Question 1

Which of the following statements is correct?

Accepted Answer

A)  Specific identification is the most practical, but least accurate, measure of cost and net income. 
B)  When unit costs are increasing, the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO. 
C)  FIFO will lead to the highest net income if unit costs are falling. 
D)  LIFO will always yield a smaller net income than FIFO. 
A)  Specific identification is the most practical, but least accurate, measure of cost and net income. 
B)  When unit costs are increasing, the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO. 
C)  FIFO will lead to the highest net income if unit costs are falling. 
D)  LIFO will always yield a smaller net income than FIFO.

Question 2

A declining inventory turnover ratio may mean that:

Accepted Answer

A)  goods are not selling as fast as they were in the past. 
B)  the company is expecting to sell more in the future. 
C)  goods are selling, but it is taking longer to collect payment. 
D)  goods cannot be shipped fast enough. 
A)  goods are not selling as fast as they were in the past. 
B)  the company is expecting to sell more in the future. 
C)  goods are selling, but it is taking longer to collect payment. 
D)  goods cannot be shipped fast enough.

Question 3

Bailey Company uses a periodic inventory system and its inventory records contain the following information:
   
The company sold 1,000 units during June.There were no additional purchases or sales during the remainder of the year.The company had 500 units were in its ending inventory at the end of the year.
-Use the information above to answer the following question.If Bailey Company uses the LIFO costing method,what is the cost of its ending inventory?

Accepted Answer

A)  $1,365 
B)  $1,494 
C)  $1,620 
D)  $2,835 
A)  $1,365 
B)  $1,494 
C)  $1,620 
D)  $2,835

Question 4

Inventory levels increase by 10% at your company during the fourth quarter.Based on this increase,which of the following statements must be correct?

Accepted Answer

A)  This must be good news because inventories are an asset to the company. 
B)  This could be good news if the company is ordering more goods because sales appear to be rising. 
C)  This could be bad news if the company is ordering more goods because unit costs are falling. 
D)  This must be bad news because higher inventories mean higher costs. 
A)  This must be good news because inventories are an asset to the company. 
B)  This could be good news if the company is ordering more goods because sales appear to be rising. 
C)  This could be bad news if the company is ordering more goods because unit costs are falling. 
D)  This must be bad news because higher inventories mean higher costs.

Question 5

The Farley Corporation starts the year with a beginning inventory of 3,000 units at $5 per unit.The company purchases 5,000 units at $4 each in February and 2,000 units at $6 each in March.Farley sells 1,500 units during this quarter.Farley has a perpetual inventory system and uses the FIFO inventory costing method.What is the cost of goods sold for the quarter?

Accepted Answer

A)  $6,000 
B)  $9,340 
C)  $7,500 
D)  $9,000 
A)  $6,000 
B)  $9,340 
C)  $7,500 
D)  $9,000

Question 6

Probes,Inc.wrote down its inventory to the lower replacement value.The effect on Probes' accounting equation includes a(n):

Accepted Answer

A)  increase in assets. 
B)  decrease in assets. 
C)  increase in liabilities. 
D)  increase in stockholders' equity. 
A)  increase in assets. 
B)  decrease in assets. 
C)  increase in liabilities. 
D)  increase in stockholders' equity.

Question 7

Under the FIFO cost method,what is the cost of goods sold for January?

Accepted Answer

A)  $17,250 
B)  $16,500 
C)  $18,750 
D)  $18,000 
A)  $17,250 
B)  $16,500 
C)  $18,750 
D)  $18,000

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Valuing inventory under LIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
B)  Valuing inventory under the weighted average cost method always produces the same results using either a perpetual or periodic inventory system. 
C)  Valuing inventory under FIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
D)  Using the specific identification method will produce different results depending on whether perpetual or periodic inventory system is used. 
A)  Valuing inventory under LIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
B)  Valuing inventory under the weighted average cost method always produces the same results using either a perpetual or periodic inventory system. 
C)  Valuing inventory under FIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
D)  Using the specific identification method will produce different results depending on whether perpetual or periodic inventory system is used.

Question 9

The records of Alberta Inc.included the following information:
  
-Use the information above to answer the following question.What is the number of days to sell?

Accepted Answer

A)  91.25 days 
B)  94.30 days 
C)  88.16 days 
D)  182.50 days 
A)  91.25 days 
B)  94.30 days 
C)  88.16 days 
D)  182.50 days

Question 10

Assume that the cost of inventory is decreasing.
Required:
Fill in the blanks below with the words "higher" and "lower" to indicate which inventory costing method causes the value to be higher and which causes it to be lower.

Accepted Answer

The answer of Assume that the cost of inventory is...

Question 11

An understatement of beginning inventory causes net income to be understated.

Accepted Answer

A) True 
 B)False

Question 12

When the market value of inventory drops below the cost recorded in the financial records,applying the lower of cost or market (LCM)rule causes:

Accepted Answer

A)  a decrease in cost of goods sold. 
B)  no change in net income, other things being equal. 
C)  a decrease in total assets. 
D)  an increase in net income. 
A)  a decrease in cost of goods sold. 
B)  no change in net income, other things being equal. 
C)  a decrease in total assets. 
D)  an increase in net income.

Question 13

The records of Alberta Inc.included the following information:
  
-Use the information above to answer the following question.What is the inventory turnover ratio?

Accepted Answer

A)  3.87 times 
B)  4.00 times 
C)  4.14 times 
D)  2.00 times 
A)  3.87 times 
B)  4.00 times 
C)  4.14 times 
D)  2.00 times

Question 14

If Vito,Inc.has an inventory turnover ratio of 5 times,its days to sell must be:

Accepted Answer

A)  73 days. 
B)  73 times per year. 
C)  14 days. 
D)  14%. 
A)  73 days. 
B)  73 times per year. 
C)  14 days. 
D)  14%.

Question 15

Assume a periodic inventory system is used.Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Accepted Answer

A)  LIFO 
B)  FIFO 
C)  Weighted average cost 
D)  Simple average cost 
A)  LIFO 
B)  FIFO 
C)  Weighted average cost 
D)  Simple average cost

Question 16

Which of the following statements about inventory costing methods is correct?

Accepted Answer

A)  A change in inventory method is allowed only if it improves the accuracy of the company's financial results. 
B)  During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. 
C)  International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. 
D)  In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial reporting. 
A)  A change in inventory method is allowed only if it improves the accuracy of the company's financial results. 
B)  During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. 
C)  International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. 
D)  In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial reporting.

Question 17

Which of the following companies would be least concerned about a low inventory turnover ratio?

Accepted Answer

A)  A fish market selling fresh fish 
B)  A hardware company selling drywall screws 
C)  A dairy company selling butter and milk 
D)  A semiconductor company selling microchips 
A)  A fish market selling fresh fish 
B)  A hardware company selling drywall screws 
C)  A dairy company selling butter and milk 
D)  A semiconductor company selling microchips

Question 18

Goods in transit are:

Accepted Answer

A)  inventory items being transported from a seller to a buyer. 
B)  always included in the transportation company's inventory. 
C)  always included in the selling company's inventory. 
D)  always included in the buying company's inventory. 
A)  inventory items being transported from a seller to a buyer. 
B)  always included in the transportation company's inventory. 
C)  always included in the selling company's inventory. 
D)  always included in the buying company's inventory.

Question 19

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of November:
 
What is the per-unit value of ending inventory on November 30 if this company uses a weighted-average perpetual inventory system? (Round each per unit cost to two decimal points.)

Accepted Answer

A)  $6.00 
B)  $7.00 
C)  $8.80 
D)  $13.00 
A)  $6.00 
B)  $7.00 
C)  $8.80 
D)  $13.00

Question 20

Hardware Inc.has a periodic inventory system and uses the weighted average method.The company began the year with 150 large brass switch plates on hand at a cost of $4.00 each.Purchases of switch plates during the year were as follows:
 
The switch plates sell for $7.00 each.If Hardware sells 570 switch plates during the year,what is the company's cost of goods sold?

Accepted Answer

A)  $3,990 
B)  $2,508 
C)  $2,480 
D)  $2,560 
A)  $3,990 
B)  $2,508 
C)  $2,480 
D)  $2,560

Which of the following statements is correct?

A declining inventory turnover ratio may mean that:

Inventory levels increase by 10% at your company during the fourth quarter.Based on this increase,which of the following statements must be correct?

Probes,Inc.wrote down its inventory to the lower replacement value.The effect on Probes' accounting equation includes a(n):

Under the FIFO cost method,what is the cost of goods sold for January?

Which of the following statements is correct?

The records of Alberta Inc.included the following information: -Use the information above to answer the following question.What is the number of days to sell?

Assume that the cost of inventory is decreasing. Required: Fill in the blanks below with the words "higher" and "lower" to indicate which inventory costing method causes the value to be higher and which causes it to be lower.

An understatement of beginning inventory causes net income to be understated.

When the market value of inventory drops below the cost recorded in the financial records,applying the lower of cost or market (LCM)rule causes:

The records of Alberta Inc.included the following information: -Use the information above to answer the following question.What is the inventory turnover ratio?

If Vito,Inc.has an inventory turnover ratio of 5 times,its days to sell must be:

Assume a periodic inventory system is used.Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Which of the following statements about inventory costing methods is correct?

Which of the following companies would be least concerned about a low inventory turnover ratio?

Goods in transit are:

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 is correct?

A declining inventory turnover ratio may mean that:

Inventory levels increase by 10% at your company during the fourth quarter.Based on this increase,which of the following statements must be correct?

Probes,Inc.wrote down its inventory to the lower replacement value.The effect on Probes' accounting equation includes a(n):

Under the FIFO cost method,what is the cost of goods sold for January?

Which of the following statements is correct?

The records of Alberta Inc.included the following information: -Use the information above to answer the following question.What is the number of days to sell?

Assume that the cost of inventory is decreasing. Required: Fill in the blanks below with the words "higher" and "lower" to indicate which inventory costing method causes the value to be higher and which causes it to be lower.

An understatement of beginning inventory causes net income to be understated.

When the market value of inventory drops below the cost recorded in the financial records,applying the lower of cost or market (LCM)rule causes:

The records of Alberta Inc.included the following information: -Use the information above to answer the following question.What is the inventory turnover ratio?

If Vito,Inc.has an inventory turnover ratio of 5 times,its days to sell must be:

Assume a periodic inventory system is used.Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Which of the following statements about inventory costing methods is correct?

Which of the following companies would be least concerned about a low inventory turnover ratio?

Goods in transit are:

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