the period. 
B)  merchandise in transit sold to customers FOB shipping point. 
C)  merchandise purchased in transit with terms FOB destination. 
D)  merchandise in transit sold to customers FOB destination. 
A)  the cost of all inventory purchased during the period. 
B)  merchandise in transit sold to customers FOB shipping point. 
C)  merchandise purchased in transit with terms FOB destination. 
D)  merchandise in transit sold to customers FOB destination.

Question 19

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

Accepted Answer

A)  full disclosure principle 
B)  matching principle 
C)  historical cost principle 
D)  revenue realization principle 
A)  full disclosure principle 
B)  matching principle 
C)  historical cost principle 
D)  revenue realization principle

Question 20

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Costs to purchase goods ready to sell.

Accepted Answer

A) Merchandise Inventory 
B) Raw Materials 
C) Work in Process 
D) Finished Goods 
E) Cost of Goods Sold 
A) Merchandise Inventory 
B) Raw Materials 
C) Work in Process 
D) Finished Goods 
E) Cost of Goods Sold

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.

Which one of the following statements regarding changing inventory methods is true?

The three distinct types of cost to a manufacturer are direct materials, direct labor, and manufacturing overhead.

Selected data for Sorenta, Inc.and New World Corp., two companies in the same industry, are presented below: Sorenta, Inc. New World Corp. Sales \ 50,000 \ 80,000 Cost of goods sold 30,000 50,000 Average inventory balance 5,000 5,000 Based on this data, which statement below is true?

The inventory costing method is applied after each sale of merchandise to update the Inventory account.

Which one of the following types of inventory accounts would be used by a wholesaler or retailer?

Which method of inventory costing is not acceptable for financial accounting purposes?

Cost of goods available for sale is equal to beginning inventory less cost of goods sold.

The weighted average cost is calculated by adding up the units' costs from each purchase and then dividing by the number of purchases.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs of direct materials, overhead, and direct labor used in unfinished goods.

A departure from the cost basis of accounting may be necessary when the _________________________ of the inventory is less than its cost to the company.

The gross profit ratio is calculated as gross profit divided by net income.

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Floors, Inc.offers terms of 2/10, n/30 to credit customers.Tile Magic Corp.purchased 100 tile cutters with a list price of $20 each on August 5, 2016, on account.Tile Magic Corp.paid the invoice on August 31, 2016.How much sales discount will Floors recognize?

Which one of the following statements is true?

Xu Corp.started business at the beginning of 2016.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2016 under this method, prices must be

Maxim Company sells auto parts.The company employs a periodic inventory system.Identify all the effects on the accounting equation. -Gave a customer a cash refund.

Ending inventory is equal to the cost of items on hand plus

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs to purchase goods ready to sell.

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

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.

Which one of the following statements regarding changing inventory methods is true?

The three distinct types of cost to a manufacturer are direct materials, direct labor, and manufacturing overhead.

Selected data for Sorenta, Inc.and New World Corp., two companies in the same industry, are presented below: Sorenta, Inc. New World Corp. Sales \ 50,000 \ 80,000 Cost of goods sold 30,000 50,000 Average inventory balance 5,000 5,000 Based on this data, which statement below is true?

The inventory costing method is applied after each sale of merchandise to update the Inventory account.

Which one of the following types of inventory accounts would be used by a wholesaler or retailer?

Which method of inventory costing is not acceptable for financial accounting purposes?

Cost of goods available for sale is equal to beginning inventory less cost of goods sold.

The weighted average cost is calculated by adding up the units' costs from each purchase and then dividing by the number of purchases.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs of direct materials, overhead, and direct labor used in unfinished goods.

A departure from the cost basis of accounting may be necessary when the _________________________ of the inventory is less than its cost to the company.

The gross profit ratio is calculated as gross profit divided by net income.

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Floors, Inc.offers terms of 2/10, n/30 to credit customers.Tile Magic Corp.purchased 100 tile cutters with a list price of $20 each on August 5, 2016, on account.Tile Magic Corp.paid the invoice on August 31, 2016.How much sales discount will Floors recognize?

Which one of the following statements is true?

Xu Corp.started business at the beginning of 2016.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2016 under this method, prices must be

Maxim Company sells auto parts.The company employs a periodic inventory system.Identify all the effects on the accounting equation. -Gave a customer a cash refund.

Ending inventory is equal to the cost of items on hand plus

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Costs to purchase goods ready to sell.

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