Question 1

Which of the following statements about inventory turnover analysis is not correct?

Accepted Answer

A)  In making comparisons of financial statements, it is desirable to compare data calculated using the same inventory costing methods. 
B)  The inventory turnover ratio and days to sell measure will be affected by the cost flow assumptions used, which causes problems for financial statements users. 
C)  Inventory turnover also can vary significantly between companies within the same industry. 
D)  The inventory turnover and days to sell ratios are consistent among companies in different industries. 
A)  In making comparisons of financial statements, it is desirable to compare data calculated using the same inventory costing methods. 
B)  The inventory turnover ratio and days to sell measure will be affected by the cost flow assumptions used, which causes problems for financial statements users. 
C)  Inventory turnover also can vary significantly between companies within the same industry. 
D)  The inventory turnover and days to sell ratios are consistent among companies in different industries.

Question 2

Which of the following would not be affected by the choice of an inventory costing method (that is,choosing between FIFO,LIFO,weighted average,and specific identification)?

Accepted Answer

A)  Sales revenue 
B)  Cost of goods sold 
C)  Gross profit 
D)  Net income 
A)  Sales revenue 
B)  Cost of goods sold 
C)  Gross profit 
D)  Net income

Question 3

Which company will have the lower number of days to sell?

Accepted Answer

A)  Company A whose cost of goods sold equals $1,000 and whose average inventory is $100. 
B)  Company B whose cost of goods sold equals $2,000 and whose average inventory is $100. 
C)  Company C whose cost of goods sold equals $2,000 and whose average inventory is $200. 
D)  There is not enough information to answer this question. 
A)  Company A whose cost of goods sold equals $1,000 and whose average inventory is $100. 
B)  Company B whose cost of goods sold equals $2,000 and whose average inventory is $100. 
C)  Company C whose cost of goods sold equals $2,000 and whose average inventory is $200. 
D)  There is not enough information to answer this question.

Question 4

Cost of goods sold = Beginning inventory + Purchases - Ending inventory

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is merchandise inventory?

Accepted Answer

A)  Goods held for sale in the normal course of business 
B)  Office supplies that a company plans to use in the next few months 
C)  Equipment used to manufacture products which will be sold later 
D)  Raw materials and work in process 
A)  Goods held for sale in the normal course of business 
B)  Office supplies that a company plans to use in the next few months 
C)  Equipment used to manufacture products which will be sold later 
D)  Raw materials and work in process

Question 6

Bluebell Company sells blue jeans.Last year,bell-bottom jeans were fashionable; this year,boot cut jeans are in style.The company has 375 units of bell-bottom jeans with a cost of $17 per unit and a market value of $15 per unit.The inventory also includes 1,000 units of boot cut jeans with a cost of $16 per unit and a market value of $19 per unit.
Required:
Part a - Explain whether this situation requires an adjustment to the accounting records.
Part b - Prepare the journal entry,if any,that is required to adjust the Inventory account.

Accepted Answer

Part a
When the value of inventory falls

Question 7

Inventory shipped FOB shipping point and in transit on the last day of the year should be included in:

Accepted Answer

A)  the inventory balance of the seller. 
B)  the inventory balance of the buyer. 
C)  neither the inventory balance of the buyer or the seller. 
D)  both the inventory balance of the buyer and the seller. 
A)  the inventory balance of the seller. 
B)  the inventory balance of the buyer. 
C)  neither the inventory balance of the buyer or the seller. 
D)  both the inventory balance of the buyer and the seller.

Question 8

Eaton Electronics uses a periodic inventory system.On March 31, Eaton has two plasma TVs on hand at a cost of $1,500 each (serial numbers 11534892 and 11534894).In April, the company purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 11542631 through 11542634).In May, the company purchases five more identical TVs for $1,600 each (serial numbers 11550964 through 11550968).In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631).There were no additional purchases or sales during the remainder of the year.
-Use the information above to answer the following question.Eaton Electronics uses the specific identification method.What is its cost of goods sold?

Accepted Answer

A)  $3,000 
B)  $2,950 
C)  $3,200 
D)  $3,033 
A)  $3,000 
B)  $2,950 
C)  $3,200 
D)  $3,033

Question 9

Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Weighted average 
D)  Specific identification 
A)  FIFO 
B)  LIFO 
C)  Weighted average 
D)  Specific identification

Question 10

Which of the following would be considered merchandise inventory?

Accepted Answer

A)  Work in progress 
B)  Raw materials 
C)  Purchased finished goods 
D)  Cost of goods sold 
A)  Work in progress 
B)  Raw materials 
C)  Purchased finished goods 
D)  Cost of goods sold

Question 11

It is more useful to compare a company's inventory turnover with its own results from prior periods than with the results of other companies:

Accepted Answer

A)  because companies may use different accounting methods which may cause the turnovers to vary significantly. 
B)  because larger companies' ratios are not comparable with smaller companies' ratios. 
C)  on extremely rare occasions. Little information can be gleaned from comparing a company's current and prior period results. 
D)  because knowing the results of other companies does not help you manage or evaluate the company in which you are interested. 
A)  because companies may use different accounting methods which may cause the turnovers to vary significantly. 
B)  because larger companies' ratios are not comparable with smaller companies' ratios. 
C)  on extremely rare occasions. Little information can be gleaned from comparing a company's current and prior period results. 
D)  because knowing the results of other companies does not help you manage or evaluate the company in which you are interested.

Question 12

The following company purchases and sells collectors' coin sets.The company uses the LIFO inventory costing method.In the first two sections of the table below,each coin set is identified by its letter and its cost.The third section indicates when coin sets were sold.
   
Required:
For each inventory costing method given below,fill in the blanks to indicate the letter of the coin set which will be used to calculate either cost of goods sold or the cost of ending inventory.
Part a.Periodic Inventory System
Cost of Goods Sold = _____ + _____ + _____ + _____ + _____
Ending Inventory = _____ + _____ + _____
Part b.Perpetual Inventory System
Cost of Goods Sold = _____ + _____ + _____ + _____ + _____
Ending Inventory = _____ + _____ + _____

Accepted Answer

Part A - Periodic Inventory System
Cost

Question 13

LIFO and weighted average results will be the same using either a perpetual or periodic system.

Accepted Answer

A) True 
 B)False

Question 14

If inventory costs have been falling during the year,which cost method results in the highest gross profit for the year?

Accepted Answer

A)  Specific identification 
B)  Weighted average cost 
C)  LIFO 
D)  FIFO 
A)  Specific identification 
B)  Weighted average cost 
C)  LIFO 
D)  FIFO

Question 15

A company can use LIFO to prepare its U.S.tax return and FIFO to prepare its financial statements.

Accepted Answer

A) True 
 B)False

Question 16

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of August:
 
What is the per-unit value of ending inventory on August 31? (Round each per unit cost to two decimal points.)

Accepted Answer

A)  $12.00 
B)  $13.80 
C)  $15.42 
D)  $16.00 
E)  $17.74 
A)  $12.00 
B)  $13.80 
C)  $15.42 
D)  $16.00 
E)  $17.74

Question 17

Alpha Company uses a periodic inventory system.The company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.Alpha's weighted average cost per unit is:

Accepted Answer

A)  $4.25. 
B)  $4.50. 
C)  $4.00. 
D)  $5.00. 
A)  $4.25. 
B)  $4.50. 
C)  $4.00. 
D)  $5.00.

Question 18

The most commonly used inventory costing method in the U.S.is:

Accepted Answer

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

Question 19

Which of the following is not one of the primary goals of inventory management?

Accepted Answer

A)  Maintain a sufficient quantity of inventory to meet customer needs. 
B)  Ensure inventory quality meets customers' expectations and company standards 
C)  Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing). 
D)  Minimize the quantity of ending inventory. 
A)  Maintain a sufficient quantity of inventory to meet customer needs. 
B)  Ensure inventory quality meets customers' expectations and company standards 
C)  Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing). 
D)  Minimize the quantity of ending inventory.

Question 20

Which inventory method is typically used when accounting for expensive and unique inventory items?

Accepted Answer

A)  Specific identification 
B)  FIFO 
C)  LIFO 
D)  Weighted Average Cost 
A)  Specific identification 
B)  FIFO 
C)  LIFO 
D)  Weighted Average Cost

Which of the following statements about inventory turnover analysis is not correct?

Which of the following would not be affected by the choice of an inventory costing method (that is,choosing between FIFO,LIFO,weighted average,and specific identification)?

Which company will have the lower number of days to sell?

Cost of goods sold = Beginning inventory + Purchases - Ending inventory

Which of the following is merchandise inventory?

Inventory shipped FOB shipping point and in transit on the last day of the year should be included in:

Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased?

Which of the following would be considered merchandise inventory?

It is more useful to compare a company's inventory turnover with its own results from prior periods than with the results of other companies:

LIFO and weighted average results will be the same using either a perpetual or periodic system.

If inventory costs have been falling during the year,which cost method results in the highest gross profit for the year?

A company can use LIFO to prepare its U.S.tax return and FIFO to prepare its financial statements.

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of August: What is the per-unit value of ending inventory on August 31? (Round each per unit cost to two decimal points.)

Alpha Company uses a periodic inventory system.The company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.Alpha's weighted average cost per unit is:

The most commonly used inventory costing method in the U.S.is:

Which of the following is not one of the primary goals of inventory management?

Which inventory method is typically used when accounting for expensive and unique inventory items?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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Exam 7: Reporting and Interpreting Inventories and Cost of Goods Sold

Which of the following statements about inventory turnover analysis is not correct?

Which of the following would not be affected by the choice of an inventory costing method (that is,choosing between FIFO,LIFO,weighted average,and specific identification)?

Which company will have the lower number of days to sell?

Cost of goods sold = Beginning inventory + Purchases - Ending inventory

Which of the following is merchandise inventory?

Inventory shipped FOB shipping point and in transit on the last day of the year should be included in:

Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased?

Which of the following would be considered merchandise inventory?

It is more useful to compare a company's inventory turnover with its own results from prior periods than with the results of other companies:

LIFO and weighted average results will be the same using either a perpetual or periodic system.

If inventory costs have been falling during the year,which cost method results in the highest gross profit for the year?

A company can use LIFO to prepare its U.S.tax return and FIFO to prepare its financial statements.

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of August: What is the per-unit value of ending inventory on August 31? (Round each per unit cost to two decimal points.)

Alpha Company uses a periodic inventory system.The company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.Alpha's weighted average cost per unit is:

The most commonly used inventory costing method in the U.S.is:

Which of the following is not one of the primary goals of inventory management?

Which inventory method is typically used when accounting for expensive and unique inventory items?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters