Question 1

In which case will the journal entries relating to inventory differ based on the chosen costing method?

Accepted Answer

A) When inventory is purchased on account. 
B) When inventory is purchased for cash. 
C) When inventory is sold - the revenue entry will differ. 
D) When inventory is sold - the inventory entry will differ. 
A) When inventory is purchased on account. 
B) When inventory is purchased for cash. 
C) When inventory is sold - the revenue entry will differ. 
D) When inventory is sold - the inventory entry will differ.

Question 2

The LEAST widely used of the four inventory valuation methods is:

Accepted Answer

A) FIFO. 
B) LIFO. 
C) average cost. 
D) specific-identification. 
A) FIFO. 
B) LIFO. 
C) average cost. 
D) specific-identification.

Question 3

If Period 1 ending inventory is understated, then:

Accepted Answer

A) both cost of goods sold and net income are understated in Period 1. 
B) cost of goods sold is overstated and net income is understated in Period 1. 
C) cost of goods sold is understated and net income is overstated in Period 1. 
D) both cost of goods sold and net income are overstated in Period 1. 
A) both cost of goods sold and net income are understated in Period 1. 
B) cost of goods sold is overstated and net income is understated in Period 1. 
C) cost of goods sold is understated and net income is overstated in Period 1. 
D) both cost of goods sold and net income are overstated in Period 1.

Question 4

An indication that inventory is being sold quickly is:

Accepted Answer

A) a high turnover rate and high days-sales-in-inventory rate. 
B) a high turnover rate and low days-sales-in-inventory rate. 
C) a low turnover rate and high days-sales-in-inventory rate. 
D) a low turnover rate and low days-sales-in-inventory rate. 
A) a high turnover rate and high days-sales-in-inventory rate. 
B) a high turnover rate and low days-sales-in-inventory rate. 
C) a low turnover rate and high days-sales-in-inventory rate. 
D) a low turnover rate and low days-sales-in-inventory rate.

Question 5

Beginning inventory plus net purchases equals cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 6

Other than the cost of purchasing the inventory, another large cost of inventory would be storage of the inventory.

Accepted Answer

A) True 
 B)False

Question 7

Lionworks Enterprises had the following inventory data:  
Assuming FIFO, 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) $204 
B) $65 
C) $228 
D) $206 
A) $204 
B) $65 
C) $228 
D) $206

Question 8

A method of valuing inventory based on the assumption that the newest goods will be sold first is called the:

Accepted Answer

A) LIFO method. 
B) average cost method. 
C) specific identification method. 
D) FIFO method. 
A) LIFO method. 
B) average cost method. 
C) specific identification method. 
D) FIFO method.

Question 9

Grocery stores are required to use the FIFO method because they sell the oldest stock first to avoid spoilage.

Accepted Answer

A) True 
 B)False

Question 10

The sum of ending inventory and cost of goods available for sale equals cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an INCORRECT statement if ending inventory is overstated?

Accepted Answer

A) Cost of goods sold is overstated. 
B) Gross profit is overstated. 
C) Net income is overstated. 
D) Income tax is overstated. 
A) Cost of goods sold is overstated. 
B) Gross profit is overstated. 
C) Net income is overstated. 
D) Income tax is overstated.

Question 12

The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:

Accepted Answer

A) periodic system. 
B) perpetual system. 
C) LIFO system. 
D) FIFO system. 
A) periodic system. 
B) perpetual system. 
C) LIFO system. 
D) FIFO system.

Question 13

Making notes in the financial statements to explain the justification of valuation changes and other financial decisions would be an example of:

Accepted Answer

A) conservatism. 
B) consistency. 
C) materiality. 
D) full disclosure. 
A) conservatism. 
B) consistency. 
C) materiality. 
D) full disclosure.

Question 14

The most popular inventory costing method is:

Accepted Answer

A) FIFO. 
B) LIFO. 
C) average cost. 
D) specific identification. 
A) FIFO. 
B) LIFO. 
C) average cost. 
D) specific identification.

Question 15

One benefit of the LIFO inventory method is that it most closely matches the actual flow of goods in most cases.

Accepted Answer

A) True 
 B)False

Question 16

An inventory layer is synonymous with a separate:

Accepted Answer

A) sale of merchandise. 
B) purchase of merchandise. 
C) return of merchandise. 
D) customer return of merchandise. 
A) sale of merchandise. 
B) purchase of merchandise. 
C) return of merchandise. 
D) customer return of merchandise.

Question 17

The quantity purchased and purchase price is tracked through:

Accepted Answer

A) inventory charting. 
B) FIFO and LIFO only. 
C) specific identification method only. 
D) inventory layers. 
A) inventory charting. 
B) FIFO and LIFO only. 
C) specific identification method only. 
D) inventory layers.

Question 18

The historical gross profit percentage can be used to estimate the current period's gross profit.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would cause inventory shrinkage?

Accepted Answer

A) Employee theft 
B) Spoilage of items 
C) Spills of items 
D) All of the above 
A) Employee theft 
B) Spoilage of items 
C) Spills of items 
D) All of the above

Question 20

If ending inventory in Period 1 is overstated, gross profit 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.

In which case will the journal entries relating to inventory differ based on the chosen costing method?

The LEAST widely used of the four inventory valuation methods is:

If Period 1 ending inventory is understated, then:

An indication that inventory is being sold quickly is:

Beginning inventory plus net purchases equals cost of goods sold.

Other than the cost of purchasing the inventory, another large cost of inventory would be storage of the inventory.

Lionworks Enterprises had the following inventory data: Assuming FIFO, 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.)

A method of valuing inventory based on the assumption that the newest goods will be sold first is called the:

Grocery stores are required to use the FIFO method because they sell the oldest stock first to avoid spoilage.

The sum of ending inventory and cost of goods available for sale equals cost of goods sold.

Which of the following is an INCORRECT statement if ending inventory is overstated?

The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:

Making notes in the financial statements to explain the justification of valuation changes and other financial decisions would be an example of:

The most popular inventory costing method is:

One benefit of the LIFO inventory method is that it most closely matches the actual flow of goods in most cases.

An inventory layer is synonymous with a separate:

The quantity purchased and purchase price is tracked through:

The historical gross profit percentage can be used to estimate the current period's gross profit.

Which of the following would cause inventory shrinkage?

If ending inventory in Period 1 is overstated, gross profit in Period 2 is:

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

In which case will the journal entries relating to inventory differ based on the chosen costing method?

The LEAST widely used of the four inventory valuation methods is:

If Period 1 ending inventory is understated, then:

An indication that inventory is being sold quickly is:

Beginning inventory plus net purchases equals cost of goods sold.

Other than the cost of purchasing the inventory, another large cost of inventory would be storage of the inventory.

Lionworks Enterprises had the following inventory data: Assuming FIFO, 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.)

A method of valuing inventory based on the assumption that the newest goods will be sold first is called the:

Grocery stores are required to use the FIFO method because they sell the oldest stock first to avoid spoilage.

The sum of ending inventory and cost of goods available for sale equals cost of goods sold.

Which of the following is an INCORRECT statement if ending inventory is overstated?

The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:

Making notes in the financial statements to explain the justification of valuation changes and other financial decisions would be an example of:

The most popular inventory costing method is:

One benefit of the LIFO inventory method is that it most closely matches the actual flow of goods in most cases.

An inventory layer is synonymous with a separate:

The quantity purchased and purchase price is tracked through:

The historical gross profit percentage can be used to estimate the current period's gross profit.

Which of the following would cause inventory shrinkage?

If ending inventory in Period 1 is overstated, gross profit in Period 2 is:

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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