Question 1

Cutoff errors are failures to record transactions in the correct time period.

Accepted Answer

A) True 
 B)False  True

Question 2

When the seller bears the cost of shipping,the sales invoice is stated as FOB destination.When the buyer bears the cost of shipping,the sales invoice is stated as FOB shipping point.

Accepted Answer

A) True 
 B)False  True

Question 3

LIFO tends to decrease taxes when

Accepted Answer

A) costs are declining. 
B) costs are constant. 
C) costs are increasing. 
D) LIFO will always yield the lowest possible taxes. 
E) Impossible to determine without specific cost data 
A) costs are declining. 
B) costs are constant. 
C) costs are increasing. 
D) LIFO will always yield the lowest possible taxes. 
E) Impossible to determine without specific cost data C

Question 4

Gabby Company operates under a perpetual inventory system.It began operations on March 1,20X9,and had the following transactions affecting inventory during March,20X9.
 $\begin{array}{l}
\begin{array}{lll}
\text { March 1 } & \text { Purchase } & 500 \text { units@ } \$ 5.00&\$2,500 \
\text { March5 } & \text { Sale } & 200 \text { units } \
\text { March 10 } & \text { Purchase } & 300 \text { units@ } \$ 5.20 &\$1,560\
\text { March 15 } & \text { Sale } & 320 \text { units } \
\text { March20 } & \text { Purchase } & 400 \text { units@ } \$ 5.40 &\$2,160\
\text { Sale }  & \text { Sale }&230 \text { units }
\end{array}\

\end{array}$ Assume the company is trying to decide between the periodic method and the perpetual method.Gabby has decided to use the last-in-first-out cost flow assumption.Determine the cost of goods sold for the month of March,20X9 and the ending inventory balance at March 31,20X9,using both the perpetual method and the periodic method.

Accepted Answer

The perpetual focuses upon sales,periodi

Question 5

Queen Mattresses,Inc.had the following transactions occur during May 20X3.Assume there is no beginning inventory. 
$\begin{array} { l l } 
\text { May } 2 & \text { Inventcy wes purchased on account for } \$ 5,000 , \text { terms } 2 / 10,n / 30 \
\text { May } 3 & \text { Inventcy costing } \$ 1,000 \text { was returned. } \
\text { May } 9 & \text { Paid for the inventory. } \
\text { May } 15 & \text { Inventcry costing } \$ 2,200 \text { was sold on account for } \$ 3,800, \text { , terms } 3 / 10 , n / 45 \
\text { May } 31 & \text { Closing entries are prepered for the monthend financial statements. }
\end{array}$ 
If Queen Mattresses Inc.were using the periodic inventory system,what is the journal entry for May 2?

Accepted Answer

A) $\begin{array}{lll}
\text {  Inventory } & 4,900 & \
\quad \text { Accounts Payable } & &4,900  \
\end{array}$ 
B) $\begin{array}{lccc}
\text {  Inventory } &5,000  & \
\quad \text { Accounts Payable } & &5,000 & \
\end{array}$ 
C) $\begin{array}{lccc}
\text {  Purchases } & 5,000 \
\quad \text { Accounts Payable } &  & 5,000 \
\end{array}$ 
D) $\begin{array}{lccc}
\text {  Inventory } & 4,900 & \
\text { Cash Discounts on Purchases } &100 & \
\quad \text { Accounts Payable } & &5,000 \
\end{array}$ 
E) $\begin{array}{lccc}
\text {  Purchases } & 4,900 & \
\text { Cash Discounts on Purchases } &100 & \
\quad \text { Accounts Payable } & &5,000
\end{array}$ 
A) $\begin{array}{lll}
\text {  Inventory } & 4,900 & \
\quad \text { Accounts Payable } & &4,900  \
\end{array}$ 
B) $\begin{array}{lccc}
\text {  Inventory } &5,000  & \
\quad \text { Accounts Payable } & &5,000 & \
\end{array}$ 
C) $\begin{array}{lccc}
\text {  Purchases } & 5,000 \
\quad \text { Accounts Payable } &  & 5,000 \
\end{array}$ 
D) $\begin{array}{lccc}
\text {  Inventory } & 4,900 & \
\text { Cash Discounts on Purchases } &100 & \
\quad \text { Accounts Payable } & &5,000 \
\end{array}$ 
E) $\begin{array}{lccc}
\text {  Purchases } & 4,900 & \
\text { Cash Discounts on Purchases } &100 & \
\quad \text { Accounts Payable } & &5,000
\end{array}$

Question 6

If ending inventory is overstated by $5,000 in 20X3,retained earnings will be overstated in 20X3.

Accepted Answer

A) True 
 B)False

Question 7

Compared with a pure cost method,the lower-of-cost-or-market method reports less net income in the period of decline in the market value of the inventory and more net income in the period of sale.

Accepted Answer

A) True 
 B)False

Question 8

Assuming inflation,which of the following relationships among inventory valuation methods is incorrectly stated?

Accepted Answer

A) FIFO has a higher ending inventory balance and a higher net income than LIFO. 
B) FIFO has a higher ending inventory balance and a higher net income than weighted-average. 
C) LIFO has a higher ending inventory balance and a higher net income than weighted-average. 
D) Weighted-average has a higher ending inventory balance and a lower cost of goods sold than LIFO. 
E) LIFO has a lower ending inventory balance and a higher cost of goods sold than FIFO. 
A) FIFO has a higher ending inventory balance and a higher net income than LIFO. 
B) FIFO has a higher ending inventory balance and a higher net income than weighted-average. 
C) LIFO has a higher ending inventory balance and a higher net income than weighted-average. 
D) Weighted-average has a higher ending inventory balance and a lower cost of goods sold than LIFO. 
E) LIFO has a lower ending inventory balance and a higher cost of goods sold than FIFO.

Question 9

Queen Mattresses,Inc.had the following transactions occur during May 20X3.Assume there is no beginning inventory. $\begin{array}{ll}
\text { May } 2 & \text { Inventory was purchased on account for } \$ 5,000 \text {, terms } 2 / 10, n / 30 . \
\text { May } 3 & \text { Inventory costing } \$ 1,000 \text { was returned. } \
\text { May } 9 & \text { Paid for the inventory. } \
\text { May 15 } & \text { Inventory costing } \$ 2,200 \text { was sold on account for } \$ 3,800 \text {, terms } 3 / 10, n / 45 \text {, } \
\text { May } 31 & \text { Closing entries are prepared for the month-end financial statements. }
\end{array}$ If Queen Mattresses,Inc.were using the periodic inventory system,what is the journal entry on May 3?

Accepted Answer

A) $\begin{array}{lll}
\text {  Accounts Payable } & 1,000 & \
\quad \text { Inventory } &  & 1,000 \
\end{array}$ 
B) $\begin{array}{lccc}
\text {  Accounts Payable } & 1,000 \
\quad \text { Purchases } & &1,000  \
\end{array}$ 
C) $\begin{array}{lccc}
\text {  Accounts Payable } & 1,000 \
\quad \text { Purchase Returns and Allowances } &  &1,000 \
\end{array}$ 
D) $\begin{array}{lccc}
\text {  Accounts Payable } &1,000 &  \
\quad \text { Cash Discounts on Purchases } & & 20 \
\quad \text { Inventory } & & 980\
\end{array}$ 
E) $\begin{array}{lccc}
\text {  Accounts Payable } &  1,000\
\quad \text { Cash Discounts on Purchases } & & 20  \
\text { Purchases } & & 980\
\end{array}$ 
A) $\begin{array}{lll}
\text {  Accounts Payable } & 1,000 & \
\quad \text { Inventory } &  & 1,000 \
\end{array}$ 
B) $\begin{array}{lccc}
\text {  Accounts Payable } & 1,000 \
\quad \text { Purchases } & &1,000  \
\end{array}$ 
C) $\begin{array}{lccc}
\text {  Accounts Payable } & 1,000 \
\quad \text { Purchase Returns and Allowances } &  &1,000 \
\end{array}$ 
D) $\begin{array}{lccc}
\text {  Accounts Payable } &1,000 &  \
\quad \text { Cash Discounts on Purchases } & & 20 \
\quad \text { Inventory } & & 980\
\end{array}$ 
E) $\begin{array}{lccc}
\text {  Accounts Payable } &  1,000\
\quad \text { Cash Discounts on Purchases } & & 20  \
\text { Purchases } & & 980\
\end{array}$

Question 10

A physical inventory count is required under both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 11

Under a periodic inventory system,a business maintains a continual record of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 12

In a transaction where the merchandise invoice indicates F.O.B.shipping point,who pays the cost of shipping?

Accepted Answer

A) The buyer 
B) The seller 
C) The common carrier 
D) The freight forwarder 
E) None of the above 
A) The buyer 
B) The seller 
C) The common carrier 
D) The freight forwarder 
E) None of the above

Question 13

In regards to physical inventory counts and valuations,it is not unusual

Accepted Answer

A) to use inventory counts to be able to journalize sales. 
B) for firms to choose fiscal accounting periods to end when inventory levels are high. 
C) to count inventory when inventory levels are high. 
D) to count inventory twice per week. 
E) for external auditors to use experts. 
A) to use inventory counts to be able to journalize sales. 
B) for firms to choose fiscal accounting periods to end when inventory levels are high. 
C) to count inventory when inventory levels are high. 
D) to count inventory twice per week. 
E) for external auditors to use experts.

Question 14

Gabby Company operates under a perpetual inventory system.It began operations on March 1,20X9,and had the following transactions affecting inventory during March,20X9.
 $\begin{array}{llll}
\text { March 1 } & \text { Purchase } & 500 \text { units @ } \$ 5.00 & \$ 2,500 \
\text { March 5 } & \text { Sale } & 200 \text { units } & \
\text { March 10 } & \text { Purchase } & 300 \text { units @ } \$ 5.20 & \$ 1,560 \
\text { March 15 } & \text { Sale } & 320 \text { units } & \
\text { March } 20 & \text { Purchase } & 400 \text { units } @ \$ 5.40 & \$ 2,160 \
\text { March } 25 & \text { Sale } & 230 \text { units }
\end{array}$ Determine the cost of goods sold for the month of March,20X9 and the ending inventory balance at March 31,20X9.Assume the company uses the first-in-first-out (FIFO)cost flow assumption.

Accepted Answer

Note that 750 units were sold,450 units

Question 15

Biscuit Bakery had the following activity in its inventory account during August 20X3. $\begin{array}{lllcc}
\text { Date } & \text { Activity } & \text { Units } & \begin{array}{c}
\text { Cost per } \
\text { Unit Cost }
\end{array} & \text { Total } \
\hline \text { August 1 } & \text { Beginning inventory } & 100 & \$ 3.00 & \$ 300 \
\text { August 3 } & \text { Purchase } & 40 & 3.10 & 124 \
\text { August 7 } & \text { Sale } & 50 & & \
\text { August 12 } & \text { Purchase } & 50 & 3.20 & 160 \
\text { August 16 } & \text { Sale } & 70 & & \
\text { August 23 } & \text { Sale } & 40 & & \
\text { August 30 } & \text { Purchase } & 60 & 3.30 & 198
\end{array}$ What is the cost of goods sold for the month ended August 31,20X3,for Biscuit Bakery if the company uses periodic FIFO as its inventory valuation method?

Accepted Answer

A) $424.00 
B) $485.00 
C) $488.00 
D) $500.00 
E) $584.00 
A) $424.00 
B) $485.00 
C) $488.00 
D) $500.00 
E) $584.00

Question 16

In a periodic inventory system the quantity of ending inventory is determined by

Accepted Answer

A) subtracting units sold from units purchased. 
B) a physical inventory count. 
C) looking at the balance in the inventory account. 
D) subtracting cost of goods sold from the beginning inventory balance. 
E) adding units sold to the beginning inventory balance. 
A) subtracting units sold from units purchased. 
B) a physical inventory count. 
C) looking at the balance in the inventory account. 
D) subtracting cost of goods sold from the beginning inventory balance. 
E) adding units sold to the beginning inventory balance.

Question 17

If ending inventory is understated by $8,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on retained earnings on December 31,20X4?

Accepted Answer

A) The 20X4 ending retained earnings will be understated by $2,400. 
B) The 20X4 ending retained earnings will be overstated by $2,400. 
C) The 20X4 ending retained earnings will be understated by $5,600. 
D) The 20X4 ending retained earnings will be overstated by $5,600. 
E) The 20X4 ending retained earnings will not be understated or overstated. 
A) The 20X4 ending retained earnings will be understated by $2,400. 
B) The 20X4 ending retained earnings will be overstated by $2,400. 
C) The 20X4 ending retained earnings will be understated by $5,600. 
D) The 20X4 ending retained earnings will be overstated by $5,600. 
E) The 20X4 ending retained earnings will not be understated or overstated.

Question 18

Arko,Inc.,manufactures tables.During the month of March,20X9,Arko purchased 100 table tops of wood costing $3 per piece,400 table legs of wood costing $1 per leg,100 bottles of glue costing $2.50 per bottle,and 800 nails costing $.20 per nail.All raw materials were put into production during March,20X9,and production wages related to the production of tables amounted to $300.At the end of March,20X9,ending work in process inventory had 20 table tops of wood,80 table legs of wood,20 bottles of glue,and 160 nails.
Required:
Prepare journal entries for the purchase of raw materials on account,production activity,and completion of production.

Accepted Answer

None

Question 19

Inventory turnover is calculated as cost of goods sold divided by average inventory.

Accepted Answer

A) True 
 B)False

Question 20

LIFO results in a more accurate valuation of ending inventory on the balance sheet than does FIFO.

Accepted Answer

A) True 
 B)False

Cutoff errors are failures to record transactions in the correct time period.

When the seller bears the cost of shipping,the sales invoice is stated as FOB destination.When the buyer bears the cost of shipping,the sales invoice is stated as FOB shipping point.

LIFO tends to decrease taxes when

If ending inventory is overstated by $5,000 in 20X3,retained earnings will be overstated in 20X3.

Compared with a pure cost method,the lower-of-cost-or-market method reports less net income in the period of decline in the market value of the inventory and more net income in the period of sale.

Assuming inflation,which of the following relationships among inventory valuation methods is incorrectly stated?

A physical inventory count is required under both the perpetual and periodic inventory systems.

Under a periodic inventory system,a business maintains a continual record of inventory on hand.

In a transaction where the merchandise invoice indicates F.O.B.shipping point,who pays the cost of shipping?

In regards to physical inventory counts and valuations,it is not unusual

In a periodic inventory system the quantity of ending inventory is determined by

If ending inventory is understated by $8,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on retained earnings on December 31,20X4?

Inventory turnover is calculated as cost of goods sold divided by average inventory.

LIFO results in a more accurate valuation of ending inventory on the balance sheet than does FIFO.

Accounting: the Language of Business

Measuring Income to Assess Performance

Recording Transactions

Accrual Accounting and Financial Statements

Statement of Cash Flows

Accounting for Sales

Long-Lived Assets

Liabilities and Interest

Stockholders Equity

Intercorporate Investments and Consolidations

Financial Statement Analysis

Filters

Exam 7: Inventories and Cost of Goods Sold

Cutoff errors are failures to record transactions in the correct time period.

When the seller bears the cost of shipping,the sales invoice is stated as FOB destination.When the buyer bears the cost of shipping,the sales invoice is stated as FOB shipping point.

LIFO tends to decrease taxes when

If ending inventory is overstated by $5,000 in 20X3,retained earnings will be overstated in 20X3.

Compared with a pure cost method,the lower-of-cost-or-market method reports less net income in the period of decline in the market value of the inventory and more net income in the period of sale.

Assuming inflation,which of the following relationships among inventory valuation methods is incorrectly stated?

A physical inventory count is required under both the perpetual and periodic inventory systems.

Under a periodic inventory system,a business maintains a continual record of inventory on hand.

In a transaction where the merchandise invoice indicates F.O.B.shipping point,who pays the cost of shipping?

In regards to physical inventory counts and valuations,it is not unusual

In a periodic inventory system the quantity of ending inventory is determined by

If ending inventory is understated by $8,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on retained earnings on December 31,20X4?

Inventory turnover is calculated as cost of goods sold divided by average inventory.

LIFO results in a more accurate valuation of ending inventory on the balance sheet than does FIFO.

Accounting: the Language of Business

Measuring Income to Assess Performance

Recording Transactions

Accrual Accounting and Financial Statements

Statement of Cash Flows

Accounting for Sales

Long-Lived Assets

Liabilities and Interest

Stockholders Equity

Intercorporate Investments and Consolidations

Financial Statement Analysis

Filters