Question 1

Which of the following is correct?

Accepted Answer

A)  Goods on consignment are included in the consignee's inventory. 
B)  Goods on consignment are included in the consignor's inventory. 
C)  The consignee essentially has the risks and rewards of ownership. 
D)  Inventory on consignment is always shown in a separate account. 
A)  Goods on consignment are included in the consignee's inventory. 
B)  Goods on consignment are included in the consignor's inventory. 
C)  The consignee essentially has the risks and rewards of ownership. 
D)  Inventory on consignment is always shown in a separate account.

Question 2

When using the moving-average cost formula with a perpetual system,

Accepted Answer

A)  a weighted-average cost is calculated at year end. 
B)  a new unit cost is calculated each time a sale is made. 
C)  a new unit cost is calculated each time a purchase is made. 
D)  a new unit cost is calculated both when a sale is made and when a purchase is made. 
A)  a weighted-average cost is calculated at year end. 
B)  a new unit cost is calculated each time a sale is made. 
C)  a new unit cost is calculated each time a purchase is made. 
D)  a new unit cost is calculated both when a sale is made and when a purchase is made.

Question 3

For calendar 2020, cost of goods available for sale for Janus Corp. was $820,000. The average gross profit rate was 30%. Sales for the year were $600,000. What is the estimated dollar value of the inventory at December 31?

Accepted Answer

A)  $400,000 
B)  $420,000 
C)  $328,000 
D)  $88,000 
A)  $400,000 
B)  $420,000 
C)  $328,000 
D)  $88,000

Question 4

Which of the following does NOT correctly describe a periodic inventory system?

Accepted Answer

A)  Cost of goods sold is calculated every time a sale is made. 
B)  Cost of goods sold is a residual amount. 
C)  Assuming a FIFO cost flow, cost of goods sold would equal that calculated by the perpetual system. 
D)  Inventory and cost of goods sold must be updated at the end of the period. 
A)  Cost of goods sold is calculated every time a sale is made. 
B)  Cost of goods sold is a residual amount. 
C)  Assuming a FIFO cost flow, cost of goods sold would equal that calculated by the perpetual system. 
D)  Inventory and cost of goods sold must be updated at the end of the period.

Question 5

Which of the following does NOT correctly describe the concept of net realizable value (NRV)?

Accepted Answer

A)  Estimates of NRV are based on the best evidence available at and shortly after the statement of financial position date. 
B)  NRV generally does not change over time. 
C)  NRV generally changes over time. 
D)  A new estimate of NRV is required at each statement of financial position date. 
A)  Estimates of NRV are based on the best evidence available at and shortly after the statement of financial position date. 
B)  NRV generally does not change over time. 
C)  NRV generally changes over time. 
D)  A new estimate of NRV is required at each statement of financial position date.

Question 6

The retail inventory method is NOT used

Accepted Answer

A)  as a control measure to determine inventory shortages. 
B)  to allow the calculation of net income without taking a physical inventory count. 
C)  to control quantities of merchandise on hand. 
D)  to calculate the gross profit percentage. 
A)  as a control measure to determine inventory shortages. 
B)  to allow the calculation of net income without taking a physical inventory count. 
C)  to control quantities of merchandise on hand. 
D)  to calculate the gross profit percentage.

Question 7

The following information was reported by Belleville Inc. for 2020: $\begin{array}{ll}
\text { Merchandise purchased for resale } & \$ 25,000 \
\text { Freight-in } & 1,750 \
\text { Freight-out } & 1,000 \
\text { Purchase returns } & 500
\end{array}$
 Based on this data, Belleville's 2020 inventoriable cost was

Accepted Answer

A)  $28,250. 
B)  $27,750. 
C)  $26,250. 
D)  $25,000. 
A)  $28,250. 
B)  $27,750. 
C)  $26,250. 
D)  $25,000.

Question 8

Washington Distribution Co. has determined its December 31, 2020, inventory on a FIFO basis at $240,000. Information pertaining to that inventory follows: $\begin{array}{llcc}
  \text { Etimated selling price } & \$255,000 \
 \text { Estimated cost of disposal } &10,000\
 \text { Normal profit margin } &30,000\
\end{array}$
 Washington records losses that result from applying the lower of cost and net realizable value rule. At December 31, 2020, the loss that Washington should recognize is

Accepted Answer

A)  $0. 
B)  $5,000. 
C)  $15,000. 
D)  $25,000. 
A)  $0. 
B)  $5,000. 
C)  $15,000. 
D)  $25,000.

Question 9

Maine Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to the calculation of the inventory at July 31, 2020, are as follows: $$\begin{array} { l l l } 
& \text { Cost } & \text { Retail } \
\text { Inventory, July } 1 / 20 &\$200,000 &\$360,000\
\text { Purchases } & 1,200,000 & 1,575,000 \
\text { Markups, net } & & 175,000 \
\text { Sales } & & 1,700,000 \
\text { Estimated normal shoplifting losses } & & 20,000 \
\text { Markdowns, net } & & 110,000
\end{array}$$ Maine's estimated inventory at July 31, 2020, using the retail method is

Accepted Answer

A)  $210,000. 
B)  $196,000. 
C)  $197,980. 
D)  $185,782. 
A)  $210,000. 
B)  $196,000. 
C)  $197,980. 
D)  $185,782.

Question 10

In a periodic inventory system, if the beginning inventory is overstated

Accepted Answer

A)  net income is understated. 
B)  working capital is understated. 
C)  the current ratio is overstated. 
D)  cost of goods sold is understated. 
A)  net income is understated. 
B)  working capital is understated. 
C)  the current ratio is overstated. 
D)  cost of goods sold is understated.

Question 11

The gross profit method of inventory valuation is NOT suitable when

Accepted Answer

A)  a portion of the inventory is destroyed. 
B)  there is a substantial increase in inventory during the year. 
C)  there is no beginning inventory because it is the first year of operation. 
D)  the gross profit percentage applicable to the goods in ending inventory is different from the percentage applicable to the goods sold during the period. 
A)  a portion of the inventory is destroyed. 
B)  there is a substantial increase in inventory during the year. 
C)  there is no beginning inventory because it is the first year of operation. 
D)  the gross profit percentage applicable to the goods in ending inventory is different from the percentage applicable to the goods sold during the period.

Question 12

To record a "basket purchase" or to allocate a joint product cost, which method is the most rational?

Accepted Answer

A)  average cost 
B)  relative sales value 
C)  fair value 
D)  amortized cost 
A)  average cost 
B)  relative sales value 
C)  fair value 
D)  amortized cost

Question 13

Use the following information for the following questions:
Transactions for Durham Ltd. for the month of June were:
  
-The ending inventory on a weighted average cost basis, rounded to the nearest dollar, is

Accepted Answer

A)  $1,956. 
B)  $1,970. 
C)  $1,980. 
D)  $1,995. 
A)  $1,956. 
B)  $1,970. 
C)  $1,980. 
D)  $1,995.

Question 14

Lower of cost and net realizable value (NRV)
The December 31, 2020, inventory of Rhode Inc. consisted of four products, for which certain information is provided below:
 $$\begin{array} { c c c c c } 
&& \text { Replacement }& \text { Estimated }&\text { Expected } \
\text { Product } & \text { Original Cost } &\text {Cost} &\text { Disposal cost } &  \text { Selling Price }  \
\text { A } & \$ 29.00 & \$ 22.00 & \$ 6.50  &\$ 40.00 \
\text { B } & \$ 44.00 & \$ 40.00 &\$8.00 &\$48.00  \
\text { C } & \$ 145.00 & \$ 125.00 & \$ 25.00 & \$ 190.00 \
\text { D } & \$ 21.00 & \$ 15.80 & \$ 3.00 & \$ 28.00
\end{array}$$ Instructions
Using the lower of cost and NRV approach applied on an individual-item basis, calculate the inventory valuation that should be reported for each product on December 31, 2020.

Accepted Answer

The answer of Lower of cost and net realizable value...

Question 15

Borrowing costs

Accepted Answer

A)  are never included in the costs of inventories. 
B)  must only be included in inventory cost if they relate to inventories produced in large quantities and on a repetitive basis. 
C)  are capitalized if incurred to finance activities that help bring inventories to a condition available for sale. 
D)  none of the above 
A)  are never included in the costs of inventories. 
B)  must only be included in inventory cost if they relate to inventories produced in large quantities and on a repetitive basis. 
C)  are capitalized if incurred to finance activities that help bring inventories to a condition available for sale. 
D)  none of the above

Question 16

Why are inventories included in the computation of net income?

Accepted Answer

A)  to determine cost of goods sold 
B)  to determine sales revenue 
C)  to determine merchandise returns 
D)  Inventories are not included in the computation of net income. 
A)  to determine cost of goods sold 
B)  to determine sales revenue 
C)  to determine merchandise returns 
D)  Inventories are not included in the computation of net income.

Question 17

Goods in transit that are shipped FOB destination should be included

Accepted Answer

A)  in the inventory of the buyer. 
B)  in the inventory of the seller. 
C)  in the inventory of the shipping company. 
D)  in no one's inventory until they arrive at their destination. 
A)  in the inventory of the buyer. 
B)  in the inventory of the seller. 
C)  in the inventory of the shipping company. 
D)  in no one's inventory until they arrive at their destination.

Question 18

The balance in Georgia Corp.'s accounts payable account at December 31, 2020, was $900,000 before any necessary year-end adjustments relating to the following:
1) Goods were in transit to Georgia from a vendor on December 31, 2020. The invoice cost was $75,000. The goods were shipped FOB shipping point on December 29, 2020 and were received on January 4, 2021.
2) Goods shipped FOB destination on December 21, 2020 from a vendor were received on January 6, 2021. The invoice cost was $37,500.
3) On December 27, 2020, Georgia wrote and recorded cheques to creditors totalling $45,000 that were mailed on January 10, 2021.
At December 31, 2020, what amount should Georgia report as total accounts payable?

Accepted Answer

A)  $1,020,000 
B)  $1,012,500 
C)  $975,000 
D)  $945,000 
A)  $1,020,000 
B)  $1,012,500 
C)  $975,000 
D)  $945,000

Question 19

Which of the following items would be inventory for a company like Marriott Hotel Corporation?

Accepted Answer

A)  hotel rooms 
B)  food and beverage stock 
C)  cleaning supplies 
D)  all of the above 
A)  hotel rooms 
B)  food and beverage stock 
C)  cleaning supplies 
D)  all of the above

Question 20

Year-end entries to update inventory under periodic system
The accountant for the Oswego chain of retail stores is getting ready to prepare the 2020 year-end inventory entries for its periodic inventory system. Her assistant has provided the following information:

$\begin{array}{llcc}
  \text { Beginning inventory } &\$88,000  \
 \text { Imentory purchase during year } &900,000\
 \text {  Ending inventory} &62,000\

\end{array}$
 Instructions
Record the journal entry(ies) that Oswego's accountant would prepare to bring the inventory and cost of goods sold up to date for 2020.

Accepted Answer

@#IMG-DLM& 
Note 1:	To record ending inv

Which of the following is correct?

When using the moving-average cost formula with a perpetual system,

For calendar 2020, cost of goods available for sale for Janus Corp. was $820,000. The average gross profit rate was 30%. Sales for the year were $600,000. What is the estimated dollar value of the inventory at December 31?

Which of the following does NOT correctly describe a periodic inventory system?

Which of the following does NOT correctly describe the concept of net realizable value (NRV)?

The retail inventory method is NOT used

The following information was reported by Belleville Inc. for 2020: Merchandise purchased for resale \ 25,000 Freight-in 1,750 Freight-out 1,000 Purchase returns 500 Based on this data, Belleville's 2020 inventoriable cost was

In a periodic inventory system, if the beginning inventory is overstated

The gross profit method of inventory valuation is NOT suitable when

To record a "basket purchase" or to allocate a joint product cost, which method is the most rational?

Use the following information for the following questions: Transactions for Durham Ltd. for the month of June were: -The ending inventory on a weighted average cost basis, rounded to the nearest dollar, is

Borrowing costs

Why are inventories included in the computation of net income?

Goods in transit that are shipped FOB destination should be included

Which of the following items would be inventory for a company like Marriott Hotel Corporation?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 8: Inventory

Which of the following is correct?

When using the moving-average cost formula with a perpetual system,

For calendar 2020, cost of goods available for sale for Janus Corp. was $820,000. The average gross profit rate was 30%. Sales for the year were $600,000. What is the estimated dollar value of the inventory at December 31?

Which of the following does NOT correctly describe a periodic inventory system?

Which of the following does NOT correctly describe the concept of net realizable value (NRV)?

The retail inventory method is NOT used

The following information was reported by Belleville Inc. for 2020: Merchandise purchased for resale \ 25,000 Freight-in 1,750 Freight-out 1,000 Purchase returns 500 Based on this data, Belleville's 2020 inventoriable cost was

In a periodic inventory system, if the beginning inventory is overstated

The gross profit method of inventory valuation is NOT suitable when

To record a "basket purchase" or to allocate a joint product cost, which method is the most rational?

Use the following information for the following questions: Transactions for Durham Ltd. for the month of June were: -The ending inventory on a weighted average cost basis, rounded to the nearest dollar, is

Borrowing costs

Why are inventories included in the computation of net income?

Goods in transit that are shipped FOB destination should be included

Which of the following items would be inventory for a company like Marriott Hotel Corporation?

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters