Question 1

Inventory turnover measures the amount of times a company turns over its beginning inventory during a period.

Accepted Answer

A) True 
 B)False

Question 2

Under the conservatism rule, assets and income would be understated, rather than overstated.

Accepted Answer

A) True 
 B)False

Question 3

Inventory errors cancel out at the end of ________ accounting periods.

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 4

________ produces the lowest cost of goods sold and the highest gross profit when prices are increasing.

Accepted Answer

A) FIFO 
B) LIFO 
C) Average cost 
D) Specific identification 
A) FIFO 
B) LIFO 
C) Average cost 
D) Specific identification

Question 5

A company has $8,100 in net sales, $1,000 in gross profit, $2,300 in ending inventory and $1,900 in beginning inventory. The company's cost of goods sold is:

Accepted Answer

A) $7,100. 
B) $6,200. 
C) $5,800. 
D) $5,200. 
A) $7,100. 
B) $6,200. 
C) $5,800. 
D) $5,200.

Question 6

Applying LCM to the items that make up ending inventory is an application of which of the following concepts?

Accepted Answer

A) Materiality 
B) Conservatism 
C) Reliability 
D) Full disclosure 
A) Materiality 
B) Conservatism 
C) Reliability 
D) Full disclosure

Question 7

S&C Inc. has the following LIFO perpetual inventory records:  
The current replacement cost of the ending inventory is $2,400. To apply the lower-of-cost-or-market rule, the journal entry would be:

Accepted Answer

A) Debit Cost of Goods Sold $900, credit Inventory $900 
B) debit Inventory $900, credit Cost of Goods Sold $900 
C) Debit Cost of Goods Sold $800, credit Inventory $800 
D) debit Inventory $800, credit Cost of Goods Sold $800 
A) Debit Cost of Goods Sold $900, credit Inventory $900 
B) debit Inventory $900, credit Cost of Goods Sold $900 
C) Debit Cost of Goods Sold $800, credit Inventory $800 
D) debit Inventory $800, credit Cost of Goods Sold $800

Question 8

Cost of goods sold is shown on the:

Accepted Answer

A) Balance Sheet as an asset. 
B) Income Statement before gross profit. 
C) Statement of Retained Earnings. 
D) Income Statement after gross profit. 
A) Balance Sheet as an asset. 
B) Income Statement before gross profit. 
C) Statement of Retained Earnings. 
D) Income Statement after gross profit.

Question 9

Caesar's Coffee has beginning inventory of $15,000, ending inventory of $20,000, and cost of goods sold $50,000. Caesar's could operate for approximately 4 months without buying more inventory.

Accepted Answer

A) True 
 B)False

Question 10

Inventory is often the largest:

Accepted Answer

A) expense on the Income Statement. 
B) long-term asset on the Balance Sheet. 
C) current asset on the Balance Sheet. 
D) part of general selling expenses. 
A) expense on the Income Statement. 
B) long-term asset on the Balance Sheet. 
C) current asset on the Balance Sheet. 
D) part of general selling expenses.

Question 11

Which of the following would probably NOT need to be disclosed in a footnote?

Accepted Answer

A) Change of inventory methods 
B) A material change in estimated shrinkage 
C) A change in depreciation method 
D) A 10% increase in sales 
A) Change of inventory methods 
B) A material change in estimated shrinkage 
C) A change in depreciation method 
D) A 10% increase in sales

Question 12

When using the LIFO inventory method, the ending inventory has the newer, higher costs.

Accepted Answer

A) True 
 B)False

Question 13

Goods available for sale are $29,000; beginning inventory is $8,000; ending inventory is $15,000; and cost of goods sold is $10,000. The days-sales-in-inventory is closest to: (Round any intermediary calculations two decimal places, X.XX, and your final answer to the nearest day.)

Accepted Answer

A) 460. 
B) 292. 
C) 420. 
D) 548. 
A) 460. 
B) 292. 
C) 420. 
D) 548.

Question 14

Ignoring a write-off of inventory because it will not make a difference to financial statement users is an example of:

Accepted Answer

A) conservatism. 
B) consistency. 
C) materiality. 
D) entity. 
A) conservatism. 
B) consistency. 
C) materiality. 
D) entity.

Question 15

Goods such as milk, bread, and cheese need to be sold quickly due to potential spoilage. Therefore, they would probably be costed using the:

Accepted Answer

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

Question 16

The inventory turnover ratio is normally computed for:

Accepted Answer

A) a buying season. 
B) the entire year. 
C) each monthly accounting period. 
D) each quarter. 
A) a buying season. 
B) the entire year. 
C) each monthly accounting period. 
D) each quarter.

Question 17

Inventory turnover equals average ending inventory divided by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

Lionworks Enterprises had the following inventory data:  
Assuming LIFO, what is the ending inventory after the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A) $224 
B) $200 
C) $214 
D) $192 
A) $224 
B) $200 
C) $214 
D) $192

Question 19

Ending inventory can be estimated by subtracting the estimated cost of goods available for sale from the Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would NOT cause an error in the physical inventory count on December 31?

Accepted Answer

A) Counting inventory purchased that was shipped by the supplier FOB destination on December 31 
B) Double counting an aisle of product 
C) Counting inventory purchased that was shipped by the supplier FOB shipping point on December 31 
D) Forgetting to tag a section of inventory 
A) Counting inventory purchased that was shipped by the supplier FOB destination on December 31 
B) Double counting an aisle of product 
C) Counting inventory purchased that was shipped by the supplier FOB shipping point on December 31 
D) Forgetting to tag a section of inventory

Inventory turnover measures the amount of times a company turns over its beginning inventory during a period.

Under the conservatism rule, assets and income would be understated, rather than overstated.

Inventory errors cancel out at the end of ________ accounting periods.

________ produces the lowest cost of goods sold and the highest gross profit when prices are increasing.

A company has $8,100 in net sales, $1,000 in gross profit, $2,300 in ending inventory and $1,900 in beginning inventory. The company's cost of goods sold is:

Applying LCM to the items that make up ending inventory is an application of which of the following concepts?

S&C Inc. has the following LIFO perpetual inventory records: The current replacement cost of the ending inventory is $2,400. To apply the lower-of-cost-or-market rule, the journal entry would be:

Cost of goods sold is shown on the:

Caesar's Coffee has beginning inventory of $15,000, ending inventory of $20,000, and cost of goods sold $50,000. Caesar's could operate for approximately 4 months without buying more inventory.

Inventory is often the largest:

Which of the following would probably NOT need to be disclosed in a footnote?

When using the LIFO inventory method, the ending inventory has the newer, higher costs.

Goods available for sale are $29,000; beginning inventory is $8,000; ending inventory is $15,000; and cost of goods sold is $10,000. The days-sales-in-inventory is closest to: (Round any intermediary calculations two decimal places, X.XX, and your final answer to the nearest day.)

Ignoring a write-off of inventory because it will not make a difference to financial statement users is an example of:

Goods such as milk, bread, and cheese need to be sold quickly due to potential spoilage. Therefore, they would probably be costed using the:

The inventory turnover ratio is normally computed for:

Inventory turnover equals average ending inventory divided by cost of goods sold.

Lionworks Enterprises had the following inventory data: Assuming LIFO, what is the ending inventory after the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Ending inventory can be estimated by subtracting the estimated cost of goods available for sale from the Cost of Goods Sold.

Which of the following would NOT cause an error in the physical inventory count on December 31?

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

Filters

Exam 5: Inventory

Inventory turnover measures the amount of times a company turns over its beginning inventory during a period.

Under the conservatism rule, assets and income would be understated, rather than overstated.

Inventory errors cancel out at the end of ________ accounting periods.

________ produces the lowest cost of goods sold and the highest gross profit when prices are increasing.

A company has $8,100 in net sales, $1,000 in gross profit, $2,300 in ending inventory and $1,900 in beginning inventory. The company's cost of goods sold is:

Applying LCM to the items that make up ending inventory is an application of which of the following concepts?

S&C Inc. has the following LIFO perpetual inventory records: The current replacement cost of the ending inventory is $2,400. To apply the lower-of-cost-or-market rule, the journal entry would be:

Cost of goods sold is shown on the:

Caesar's Coffee has beginning inventory of $15,000, ending inventory of $20,000, and cost of goods sold $50,000. Caesar's could operate for approximately 4 months without buying more inventory.

Inventory is often the largest:

Which of the following would probably NOT need to be disclosed in a footnote?

When using the LIFO inventory method, the ending inventory has the newer, higher costs.

Goods available for sale are $29,000; beginning inventory is $8,000; ending inventory is $15,000; and cost of goods sold is $10,000. The days-sales-in-inventory is closest to: (Round any intermediary calculations two decimal places, X.XX, and your final answer to the nearest day.)

Ignoring a write-off of inventory because it will not make a difference to financial statement users is an example of:

Goods such as milk, bread, and cheese need to be sold quickly due to potential spoilage. Therefore, they would probably be costed using the:

The inventory turnover ratio is normally computed for:

Inventory turnover equals average ending inventory divided by cost of goods sold.

Lionworks Enterprises had the following inventory data: Assuming LIFO, what is the ending inventory after the July 14 sale? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Ending inventory can be estimated by subtracting the estimated cost of goods available for sale from the Cost of Goods Sold.

Which of the following would NOT cause an error in the physical inventory count on December 31?

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

Filters