Question 1

Thompson TV and Appliance reported the following in its 2018 financial statements:   
-Thompson's 2018 gross profit ratio is:

Accepted Answer

A)  25%. 
B)  19%. 
C)  20%. 
D)  None of these answer choices are correct. 
A)  25%. 
B)  19%. 
C)  20%. 
D)  None of these answer choices are correct.

Question 2

A company's estimate of merchandise that will be returned by customers should be:

Accepted Answer

A)  Included in inventory at an amount equal to the selling price of the merchandise. 
B)  Included in inventory at an amount equal to the cost of the merchandise. 
C)  Excluded from inventory but deducted from sales revenue and accounts receivable. 
D)  None of these answer choices are correct. 
A)  Included in inventory at an amount equal to the selling price of the merchandise. 
B)  Included in inventory at an amount equal to the cost of the merchandise. 
C)  Excluded from inventory but deducted from sales revenue and accounts receivable. 
D)  None of these answer choices are correct.

Question 3

On January 1, 2018, the National Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1 was $200,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:
 
Required:
Compute inventory amounts at the end of each year.

Accepted Answer

Ending
Ending Inventory Inventory Layers

Question 4

Bunker Auto Supply purchased merchandise on January 4, 2018, at a price of $70,000, subject to credit terms of 2/10, n/30. Bunker uses the gross method for recording purchases and uses a periodic inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the payment of one-half the invoice amount on January 11, 2018.
3. Prepare the journal entry to record the balance of the amount due on February 2, 2018.

Accepted Answer

The answer of Bunker Auto Supply purchased merchandise on January...

Question 5

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

Accepted Answer

A)  Weighted average. 
B)  Moving average. 
C)  FIFO. 
D)  LIFO. 
A)  Weighted average. 
B)  Moving average. 
C)  FIFO. 
D)  LIFO.

Question 6

Shipping charges on outgoing goods are included in either cost of goods sold or selling expenses.

Accepted Answer

A) True 
 B)False

Question 7

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-LIFO

Accepted Answer

A) Method not feasible for most inventories. 
B) Most recent purchases will be included in cost of goods sold. 
C) The cost of components purchased from other manufacturers. 
D) Used to convert ending inventory at year-end cost to base year cost. 
E) Could be used instead of an internally generated index in dollar-value LIFO computations. 
A) Method not feasible for most inventories. 
B) Most recent purchases will be included in cost of goods sold. 
C) The cost of components purchased from other manufacturers. 
D) Used to convert ending inventory at year-end cost to base year cost. 
E) Could be used instead of an internally generated index in dollar-value LIFO computations.

Question 8

-Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses average cost and a perpetual inventory system.

Accepted Answer

Perpetual

Question 9

Meteor Co. purchased merchandise on March 4, 2018, at a price of $30,000, subject to credit terms of 2/10, n/30. Meteor uses the net method for recording purchases and uses a periodic inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on March 11, 2018.
3. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on April 2, 2018.

Accepted Answer

The answer of Meteor Co. purchased merchandise on March 4,...

Question 10

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Accepted Answer

A)  $5,940. 
B)  $5,880. 
C)  $6,000. 
D)  $6,120. 
A)  $5,940. 
B)  $5,880. 
C)  $6,000. 
D)  $6,120.

Question 11

FIFO periodic and FIFO perpetual always produce the same dollar amounts for cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 12

In a perpetual inventory system, which of the following is recorded at the time of the sale?

Accepted Answer

A)  Sales revenue only. 
B)  Both sales revenue and cost of goods sold. 
C)  Cost of goods sold only. 
D)  Neither sales revenue or cost of goods sold. 
A)  Sales revenue only. 
B)  Both sales revenue and cost of goods sold. 
C)  Cost of goods sold only. 
D)  Neither sales revenue or cost of goods sold.

Question 13

Northwest Fur Co. started 2018 with $94,000 of merchandise inventory on hand. During 2018, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system. 
-Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

Accepted Answer

A)  $492,500. 
B)  $496,500. 
C)  $490,500. 
D)  $492,550. 
A)  $492,500. 
B)  $496,500. 
C)  $490,500. 
D)  $492,550.

Question 14

Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 qts. @ $2.40 on April 1.   The ending inventory assuming LIFO and a periodic inventory system is:

Accepted Answer

A)  $1,580. 
B)  $1,510. 
C)  $1,575. 
D)  $1,470. 
A)  $1,580. 
B)  $1,510. 
C)  $1,575. 
D)  $1,470.

Question 15

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2018 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2017. Assuming GG has a 40% income tax rate:

Accepted Answer

A)  Its reported cost of goods sold for 2018 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
B)  Its reported cost of goods sold for 2018 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements. 
C)  Its reported net income for 2018 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
D)  Its reported net income for 2018 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements. 
A)  Its reported cost of goods sold for 2018 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
B)  Its reported cost of goods sold for 2018 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements. 
C)  Its reported net income for 2018 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
D)  Its reported net income for 2018 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.

Question 16

In periods when costs are rising, LIFO liquidations:

Accepted Answer

A)  Can't occur. 
B)  Are used to reduce tax liabilities. 
C)  Are a source of off-balance-sheet financing. 
D)  Distort the net income. 
A)  Can't occur. 
B)  Are used to reduce tax liabilities. 
C)  Are a source of off-balance-sheet financing. 
D)  Distort the net income.

Question 17

Dollar-value LIFO eliminates the risk of LIFO liquidations.

Accepted Answer

A) True 
 B)False

Question 18

LIFO periodic and LIFO perpetual always produce the same dollar amounts for ending inventory.

Accepted Answer

A) True 
 B)False

Question 19

On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below:  
- What inventory balance would Badger report on its 12/31/2020 balance sheet?

Accepted Answer

A)  $128,000. 
B)  $129,800. 
C)  $153,600. 
D)  None of these answer choices are correct. 
A)  $128,000. 
B)  $129,800. 
C)  $153,600. 
D)  None of these answer choices are correct.

Question 20

The LIFO Conformity Rule states that if LIFO is used for:

Accepted Answer

A)  One class of inventory, it must be used for all classes of inventory. 
B)  Tax purposes, it must be used for financial reporting. 
C)  One company in an affiliated group, it must be used by all companies in an affiliated group. 
D)  Domestic companies, it must be used by foreign partners. 
A)  One class of inventory, it must be used for all classes of inventory. 
B)  Tax purposes, it must be used for financial reporting. 
C)  One company in an affiliated group, it must be used by all companies in an affiliated group. 
D)  Domestic companies, it must be used by foreign partners.

Thompson TV and Appliance reported the following in its 2018 financial statements: -Thompson's 2018 gross profit ratio is:

A company's estimate of merchandise that will be returned by customers should be:

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

Shipping charges on outgoing goods are included in either cost of goods sold or selling expenses.

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -LIFO

-Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses average cost and a perpetual inventory system.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

FIFO periodic and FIFO perpetual always produce the same dollar amounts for cost of goods sold.

In a perpetual inventory system, which of the following is recorded at the time of the sale?

Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 qts. @ $2.40 on April 1. The ending inventory assuming LIFO and a periodic inventory system is:

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2018 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2017. Assuming GG has a 40% income tax rate:

In periods when costs are rising, LIFO liquidations:

Dollar-value LIFO eliminates the risk of LIFO liquidations.

LIFO periodic and LIFO perpetual always produce the same dollar amounts for ending inventory.

The LIFO Conformity Rule states that if LIFO is used for:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 8: Inventories: Measurement

Thompson TV and Appliance reported the following in its 2018 financial statements: -Thompson's 2018 gross profit ratio is:

A company's estimate of merchandise that will be returned by customers should be:

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

Shipping charges on outgoing goods are included in either cost of goods sold or selling expenses.

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -LIFO

-Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses average cost and a perpetual inventory system.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

FIFO periodic and FIFO perpetual always produce the same dollar amounts for cost of goods sold.

In a perpetual inventory system, which of the following is recorded at the time of the sale?

Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 qts. @ $2.40 on April 1. The ending inventory assuming LIFO and a periodic inventory system is:

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2018 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2017. Assuming GG has a 40% income tax rate:

In periods when costs are rising, LIFO liquidations:

Dollar-value LIFO eliminates the risk of LIFO liquidations.

LIFO periodic and LIFO perpetual always produce the same dollar amounts for ending inventory.

The LIFO Conformity Rule states that if LIFO is used for:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters