Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The second step in using the gross profit method to estimate ending inventory is to:

Accepted Answer

A) estimate the cost of goods sold. 
B) calculate the cost of goods available for sale. 
C) estimate the ending inventory. 
D) estimate the beginning inventory. 
A) estimate the cost of goods sold. 
B) calculate the cost of goods available for sale. 
C) estimate the ending inventory. 
D) estimate the beginning inventory.

Question 3

Beginning inventory plus net purchases equals cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

Inventory is probably the retailer's smallest (by value)current asset.

Accepted Answer

A) True 
 B)False

Question 5

The Vintage Showroom,an antique shop,would most likely use the FIFO method of accounting for inventory.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

An ending inventory error in one year does not have any effect on the inventory at the start of the next year.

Accepted Answer

A) True 
 B)False

Question 8

Lionworks Enterprises had the following inventory data:
 
Assuming average cost,what is the cost of goods sold for the July 14 sale?

Accepted Answer

A) $455 
B) $456 
C) $452 
D) $464 
A) $455 
B) $456 
C) $452 
D) $464

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Companies that want a "middle ground" solution to net income and the amount of income taxes that the company will pay will value their inventory at:

Accepted Answer

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

In order to pay the least income tax possible in periods of constant costs,the company should use which of the following inventory costing methods?

Accepted Answer

A) FIFO 
B) LIFO 
C) Average cost 
D) Any method,as there is no effect on net income or taxes for the period if costs are constant. 
A) FIFO 
B) LIFO 
C) Average cost 
D) Any method,as there is no effect on net income or taxes for the period if costs are constant.

Question 15

If gross profit is overstated in Period 1,then the ending inventory and net income in Period 1 were respectively:

Accepted Answer

A) overstated,and understated. 
B) overstated,and overstated. 
C) understated,and overstated. 
D) understated,and understated. 
A) overstated,and understated. 
B) overstated,and overstated. 
C) understated,and overstated. 
D) understated,and understated.

Question 16

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 17

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 18

When using LIFO,an accounting department only needs to know:

Accepted Answer

A) how many units were sold,not which units were sold. 
B) which units were sold,not how many units were sold. 
C) the specific price of a specific unit. 
D) the average price of a specific unit. 
A) how many units were sold,not which units were sold. 
B) which units were sold,not how many units were sold. 
C) the specific price of a specific unit. 
D) the average price of a specific unit.

Question 19

Cost of goods available for sale minus estimated Cost of Goods Sold 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 20

Having too much inventory can be a problem because:

Accepted Answer

A) inventory takes up space and ties up money. 
B) inventory can become obsolete and lose value. 
C) inventory is expensive to maintain. 
D) all of the above. 
A) inventory takes up space and ties up money. 
B) inventory can become obsolete and lose value. 
C) inventory is expensive to maintain. 
D) all of the above.

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

The second step in using the gross profit method to estimate ending inventory is to:

Beginning inventory plus net purchases equals cost of goods sold.

Inventory is probably the retailer's smallest (by value)current asset.

The Vintage Showroom,an antique shop,would most likely use the FIFO method of accounting for inventory.

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

An ending inventory error in one year does not have any effect on the inventory at the start of the next year.

Lionworks Enterprises had the following inventory data: Assuming average cost,what is the cost of goods sold for the July 14 sale?

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

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

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

Companies that want a "middle ground" solution to net income and the amount of income taxes that the company will pay will value their inventory at:

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

In order to pay the least income tax possible in periods of constant costs,the company should use which of the following inventory costing methods?

If gross profit is overstated in Period 1,then the ending inventory and net income in Period 1 were respectively:

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

Inventory is often the largest:

When using LIFO,an accounting department only needs to know:

Cost of goods available for sale minus estimated Cost of Goods Sold yields the estimated:

Having too much inventory can be a problem because:

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

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

The second step in using the gross profit method to estimate ending inventory is to:

Beginning inventory plus net purchases equals cost of goods sold.

Inventory is probably the retailer's smallest (by value)current asset.

The Vintage Showroom,an antique shop,would most likely use the FIFO method of accounting for inventory.

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

An ending inventory error in one year does not have any effect on the inventory at the start of the next year.

Lionworks Enterprises had the following inventory data: Assuming average cost,what is the cost of goods sold for the July 14 sale?

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

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

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

Companies that want a "middle ground" solution to net income and the amount of income taxes that the company will pay will value their inventory at:

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

In order to pay the least income tax possible in periods of constant costs,the company should use which of the following inventory costing methods?

If gross profit is overstated in Period 1,then the ending inventory and net income in Period 1 were respectively:

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

Inventory is often the largest:

When using LIFO,an accounting department only needs to know:

Cost of goods available for sale minus estimated Cost of Goods Sold yields the estimated:

Having too much inventory can be a problem because:

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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