Question 1

If the inventory shows an actual count of $450 and the perpetual inventory according to the records shows $410, the adjusting entry for the $40 would:

Accepted Answer

A) debit Cost of Goods Sold; debit Purchase Returns and Allowances. 
B) debit Cost of Goods Sold; credit Inventory. 
C) debit Inventory; credit Cost of Goods Sold. 
D) debit Inventory; credit Purchase Returns and Allowances. 
A) debit Cost of Goods Sold; debit Purchase Returns and Allowances. 
B) debit Cost of Goods Sold; credit Inventory. 
C) debit Inventory; credit Cost of Goods Sold. 
D) debit Inventory; credit Purchase Returns and Allowances.

Question 2

A manufacturer uses ________ inventory to produce the goods it sells.

Accepted Answer

A) raw materials 
B) purchases 
C) finished goods 
D) work-in-process 
A) raw materials 
B) purchases 
C) finished goods 
D) work-in-process

Question 3

A piece of artwork would probably be inventoried using the specific-identification method.

Accepted Answer

A) True 
 B)False

Question 4

Net sales minus estimated gross profit yields the estimated:

Accepted Answer

A) ending inventory. 
B) beginning inventory. 
C) gross profit. 
D) cost of goods sold. 
A) ending inventory. 
B) beginning inventory. 
C) gross profit. 
D) cost of goods sold.

Question 5

An error in the reported inventory will cause errors in all of the following EXCEPT the:

Accepted Answer

A) Balance Sheet. 
B) Statement of Retained Earnings. 
C) following year's financial statements. 
D) cash account. 
A) Balance Sheet. 
B) Statement of Retained Earnings. 
C) following year's financial statements. 
D) cash account.

Question 6

Which account would always be used for an inventory adjustment?

Accepted Answer

A) Sales 
B) Purchase Returns and Allowances 
C) Cost of Goods Sold 
D) Cash 
A) Sales 
B) Purchase Returns and Allowances 
C) Cost of Goods Sold 
D) Cash

Question 7

Given the following inventory activity, what is ending inventory using the perpetual LIFO costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A) 195 units @ $3.32 
B) 120 units @ $3.00 and 45 units @ $2.50 and 30 units @ $6.00 
C) 165 units @ $2.83 and 30 units @ $6.00 
D) 105 units @ $3.00 and 60 units @ $2.50 and 30 units @ $6.00 
A) 195 units @ $3.32 
B) 120 units @ $3.00 and 45 units @ $2.50 and 30 units @ $6.00 
C) 165 units @ $2.83 and 30 units @ $6.00 
D) 105 units @ $3.00 and 60 units @ $2.50 and 30 units @ $6.00

Question 8

If the ending inventory in Period 1 is understated, gross profit for Year 1 is:

Accepted Answer

A) overstated. 
B) understated. 
C) not affected. 
D) determined by beginning inventory. 
A) overstated. 
B) understated. 
C) not affected. 
D) determined by beginning inventory.

Question 9

The ________ estimates inventory by using the format for cost of goods sold.

Accepted Answer

A) FIFO method 
B) LIFO method 
C) gross profit method 
D) average cost method 
A) FIFO method 
B) LIFO method 
C) gross profit method 
D) average cost method

Question 10

Lionworks Enterprises had the following inventory data:  
Assuming FIFO, what is the cost of goods sold for the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A) $441 
B) $416 
C) $444 
D) $456 
A) $441 
B) $416 
C) $444 
D) $456

Question 11

An inventory turnover rate of 4 means that the company is selling its inventory approximately every three months.

Accepted Answer

A) True 
 B)False

Question 12

The Wolfe Company recently lost it's entire inventory in a fire. The accounting records reflect the following information:  
Using the gross profit method, estimated inventory is:

Accepted Answer

A) $101,760 
B) $27,600 
C) $34,000 
D) Cannot be determined with given information. 
A) $101,760 
B) $27,600 
C) $34,000 
D) Cannot be determined with given information.

Question 13

When purchasing inventory on account in a perpetual inventory system, which of the following is TRUE?

Accepted Answer

A) The journal entry would be exactly the same for all inventory costing methods. 
B) LIFO and FIFO inventory valuation methods require a debit to inventory while all others require a debit to purchases. 
C) GAAP does not allow inventory to be purchased on account. 
D) The average costing method requires a credit to inventory. 
A) The journal entry would be exactly the same for all inventory costing methods. 
B) LIFO and FIFO inventory valuation methods require a debit to inventory while all others require a debit to purchases. 
C) GAAP does not allow inventory to be purchased on account. 
D) The average costing method requires a credit to inventory.

Question 14

If the ending inventory is understated in Year 1, then the Gross Profit will be understated in Year 2.

Accepted Answer

A) True 
 B)False

Question 15

A material amount of value is one large enough to cause someone to change a decision that has been made.

Accepted Answer

A) True 
 B)False

Question 16

New technology, like the latest cell phones and HDTV, would probably be costed using the:

Accepted Answer

A) LIFO method of inventory costing. 
B) FIFO method of inventory costing. 
C) moving average method of inventory costing. 
D) any method as the physical flow and the cost flow are different. 
A) LIFO method of inventory costing. 
B) FIFO method of inventory costing. 
C) moving average method of inventory costing. 
D) any method as the physical flow and the cost flow are different.

Question 17

If ending inventory in Period 1 is understated, Cost of Goods Sold in Period 2 is:

Accepted Answer

A) overstated. 
B) understated. 
C) not affected. 
D) the same as in Period 1. 
A) overstated. 
B) understated. 
C) not affected. 
D) the same as in Period 1.

Question 18

Cypress Co. has the following LIFO perpetual inventory records:  
The current replacement cost of the ending inventory is $3,300. To apply the lower-of-cost-or-market rule, the journal entry would be:

Accepted Answer

A) Debit Cost of Goods Sold $2,950, credit Inventory $2,950, 
B) Debit Inventory $2,950, credit Cost of Goods Sold $2,950, 
C) Debit Cost of Goods Sold $1,000, credit Inventory $1,000 
D) Debit inventory $1,000, credit Cost of Goods Sold $1,000 
A) Debit Cost of Goods Sold $2,950, credit Inventory $2,950, 
B) Debit Inventory $2,950, credit Cost of Goods Sold $2,950, 
C) Debit Cost of Goods Sold $1,000, credit Inventory $1,000 
D) Debit inventory $1,000, credit Cost of Goods Sold $1,000

Question 19

Which is usually NOT a common practice in taking a physical inventory?

Accepted Answer

A) Taking inventory during slow store hours 
B) Hiring an outside firm 
C) Taking inventory during the November and December holidays 
D) Taking inventory in team of two persons 
A) Taking inventory during slow store hours 
B) Hiring an outside firm 
C) Taking inventory during the November and December holidays 
D) Taking inventory in team of two persons

Question 20

Given the following inventory activity, what is ending inventory using the perpetual average costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A) 155 units @ $5.51 
B) 80 units @ $6.00 and 15 units @ $5.50 and 60 units @ $5 
C) 95 units @ $5.83 and 60 units @ $5 
D) 55 units @ $6.00 and 40 units @ $5.50 and 60 units @ $5 
A) 155 units @ $5.51 
B) 80 units @ $6.00 and 15 units @ $5.50 and 60 units @ $5 
C) 95 units @ $5.83 and 60 units @ $5 
D) 55 units @ $6.00 and 40 units @ $5.50 and 60 units @ $5

If the inventory shows an actual count of $450 and the perpetual inventory according to the records shows $410, the adjusting entry for the $40 would:

A manufacturer uses ________ inventory to produce the goods it sells.

A piece of artwork would probably be inventoried using the specific-identification method.

Net sales minus estimated gross profit yields the estimated:

An error in the reported inventory will cause errors in all of the following EXCEPT the:

Which account would always be used for an inventory adjustment?

Given the following inventory activity, what is ending inventory using the perpetual LIFO costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

If the ending inventory in Period 1 is understated, gross profit for Year 1 is:

The ________ estimates inventory by using the format for cost of goods sold.

Lionworks Enterprises had the following inventory data: Assuming FIFO, what is the cost of goods sold for the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

An inventory turnover rate of 4 means that the company is selling its inventory approximately every three months.

The Wolfe Company recently lost it's entire inventory in a fire. The accounting records reflect the following information: Using the gross profit method, estimated inventory is:

When purchasing inventory on account in a perpetual inventory system, which of the following is TRUE?

If the ending inventory is understated in Year 1, then the Gross Profit will be understated in Year 2.

A material amount of value is one large enough to cause someone to change a decision that has been made.

New technology, like the latest cell phones and HDTV, would probably be costed using the:

If ending inventory in Period 1 is understated, Cost of Goods Sold in Period 2 is:

Cypress Co. has the following LIFO perpetual inventory records: The current replacement cost of the ending inventory is $3,300. To apply the lower-of-cost-or-market rule, the journal entry would be:

Which is usually NOT a common practice in taking a physical inventory?

Given the following inventory activity, what is ending inventory using the perpetual average costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Accounting for a Merchandising Business

The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Current Liabilities and Long-Term Debt

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

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Exam 5: Inventory

If the inventory shows an actual count of $450 and the perpetual inventory according to the records shows $410, the adjusting entry for the $40 would:

A manufacturer uses ________ inventory to produce the goods it sells.

A piece of artwork would probably be inventoried using the specific-identification method.

Net sales minus estimated gross profit yields the estimated:

An error in the reported inventory will cause errors in all of the following EXCEPT the:

Which account would always be used for an inventory adjustment?

Given the following inventory activity, what is ending inventory using the perpetual LIFO costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

If the ending inventory in Period 1 is understated, gross profit for Year 1 is:

The ________ estimates inventory by using the format for cost of goods sold.

Lionworks Enterprises had the following inventory data: Assuming FIFO, what is the cost of goods sold for the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

An inventory turnover rate of 4 means that the company is selling its inventory approximately every three months.

The Wolfe Company recently lost it's entire inventory in a fire. The accounting records reflect the following information: Using the gross profit method, estimated inventory is:

When purchasing inventory on account in a perpetual inventory system, which of the following is TRUE?

If the ending inventory is understated in Year 1, then the Gross Profit will be understated in Year 2.

A material amount of value is one large enough to cause someone to change a decision that has been made.

New technology, like the latest cell phones and HDTV, would probably be costed using the:

If ending inventory in Period 1 is understated, Cost of Goods Sold in Period 2 is:

Cypress Co. has the following LIFO perpetual inventory records: The current replacement cost of the ending inventory is $3,300. To apply the lower-of-cost-or-market rule, the journal entry would be:

Which is usually NOT a common practice in taking a physical inventory?

Given the following inventory activity, what is ending inventory using the perpetual average costing method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Accounting for a Merchandising Business

The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Current Liabilities and Long-Term Debt

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

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