Question 1

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

Accepted Answer

The lower-of-cost-or-market rule require

Question 2

An understatement of year 1's ending inventory will

Accepted Answer

A)  cause year 2's cost of goods sold to be overstated. 
B)  result in an understatement of year 2's beginning inventory. 
C)  not affect year 2's ending owner's equity. 
D)  have no effect on year 2's gross margin. 
A)  cause year 2's cost of goods sold to be overstated. 
B)  result in an understatement of year 2's beginning inventory. 
C)  not affect year 2's ending owner's equity. 
D)  have no effect on year 2's gross margin.

Question 3

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Accepted Answer

A)  Materiality 
B)  Cost-benefit 
C)  Matching 
D)  Consistency 
A)  Materiality 
B)  Cost-benefit 
C)  Matching 
D)  Consistency

Question 4

Which of the following companies would be most likely to use the retail method?

Accepted Answer

A)  A dealer in heavy machinery 
B)  A TV repair company 
C)  A women's dress shop 
D)  A farm supply company 
A)  A dealer in heavy machinery 
B)  A TV repair company 
C)  A women's dress shop 
D)  A farm supply company

Question 5

The average-cost method relies on a calculation of average unit cost.

Accepted Answer

A) True 
 B)False

Question 6

Use this inventory information for the month of June to answer the following questions.   Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

Accepted Answer

A)  More information is needed. 
B)  $10,240 
C)  $5,440 
D)  $5,760 
A)  More information is needed. 
B)  $10,240 
C)  $5,440 
D)  $5,760

Question 7

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

Accepted Answer

A)  $100,000 
B)  $300,000 
C)  $200,000 
D)  $400,000 
A)  $100,000 
B)  $300,000 
C)  $200,000 
D)  $400,000

Question 8

What is the chief objective of supply-chain management? How is it accomplished?

Accepted Answer

The chief objective of supply-chain mana

Question 9

An understatement of year 1's beginning inventory will

Accepted Answer

A)  cause year 2's gross margin to be overstated. 
B)  cause year 1's cost of goods sold to be understated. 
C)  cause year 2's gross margin to be understated. 
D)  have no effect on year 1's gross margin. 
A)  cause year 2's gross margin to be overstated. 
B)  cause year 1's cost of goods sold to be understated. 
C)  cause year 2's gross margin to be understated. 
D)  have no effect on year 1's gross margin.

Question 10

The just-in-time operating environment produces decreased carrying costs for inventory.

Accepted Answer

A) True 
 B)False

Question 11

In periods of falling prices,FIFO will result in a higher ending inventory valuation than LIFO.

Accepted Answer

A) True 
 B)False

Question 12

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Accepted Answer

A)  Full disclosure 
B)  Consistency 
C)  Cost-benefit 
D)  Conservatism 
A)  Full disclosure 
B)  Consistency 
C)  Cost-benefit 
D)  Conservatism

Question 13

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

Accepted Answer

A)  Purchases 
B)  Beginning inventory 
C)  Sales 
D)  Freight-in 
A)  Purchases 
B)  Beginning inventory 
C)  Sales 
D)  Freight-in

Question 14

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

Accepted Answer

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

Question 15

Use this inventory information for the month of May to answer the following question.   Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

Accepted Answer

A)  $2,880 
B)  $5,120 
C)  $5,200 
D)  $2,800 
A)  $2,880 
B)  $5,120 
C)  $5,200 
D)  $2,800

Question 16

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Accepted Answer

A) True 
 B)False

Question 17

Costs incurred in storing inventory usually are included in inventory costs.

Accepted Answer

A) True 
 B)False

Question 18

An assumption about cost flow is necessary

Accepted Answer

A)  because it is required by income tax regulations. 
B)  only when the flow of goods cannot be determined. 
C)  because prices usually change,and tracking which units have been sold is difficult. 
D)  even when there is no change in the purchase price of inventory. 
A)  because it is required by income tax regulations. 
B)  only when the flow of goods cannot be determined. 
C)  because prices usually change,and tracking which units have been sold is difficult. 
D)  even when there is no change in the purchase price of inventory.

Question 19

Use this information to answer the following question.   A periodic inventory system is used.
Using the average-cost method,the cost assigned to ending inventory is

Accepted Answer

A)  $4,278. 
B)  $1,518. 
C)  $1,692. 
D)  $1,584. 
A)  $4,278. 
B)  $1,518. 
C)  $1,692. 
D)  $1,584.

Question 20

A fur dealer probably would use which of the following inventory methods?

Accepted Answer

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

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

An understatement of year 1's ending inventory will

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Which of the following companies would be most likely to use the retail method?

The average-cost method relies on a calculation of average unit cost.

Use this inventory information for the month of June to answer the following questions. Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

What is the chief objective of supply-chain management? How is it accomplished?

An understatement of year 1's beginning inventory will

The just-in-time operating environment produces decreased carrying costs for inventory.

In periods of falling prices,FIFO will result in a higher ending inventory valuation than LIFO.

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Costs incurred in storing inventory usually are included in inventory costs.

An assumption about cost flow is necessary

Use this information to answer the following question. A periodic inventory system is used. Using the average-cost method,the cost assigned to ending inventory is

A fur dealer probably would use which of the following inventory methods?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Investments

Filters

Exam 7: Inventories

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

An understatement of year 1's ending inventory will

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Which of the following companies would be most likely to use the retail method?

The average-cost method relies on a calculation of average unit cost.

Use this inventory information for the month of June to answer the following questions. Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

What is the chief objective of supply-chain management? How is it accomplished?

An understatement of year 1's beginning inventory will

The just-in-time operating environment produces decreased carrying costs for inventory.

In periods of falling prices,FIFO will result in a higher ending inventory valuation than LIFO.

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Costs incurred in storing inventory usually are included in inventory costs.

An assumption about cost flow is necessary

Use this information to answer the following question. A periodic inventory system is used. Using the average-cost method,the cost assigned to ending inventory is

A fur dealer probably would use which of the following inventory methods?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Investments

Filters