Question 1

In assigning a cost to ending inventory,the cost flow must follow the physical flow.

Accepted Answer

A) True 
 B)False  False

Question 2

To use the retail method to estimate inventory,you need to know the goods available for sale at retail.

Accepted Answer

A) True 
 B)False  True

Question 3

An understated cost of goods sold of $100 will cause:

Accepted Answer

A) income to be understated. 
B) income to be overstated. 
C) merchandise inventory to be understated. 
D) None of these answers are correct. 
A) income to be understated. 
B) income to be overstated. 
C) merchandise inventory to be understated. 
D) None of these answers are correct. B

Question 4

A business has sales of $100,250 and a normal gross profit of 30%.The estimated cost of goods sold is:

Accepted Answer

A) $30,075. 
B) $70,175. 
C) $60,150. 
D) Cannot be determined. 
A) $30,075. 
B) $70,175. 
C) $60,150. 
D) Cannot be determined.

Question 5

A subsidiary payables ledger is used to track details of quantities and costs.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following accounts is used with a periodic inventory system?

Accepted Answer

A) Purchases 
B) Purchases Discounts 
C) Purchases Returns and Allowances 
D) All of these answers are correct. 
A) Purchases 
B) Purchases Discounts 
C) Purchases Returns and Allowances 
D) All of these answers are correct.

Question 7

Merchandise Inventory is an expense account.

Accepted Answer

A) True 
 B)False

Question 8

If goods are shipped FOB destination point by the seller,when does title pass?

Accepted Answer

A) When the goods arrive at the buyer's location 
B) When they leave the seller's location 
C) When they are signed for 
D) None of the above 
A) When the goods arrive at the buyer's location 
B) When they leave the seller's location 
C) When they are signed for 
D) None of the above

Question 9

Prepare journal entries for the following transactions for HO Train Shop applying the perpetual inventory system.Omit explanations.
 $\begin{array}{llcc}
 \text {Mar.   } &  \text { 2  Purchased on account 200 model engines for $ \$ 2,000 $. } &  \
 &\text { 12 Returned 20 engines for full credit. } &\
 &\text {19 Sold 50 of the engines to $ R $. Holmes for $ \$ 1,000 $ cash  } &\
& \text {  25 Paid the balance due on the engines. } &\
\end{array}$

Accepted Answer

The answer of Prepare journal entries for the following transactions...

Question 10

Tack Room Clothing uses the retail method to estimate cost of ending inventory for its interim reports.From the following facts,estimate Tack Room's ending inventory at cost at August 31.
 $\begin{array} { l l } 
\text { August } 1 \text { inventory at cost } & \$ 900 \
\text { August } 1 \text { inventory at retail } & 1,200 \
\text { Net purchases at cost } & 9,000 \
\text { Net purchases at retail } & 12,000 \
\text { Net sales at retail } & 12,500
\end{array}$

Accepted Answer

@#IMG-DLM&_TB5851_00 $9,900/$1

Question 11

In a perpetual inventory system,the Merchandise Inventory account is updated:

Accepted Answer

A) at the end of the accounting period. 
B) once each month. 
C) when merchandise is purchased. 
D) The account never needs updating. 
A) at the end of the accounting period. 
B) once each month. 
C) when merchandise is purchased. 
D) The account never needs updating.

Question 12

When merchandise is sold,the perpetual inventory system requires a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

Accepted Answer

A) True 
 B)False

Question 13

Possible reasons for a business estimating the value of the ending inventory should NOT include:

Accepted Answer

A) the inventory is destroyed by fire. 
B) the business uses periodic system and needs to prepare interim financial statements. 
C) the business uses perpetual system so a physical inventory is never needed. 
D) All of the above are valid reasons for estimating inventory. 
A) the inventory is destroyed by fire. 
B) the business uses periodic system and needs to prepare interim financial statements. 
C) the business uses perpetual system so a physical inventory is never needed. 
D) All of the above are valid reasons for estimating inventory.

Question 14

The retail inventory method can be used to estimate the amount of inventory destroyed by fire.

Accepted Answer

A) True 
 B)False

Question 15

Hall Novelty Shop uses a periodic inventory system.It sold 150 balloons during April.Other data for April includes: $\begin{array} { | r | l | l | } 
\hline \text { Apr. 1 } & \text { Balance } & 50 @ \$ 3.00 \
\hline 11 & \text { Purchased } & 80 @ 3.25 \
\hline 25 & \text { Purchased } & 30 @ 3.50 \
\hline
\end{array}$ Cost of goods sold under the weighted-average method (rounded to the nearest dollar)is:

Accepted Answer

A) $52. 
B) $483. 
C) $501. 
D) $48. 
A) $52. 
B) $483. 
C) $501. 
D) $48.

Question 16

A credit customer purchased $450 worth of items.Two days later,the customer returned $300 worth of those items.The entry to record this under the perpetual inventory method would include:

Accepted Answer

A) a debit to Sales Returns and Allowances $300; credit Accounts Receivable $300. 
B) a debit to Merchandise Inventory for our cost. 
C) a credit to Cost of Goods Sold for our cost. 
D) All of the above. 
A) a debit to Sales Returns and Allowances $300; credit Accounts Receivable $300. 
B) a debit to Merchandise Inventory for our cost. 
C) a credit to Cost of Goods Sold for our cost. 
D) All of the above.

Question 17

Which of the following goods should Pin Department Store include in its December 31 count?

Accepted Answer

A) Goods held on consignment from ABC Wholesale 
B) Goods sold and shipped to Gray Brothers,in-transit F.O.B shipping point. 
C) Goods that have been consigned to Dalton Brothers 
D) Goods in transit purchased F.O.B.destination point 
A) Goods held on consignment from ABC Wholesale 
B) Goods sold and shipped to Gray Brothers,in-transit F.O.B shipping point. 
C) Goods that have been consigned to Dalton Brothers 
D) Goods in transit purchased F.O.B.destination point

Question 18

In a perpetual inventory system:

Accepted Answer

A) Merchandise Inventory is debited every time inventory is purchased. 
B) Cost of Goods Sold is debited every time inventory is sold. 
C) a physical inventory is taken at least annually. 
D) all of the above take place. 
A) Merchandise Inventory is debited every time inventory is purchased. 
B) Cost of Goods Sold is debited every time inventory is sold. 
C) a physical inventory is taken at least annually. 
D) all of the above take place.

Question 19

In a periodic inventory system,Purchases,Freight,and Purchases Returns and Allowances accounts are not used.

Accepted Answer

A) True 
 B)False

Question 20

An overstatement of ending inventory in one period results in:

Accepted Answer

A) an overstatement of net income for the next period. 
B) no effect on net income for the next period. 
C) an overstatement of the ending inventory for the next period. 
D) an understatement of net income for the next period. 
A) an overstatement of net income for the next period. 
B) no effect on net income for the next period. 
C) an overstatement of the ending inventory for the next period. 
D) an understatement of net income for the next period.

Exam 15: Accounting for Merchandise Inventory

In assigning a cost to ending inventory,the cost flow must follow the physical flow.

To use the retail method to estimate inventory,you need to know the goods available for sale at retail.

An understated cost of goods sold of $100 will cause:

A business has sales of $100,250 and a normal gross profit of 30%.The estimated cost of goods sold is:

A subsidiary payables ledger is used to track details of quantities and costs.

Which of the following accounts is used with a periodic inventory system?

Merchandise Inventory is an expense account.

If goods are shipped FOB destination point by the seller,when does title pass?

In a perpetual inventory system,the Merchandise Inventory account is updated:

When merchandise is sold,the perpetual inventory system requires a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

Possible reasons for a business estimating the value of the ending inventory should NOT include:

The retail inventory method can be used to estimate the amount of inventory destroyed by fire.

Hall Novelty Shop uses a periodic inventory system.It sold 150 balloons during April.Other data for April includes: Apr. 1 Balance 50@\ 3.00 11 Purchased 80@3.25 25 Purchased 30@3.50 Cost of goods sold under the weighted-average method (rounded to the nearest dollar)is:

A credit customer purchased $450 worth of items.Two days later,the customer returned $300 worth of those items.The entry to record this under the perpetual inventory method would include:

Which of the following goods should Pin Department Store include in its December 31 count?

In a perpetual inventory system:

In a periodic inventory system,Purchases,Freight,and Purchases Returns and Allowances accounts are not used.

An overstatement of ending inventory in one period results in:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Corporations and Bonds Payable

Statement of Cash Flows

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

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