Question 1

Which statement best explains the LIFO cost flow assumption?

Accepted Answer

A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales. 
A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales.

Question 2

Compare the perpetual inventory control system and the periodic inventory control system. Which system provides better information for inventory management?

Accepted Answer

Perpetual inventory system: One that dir

Question 3

Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?

Accepted Answer

Inventories need to be assessed for impa

Question 4

Which statement best explains the retail inventory method?

Accepted Answer

A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period. 
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products. 
D) This method is least appropriate for inventory items that are not distinguishable from one another. 
A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period. 
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products. 
D) This method is least appropriate for inventory items that are not distinguishable from one another.

Question 5

Which statement is not correct about overhead?

Accepted Answer

A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is expensed under variable costing. 
C) Variable overhead is expensed under both absorption and variable costing. 
D) Both fixed and variable overhead are capitalized under absorption costing. 
A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is expensed under variable costing. 
C) Variable overhead is expensed under both absorption and variable costing. 
D) Both fixed and variable overhead are capitalized under absorption costing.

Question 6

Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

Accepted Answer

A) $ 0 
B) $100,000 
C) $150,000 
D) $250,000 
A) $ 0 
B) $100,000 
C) $150,000 
D) $250,000

Question 7

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Accepted Answer

A) Gross margin is understated by $1,000. 
B) Cost of sales is overstated by $1,000. 
C) Ending inventory is understated by $1,000. 
D) Beginning inventory is understated by $1,000. 
A) Gross margin is understated by $1,000. 
B) Cost of sales is overstated by $1,000. 
C) Ending inventory is understated by $1,000. 
D) Beginning inventory is understated by $1,000.

Question 8

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Accepted Answer

A) Gross margin is understated by $1,000. 
B) No effect on cost of goods available for sale. 
C) Cost of sales is understated by $1,000. 
D) Beginning inventory is overstated by $1,000. 
A) Gross margin is understated by $1,000. 
B) No effect on cost of goods available for sale. 
C) Cost of sales is understated by $1,000. 
D) Beginning inventory is overstated by $1,000.

Question 9

Assume that a $100 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

Accepted Answer

A) Cost of sales is understated by $100. 
B) Gross margin is understated. 
C) Sales are understated by $100. 
D) Operating profit is understated by $100. 
A) Cost of sales is understated by $100. 
B) Gross margin is understated. 
C) Sales are understated by $100. 
D) Operating profit is understated by $100.

Question 10

Which statement is not correct about the periodic inventory system for inventory management?

Accepted Answer

A) The periodic inventory system keeps continuous information about the amount of inventory on hand. 
B) The cost of goods sold is a calculated number under the periodic inventory system. 
C) Under both the periodic and perpetual systems, the final amounts reported in financial statements are the same. 
D) The perpetual inventory system provides more information to allow an enterprise to better manage its inventories. 
A) The periodic inventory system keeps continuous information about the amount of inventory on hand. 
B) The cost of goods sold is a calculated number under the periodic inventory system. 
C) Under both the periodic and perpetual systems, the final amounts reported in financial statements are the same. 
D) The perpetual inventory system provides more information to allow an enterprise to better manage its inventories.

Question 11

The inventory records of ZUP indicate the following regarding its best-selling product for the month of January:
   Required:
Calculate the dollar amount of ending inventory and cost of goods sold under each of the following cost flow assumptions:
a. Weighted-average cost, periodic inventory.
b. First-in, first-out (FIFO), perpetual inventory.
c. Weighted-average cost, perpetual inventory.

Accepted Answer

a.
COGAS / units available for sale = WA

Question 12

Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

Accepted Answer

A) Purchases are overstated. 
B) Purchases are understated. 
C) Gross margin is understated. 
D) Cost of sales is overstated. 
A) Purchases are overstated. 
B) Purchases are understated. 
C) Gross margin is understated. 
D) Cost of sales is overstated.

Question 13

The following information was taken from the inventory records of Hope Corp.:   What would be the ending inventory, assuming that the LIFO method is used in a periodic inventory system?

Accepted Answer

A) $920 
B) $930 
C) $940 
D) $950 
A) $920 
B) $930 
C) $940 
D) $950

Question 14

Assume that a $400 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Accepted Answer

A) Cost of sales is overstated by $400. 
B) Gross margin is overstated. 
C) Cost of goods available for sale is understated. 
D) There is no effect on fiscal 2013. 
A) Cost of sales is overstated by $400. 
B) Gross margin is overstated. 
C) Cost of goods available for sale is understated. 
D) There is no effect on fiscal 2013.

Question 15

Explain how manufacturing companies can manipulate earnings through its production process. What should an auditor or financial statement user do to detect this type of manipulation?

Accepted Answer

For manufacturing companies, producing m

Question 16

Given the following information, what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

Accepted Answer

A) $1,510 
B) $1,575 
C) $2,075 
D) $3,120 
A) $1,510 
B) $1,575 
C) $2,075 
D) $3,120

Which statement best explains the LIFO cost flow assumption?

Compare the perpetual inventory control system and the periodic inventory control system. Which system provides better information for inventory management?

Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?

Which statement best explains the retail inventory method?

Which statement is not correct about overhead?

Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Assume that a $100 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

Which statement is not correct about the periodic inventory system for inventory management?

Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

The following information was taken from the inventory records of Hope Corp.: What would be the ending inventory, assuming that the LIFO method is used in a periodic inventory system?

Assume that a $400 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Explain how manufacturing companies can manipulate earnings through its production process. What should an auditor or financial statement user do to detect this type of manipulation?

Given the following information, what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue Recognition

Cash and Receivables

Financial Assets

Property, Plant, and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

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Exam 6: Inventories

Which statement best explains the LIFO cost flow assumption?

Compare the perpetual inventory control system and the periodic inventory control system. Which system provides better information for inventory management?

Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?

Which statement best explains the retail inventory method?

Which statement is not correct about overhead?

Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Assume that a $100 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

Which statement is not correct about the periodic inventory system for inventory management?

Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

The following information was taken from the inventory records of Hope Corp.: What would be the ending inventory, assuming that the LIFO method is used in a periodic inventory system?

Assume that a $400 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Explain how manufacturing companies can manipulate earnings through its production process. What should an auditor or financial statement user do to detect this type of manipulation?

Given the following information, what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue Recognition

Cash and Receivables

Financial Assets

Property, Plant, and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters