Question 1

The operating cycle for a merchandising firm is ________.

Accepted Answer

A) obtain cash from stockholders,invest cash in equipment,earn more cash 
B) borrow cash from lenders,earn cash from customers,repay lenders 
C) start with cash,buy inventory,sell inventory to customers,collect cash from customers 
D) issue stock to owners,earn a profit,pay dividends to owners 
A) obtain cash from stockholders,invest cash in equipment,earn more cash 
B) borrow cash from lenders,earn cash from customers,repay lenders 
C) start with cash,buy inventory,sell inventory to customers,collect cash from customers 
D) issue stock to owners,earn a profit,pay dividends to owners C

Question 2

Boise Cascade Company purchases $5,000 of merchandise from a vender with credit terms of 2/10,n/30.Assuming that Boise Cascade pays within the discount period,the total cost of the inventory is ________.

Accepted Answer

A) $5,000 
B) $4,900 
C) $4,500 
D) $3,500 
A) $5,000 
B) $4,900 
C) $4,500 
D) $3,500 B

Question 3

Montana Company made the following purchases during the month of September:
   Required:
1.Complete the chart below for each of the four purchases.
   2.Assuming that the selling company accepts all discounts,what is the total cost of purchases for the month?

Accepted Answer

1.
   2.$42,192 = ($5,600 - 112)+ (12,300 - 246 + 100)+ (15,000 - 450)+ 10,000 - 100 + 100

Question 4

Santorini Company lost its entire inventory during an earthquake.The following key inventory information was reconstructed from backup data stored electronically at a remote location:   Use the gross profit method to estimate the cost of the ending inventory.

Accepted Answer

A) $500,000 
B) $480,000 
C) $470,000 
D) $320,000 
A) $500,000 
B) $480,000 
C) $470,000 
D) $320,000

Question 5

Inventory consists of items that ________.

Accepted Answer

A) are purchased for resale to customers as a normal operating activity 
B) are purchased,and will be sold to customers only if they go up in market value 
C) are intangible in nature 
D) can be stored indefinitely and will be held in the business 
A) are purchased for resale to customers as a normal operating activity 
B) are purchased,and will be sold to customers only if they go up in market value 
C) are intangible in nature 
D) can be stored indefinitely and will be held in the business

Question 6

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much sales revenue did Inside Outfitters earn?

Accepted Answer

A) $200 
B) $0 
C) $216 
D) $184 
A) $200 
B) $0 
C) $216 
D) $184

Question 7

GAAP allow different cost flow methods to be used when accounting for inventory.

Accepted Answer

A) True 
 B)False

Question 8

A purchase allowance ________.

Accepted Answer

A) is the amount of cash the purchasing manager is allowed to spend 
B) increases the cost of inventory purchased 
C) represents the cost of merchandise returned to the vendor 
D) is a cost reduction for keeping merchandise that is damaged or defective 
A) is the amount of cash the purchasing manager is allowed to spend 
B) increases the cost of inventory purchased 
C) represents the cost of merchandise returned to the vendor 
D) is a cost reduction for keeping merchandise that is damaged or defective

Question 9

Indicate the financial statement where each item listed below would be found.
BS = the balance sheet
IS = the income statement
CF = the statement of cash flows
F = the notes to the financial statements
N = The item is NOT part of GAAP-based accounting disclosure.
______ 1.inventory
______ 2.cost of goods sold
______ 3.sales
______ 4.cash collected from customers
______ 5.accounts payable
______ 6.cash paid to suppliers
______ 7.management's estimate of inventory's market value next year
______ 8.the cost flow method adopted for inventory valuation

Accepted Answer

BS,IS,IS,C

Question 10

At December 31,Payless,Inc.reported inventory on the balance sheet at its cost of $200,000.However,the market value of the inventory at that date was $190,000.Put an X in the appropriate box to show the effect of continuing to report the inventory at cost:

Accepted Answer

The answer of At December 31,Payless,Inc.reported inventory on the balance...

Question 11

Inventory information for Missoula Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a weighted average periodic inventory system.   Determine the ending inventory at March 31.

Accepted Answer

A) $2,300 
B) $3,300 
C) $9,800 
D) $2,800 
A) $2,300 
B) $3,300 
C) $9,800 
D) $2,800

Question 12

Sales returns and allowances and Sales discounts are ________.

Accepted Answer

A) contra-asset accounts and are netted against Accounts receivable on the balance sheet 
B) contra-expense accounts and netted against Cost of goods sold on the income statement 
C) expense accounts and added to Sales on the income statement 
D) contra-revenue accounts and netted against Sales on the income statement 
A) contra-asset accounts and are netted against Accounts receivable on the balance sheet 
B) contra-expense accounts and netted against Cost of goods sold on the income statement 
C) expense accounts and added to Sales on the income statement 
D) contra-revenue accounts and netted against Sales on the income statement

Question 13

The accountants for Ruiz Imports need to estimate the ending inventory balance so that they can prepare quarterly financial statements.The accountants have gathered the following information:
   Required: Use the gross profit method to estimate the ending inventory.

Accepted Answer

Cost of Goods Available for Sale (COGAS)

Question 14

In a period of rising inventory costs,the LIFO method would result in the highest cash flow from operations.

Accepted Answer

A) True 
 B)False

Question 15

Perch X,Inc.purchased goods with an invoice price of $3,000.Purchase terms are 1/10,n/30 and the invoice is paid one week after it was received.The shipping terms are FOB shipping point and the shipping costs are $300.The cost of the inventory purchased equals _______.

Accepted Answer

A) $3,000 
B) $3,300 
C) $2,700 
D) $3,270 
A) $3,000 
B) $3,300 
C) $2,700 
D) $3,270

Question 16

A company uses a periodic inventory system.If the ending inventory is understated,the error will affect only the current accounting period.

Accepted Answer

A) True 
 B)False

Question 17

Philipsburg Corporation sells mugs to fine retailers across the world.Data from its periodic inventory system is presented in the table below.Inventory is sold for $170 per unit.Operating expenses,excluding cost of goods sold,totaled $40,000.   Which cost flow method would result in the HIGHEST taxable income for the period?

Accepted Answer

A) FIFO 
B) LIFO 
C) Weighted average method 
D) Each of the methods would have equal net income for the period. 
A) FIFO 
B) LIFO 
C) Weighted average method 
D) Each of the methods would have equal net income for the period.

Question 18

Sailors,Inc.sold $100,000 of merchandise to Breyer,Inc.with terms of 1/10,n/30.Five days later,Breyer returned $10,000 of the merchandise.If Breyer pays within the discount period,how much cash will Sailors receive?

Accepted Answer

A) $100,000 
B) $99,000 
C) $90,000 
D) $89,100 
A) $100,000 
B) $99,000 
C) $90,000 
D) $89,100

Question 19

The periodic inventory method is a method of record keeping that ________.

Accepted Answer

A) maintains a constant record of the inventory balance 
B) updates the inventory records only when a sale is made 
C) can be used only in a computerized accounting system 
D) involves calculating cost of goods sold only at the end of the period 
A) maintains a constant record of the inventory balance 
B) updates the inventory records only when a sale is made 
C) can be used only in a computerized accounting system 
D) involves calculating cost of goods sold only at the end of the period

Question 20

Inventory information for Great Falls Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a LIFO periodic inventory system.   Determine the ending inventory at March 31.

Accepted Answer

A) $3,400 
B) $2,400 
C) $10,200 
D) $800 
A) $3,400 
B) $2,400 
C) $10,200 
D) $800

The operating cycle for a merchandising firm is ________.

Boise Cascade Company purchases $5,000 of merchandise from a vender with credit terms of 2/10,n/30.Assuming that Boise Cascade pays within the discount period,the total cost of the inventory is ________.

Montana Company made the following purchases during the month of September: Required: 1.Complete the chart below for each of the four purchases. 2.Assuming that the selling company accepts all discounts,what is the total cost of purchases for the month?

Santorini Company lost its entire inventory during an earthquake.The following key inventory information was reconstructed from backup data stored electronically at a remote location: Use the gross profit method to estimate the cost of the ending inventory.

Inventory consists of items that ________.

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much sales revenue did Inside Outfitters earn?

GAAP allow different cost flow methods to be used when accounting for inventory.

A purchase allowance ________.

At December 31,Payless,Inc.reported inventory on the balance sheet at its cost of $200,000.However,the market value of the inventory at that date was $190,000.Put an X in the appropriate box to show the effect of continuing to report the inventory at cost:

Inventory information for Missoula Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a weighted average periodic inventory system. Determine the ending inventory at March 31.

Sales returns and allowances and Sales discounts are ________.

The accountants for Ruiz Imports need to estimate the ending inventory balance so that they can prepare quarterly financial statements.The accountants have gathered the following information: Required: Use the gross profit method to estimate the ending inventory.

In a period of rising inventory costs,the LIFO method would result in the highest cash flow from operations.

Perch X,Inc.purchased goods with an invoice price of $3,000.Purchase terms are 1/10,n/30 and the invoice is paid one week after it was received.The shipping terms are FOB shipping point and the shipping costs are $300.The cost of the inventory purchased equals _______.

A company uses a periodic inventory system.If the ending inventory is understated,the error will affect only the current accounting period.

Sailors,Inc.sold $100,000 of merchandise to Breyer,Inc.with terms of 1/10,n/30.Five days later,Breyer returned $10,000 of the merchandise.If Breyer pays within the discount period,how much cash will Sailors receive?

The periodic inventory method is a method of record keeping that ________.

Inventory information for Great Falls Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a LIFO periodic inventory system. Determine the ending inventory at March 31.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters

Exam 5: The Purchase and Sale of Inventory

The operating cycle for a merchandising firm is ________.

Boise Cascade Company purchases $5,000 of merchandise from a vender with credit terms of 2/10,n/30.Assuming that Boise Cascade pays within the discount period,the total cost of the inventory is ________.

Montana Company made the following purchases during the month of September: Required: 1.Complete the chart below for each of the four purchases. 2.Assuming that the selling company accepts all discounts,what is the total cost of purchases for the month?

Santorini Company lost its entire inventory during an earthquake.The following key inventory information was reconstructed from backup data stored electronically at a remote location: Use the gross profit method to estimate the cost of the ending inventory.

Inventory consists of items that ________.

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much sales revenue did Inside Outfitters earn?

GAAP allow different cost flow methods to be used when accounting for inventory.

A purchase allowance ________.

At December 31,Payless,Inc.reported inventory on the balance sheet at its cost of $200,000.However,the market value of the inventory at that date was $190,000.Put an X in the appropriate box to show the effect of continuing to report the inventory at cost:

Inventory information for Missoula Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a weighted average periodic inventory system. Determine the ending inventory at March 31.

Sales returns and allowances and Sales discounts are ________.

The accountants for Ruiz Imports need to estimate the ending inventory balance so that they can prepare quarterly financial statements.The accountants have gathered the following information: Required: Use the gross profit method to estimate the ending inventory.

In a period of rising inventory costs,the LIFO method would result in the highest cash flow from operations.

Perch X,Inc.purchased goods with an invoice price of $3,000.Purchase terms are 1/10,n/30 and the invoice is paid one week after it was received.The shipping terms are FOB shipping point and the shipping costs are $300.The cost of the inventory purchased equals _______.

A company uses a periodic inventory system.If the ending inventory is understated,the error will affect only the current accounting period.

Sailors,Inc.sold $100,000 of merchandise to Breyer,Inc.with terms of 1/10,n/30.Five days later,Breyer returned $10,000 of the merchandise.If Breyer pays within the discount period,how much cash will Sailors receive?

The periodic inventory method is a method of record keeping that ________.

Inventory information for Great Falls Merchandising,Inc.is provided below.Sales for the period were 2,800 units for $8 each.The company uses a LIFO periodic inventory system. Determine the ending inventory at March 31.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters