Question 1

Describe three inventory cost flow assumptions and how they impact the financial statements.

Accepted Answer

1. Cost flow is in the order in which co

Question 2

The following data were taken from the annual reports of Big Bang Inc.,a manufacturer of fireworks,and Orange Inc.,a manufacturer of computers.
 $\begin{array}{|l|r|r|}
\hline & {\text { Big Bang, Inc. }} & {\text { Orange, Inc. }} \
\hline \text { Cost of merchandise sold } & \$ 830,000 & \$ 11,540,000 \
\hline \text { Inventory, end of year } & 190,000 & 320,000 \
\hline \text { Inventory, beginning of year } & 240,000 & 290,000 \
\hline
\end{array}$ a Determine the 1 inventory turnover and 2 number of days' sales in inventory for Big Bang and Orange.Round your answers to two decimal places.
b How would you expect these measures to compare between the companies? Why?

Accepted Answer

a 1. Inventory I urnover:
Big Bang, Inc:

Question 3

The following units of an inventory item were available for sale during the year:
 
The firm uses the periodic inventory system.  During the year, 60 units of the item were sold.
-The value of ending inventory using FIFO is

Accepted Answer

A) $1,250 
B) $1,350 
C) $1,375 
D) $1,150 
A) $1,250 
B) $1,350 
C) $1,375 
D) $1,150

Question 4

Merchandise inventory at the end of the year was understated.Which of the following statements correctly states the effect of the error?

Accepted Answer

A) net income is understated 
B) net income is overstated 
C) cost of merchandise sold is understated 
D) merchandise inventory reported on the balance sheet is overstated 
A) net income is understated 
B) net income is overstated 
C) cost of merchandise sold is understated 
D) merchandise inventory reported on the balance sheet is overstated

Question 5

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory.Which of the following would not be included in the year-end inventory?

Accepted Answer

A) Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31. 
B) Kristin has in its warehouse merchandise on consignment from Abby Co. 
C) Kristin has sent merchandise to various retailers on a consignment basis. 
D) Kristin has merchandise on hand which has been returned by customers because of wrong size. 
A) Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31. 
B) Kristin has in its warehouse merchandise on consignment from Abby Co. 
C) Kristin has sent merchandise to various retailers on a consignment basis. 
D) Kristin has merchandise on hand which has been returned by customers because of wrong size.

Question 6

Three identical units of merchandise were purchased during March,as shown:
 $\begin{array}{|l|l|c|c|}
\hline & {\text { SteelePlate }} & \text { Units } & \text { Cost } \
\hline \text { Mar. } 3 & \text { Purchase } & 1 & \$ 830 \
\hline 10 & \text { Purchase } & 1 & 840 \
\hline 19 & \text { Purchase } & \underline{1} & \underline{880} \
\hline \text { Total } & & \underline{3} & \underline{\$ 2.550} \
\hline
\end{array}$ 
Assume that one unit is sold on March 23 for $1,125.Determine the gross profit for March and ending inventory on March 31 using a FIFO and b LIFO.

Accepted Answer

None

Question 7

Beginning inventory,purchases,and sales data for tennis rackets are as follows:
 $\begin{array}{lcllll}
&  \text { April }3 &  \text { Inventory    } &  &  \text {   12  units }  & @&  \$45\
& 11   &  \text {  Purchase   } &  &  \text {  13  units  }  & @& \$47 \
&   14 &  \text {  Sale   } &  &  \text { 18    units }  & @&  \
&  21  &  \text { Purchase    } &  &  \text { 9   units  }  & @& \$60 \
&   25 &  \text {   Sale  } &  &  \text {  10 units   }  & @&  \
\end{array}$
 Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Accepted Answer

None

Question 8

If the estimated rate of gross profit is 30%,what is the estimated cost of the merchandise inventory on September 30,based on the following data?

Accepted Answer

A)  $320,000 
B)  $192,500 
C)  $275,000 
D)  $105,000 
A)  $320,000 
B)  $192,500 
C)  $275,000 
D)  $105,000

Question 9

If the perpetual inventory system is used,the merchandise inventory account is debited for purchases of merchandise.

Accepted Answer

A) True 
 B)False

Question 10

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Accepted Answer

A) True 
 B)False

Question 11

Complete the chart,indicating whether LIFO or FIFO would give the highest and lowest amounts for each item,assuming a period of increasing costs.
$\begin{array}{|l|c|c|}
\hline & \text { Highest Amount } & \text { Lowest Amount } \
\hline \text { Cost of merchandise sold } &  \
\hline \text { Gross profit } &  \
\hline \text { Net income } & \
\hline \text { Ending merchandise inventory } &  \
\hline
\end{array}$

Accepted Answer

None

Question 12

The following lots of a particular commodity were available for sale during the year:
 
-What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method?

Accepted Answer

A) $1,685 
B) $1,575 
C) $1,805 
D) $3,705 
A) $1,685 
B) $1,575 
C) $1,805 
D) $3,705

Question 13

Excess inventory results in all of the following except

Accepted Answer

A) tied-up funds that could be used to improve operations 
B) lost sales 
C) increased storage expense 
D) increased risk of loss due to damage 
A) tied-up funds that could be used to improve operations 
B) lost sales 
C) increased storage expense 
D) increased risk of loss due to damage

Question 14

Damaged merchandise that can be sold only at prices below cost should be valued at

Accepted Answer

A) net realizable value 
B) LIFO 
C) FIFO 
D) average cost 
A) net realizable value 
B) LIFO 
C) FIFO 
D) average cost

Question 15

Use the information below to answer the following questions.

The Boxwood Company sells blankets for $60 each.  The following was taken from the inventory records during May.  The company had no beginning inventory on May 1.

$\begin{array}{|c|l|c|c|}
\hline \text { Date } & {\text { Blankets }} & \text { Units } & \text { Cost } \
\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \
\hline 10 & \text { Sale } & 3 & \
\hline 17 & \text { Purchase } & 10 & \$ 24 \
\hline 20 & \text { Sale } & 6 & \
\hline 23 & \text { Sale } & 3 & \
\hline 30 & \text { Purchase } & 10 & \$ 30 \
\hline
\end{array}$
-Assuming that the company uses the perpetual inventory system,determine the gross profit for the sale of May 23 using the FIFO inventory cost method.

Accepted Answer

A) $108 
B) $120 
C) $72 
D) $180 
A) $108 
B) $120 
C) $72 
D) $180

Question 16

Ending inventory is made up of the oldest purchases when a company uses

Accepted Answer

A) first-in,first-out 
B) last-in,first-out 
C) average cost 
D) retail method 
A) first-in,first-out 
B) last-in,first-out 
C) average cost 
D) retail method

Question 17

The method of estimating inventory that uses records of the selling prices of the merchandise is called

Accepted Answer

A) retail method 
B) gross profit method 
C) inventory turnover method 
D) average cost method 
A) retail method 
B) gross profit method 
C) inventory turnover method 
D) average cost method

Question 18

Inventory errors,if not discovered,will self-correct within two years.

Accepted Answer

A) True 
 B)False

Question 19

Under a perpetual inventory system,the amount of each type of merchandise on hand is available in the

Accepted Answer

A) customer's ledger 
B) creditor's ledger 
C) inventory ledger 
D) purchase ledger 
A) customer's ledger 
B) creditor's ledger 
C) inventory ledger 
D) purchase ledger

Question 20

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Accepted Answer

A) True 
 B)False

Describe three inventory cost flow assumptions and how they impact the financial statements.

The following units of an inventory item were available for sale during the year: The firm uses the periodic inventory system. During the year, 60 units of the item were sold. -The value of ending inventory using FIFO is

Merchandise inventory at the end of the year was understated.Which of the following statements correctly states the effect of the error?

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory.Which of the following would not be included in the year-end inventory?

If the estimated rate of gross profit is 30%,what is the estimated cost of the merchandise inventory on September 30,based on the following data?

If the perpetual inventory system is used,the merchandise inventory account is debited for purchases of merchandise.

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Complete the chart,indicating whether LIFO or FIFO would give the highest and lowest amounts for each item,assuming a period of increasing costs. Highest Amount Lowest Amount Cost of merchandise sold Gross profit Net income Ending merchandise inventory

The following lots of a particular commodity were available for sale during the year: -What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method?

Excess inventory results in all of the following except

Damaged merchandise that can be sold only at prices below cost should be valued at

Ending inventory is made up of the oldest purchases when a company uses

The method of estimating inventory that uses records of the selling prices of the merchandise is called

Inventory errors,if not discovered,will self-correct within two years.

Under a perpetual inventory system,the amount of each type of merchandise on hand is available in the

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Sarbanes-Oxley,internal Control,and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization,stock Transactions,and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

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Exam 6: Inventories

Describe three inventory cost flow assumptions and how they impact the financial statements.

The following units of an inventory item were available for sale during the year: The firm uses the periodic inventory system. During the year, 60 units of the item were sold. -The value of ending inventory using FIFO is

Merchandise inventory at the end of the year was understated.Which of the following statements correctly states the effect of the error?

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory.Which of the following would not be included in the year-end inventory?

If the estimated rate of gross profit is 30%,what is the estimated cost of the merchandise inventory on September 30,based on the following data?

If the perpetual inventory system is used,the merchandise inventory account is debited for purchases of merchandise.

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Complete the chart,indicating whether LIFO or FIFO would give the highest and lowest amounts for each item,assuming a period of increasing costs. Highest Amount Lowest Amount Cost of merchandise sold Gross profit Net income Ending merchandise inventory

The following lots of a particular commodity were available for sale during the year: -What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method?

Excess inventory results in all of the following except

Damaged merchandise that can be sold only at prices below cost should be valued at

Ending inventory is made up of the oldest purchases when a company uses

The method of estimating inventory that uses records of the selling prices of the merchandise is called

Inventory errors,if not discovered,will self-correct within two years.

Under a perpetual inventory system,the amount of each type of merchandise on hand is available in the

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Sarbanes-Oxley,internal Control,and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization,stock Transactions,and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters