Question 1

An understatement of the ending inventory balance will overstate cost of goods sold and understate net income.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

Accepted Answer

A) FIFO and LIFO 
B) LIFO and weighted-average cost 
C) Specific identification and FIFO 
D) FIFO and weighted-average cost 
E) LIFO and specific identification 
A) FIFO and LIFO 
B) LIFO and weighted-average cost 
C) Specific identification and FIFO 
D) FIFO and weighted-average cost 
E) LIFO and specific identification

Question 3

Given the following information,determine the cost of the inventory at June 30 using the LIFO perpetual inventory method.   The cost of the ending inventory is:

Accepted Answer

A) $200 
B) $220 
C) $380 
D) $275 
E) $300 
A) $200 
B) $220 
C) $380 
D) $275 
E) $300

Question 4

Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.

Accepted Answer

A) True 
 B)False

Question 5

A company's store was destroyed by an earthquake on February 10 of the current year.The only information for the current period that could be salvaged included the following:
   Historically,the company's gross profit ratio has been 30%.Estimate the value of the destroyed inventory using the gross profit method.

Accepted Answer

The answer of A company's store was destroyed by an...

Question 6

The LIFO method of inventory costing best matches current costs with revenues.

Accepted Answer

A) True 
 B)False

Question 7

A company's inventory records indicate the following data for the month of April:
   If the company uses the first-in,first-out (FIFO)method and the perpetual inventory system,what would be the cost of the ending inventory?

Accepted Answer

The answer of A company's inventory records indicate the following...

Question 8

A company had the following ending inventory costs:
   Required:
Calculate the lower of cost or market (LCM)value for each individual item.

Accepted Answer

The answer of A company had the following ending inventory...

Question 9

Describe the internal controls that must be applied when taking a physical count of inventory.

Accepted Answer

The internal controls should include (1)

Question 10

FIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans,job security,and reputation.

Accepted Answer

A) True 
 B)False

Question 11

When LIFO is used with the periodic inventory system,cost of goods sold is assigned costs from the most recent purchases at the point of each sale,rather than from the most recent purchases for the period.

Accepted Answer

A) True 
 B)False

Question 12

Errors in the ending inventory balance only affect the current period's records and financial statements.

Accepted Answer

A) True 
 B)False

Question 13

An advantage of the ________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Accepted Answer

The answer of An advantage of the ________ method of...

Question 14

Match between columns
                        Premises: Expense recognition principle
Net realizable value
Specific identification method
Inventory turnover
Consignee
Consignor
Days' sales in inventory
Lower of cost or market
Retail inventory method
Gross profit method

Accepted Answer

The Answer of Sales price minus the cost of making is...

Question 15

Days' sales in inventory:

Accepted Answer

A) Shows the buffer against out-of-stock inventory. 
B) Focuses on average inventory rather than ending inventory. 
C) Is used to measure solvency. 
D) Is calculated by dividing cost of goods sold by ending inventory. 
E) Is a substitute for the acid-test ratio. 
A) Shows the buffer against out-of-stock inventory. 
B) Focuses on average inventory rather than ending inventory. 
C) Is used to measure solvency. 
D) Is calculated by dividing cost of goods sold by ending inventory. 
E) Is a substitute for the acid-test ratio.

Question 16

Perfection Company had cost of goods sold of $853,000,ending inventory of $70,500,and average inventory of $71,600.Its inventory turnover equals:

Accepted Answer

A) 11.9. 
B) 1.0. 
C) 6.0. 
D) 30.6. 
E) 14.0. 
A) 11.9. 
B) 1.0. 
C) 6.0. 
D) 30.6. 
E) 14.0.

Question 17

Underwood had cost of goods sold of $8 million and its ending inventory was $2 million.Therefore,its days' sales in inventory equals 25 days.

Accepted Answer

A) True 
 B)False

Question 18

Grays Company has inventory of 10 units at a cost of $10 each on August 1.On August 3,it purchased 20 units at $12 each.12 units are sold on August 6.Using the FIFO perpetual inventory method,what amount will be reported as cost of goods sold for the 12 units that were sold?

Accepted Answer

A) $120. 
B) $124. 
C) $128. 
D) $130. 
E) $140. 
A) $120. 
B) $124. 
C) $128. 
D) $130. 
E) $140.

Question 19

Raleigh Co.has the following products in its ending inventory.Compute the lower of cost or market total for inventory applied separately to each product.

Accepted Answer

A) $2,040.50. 
B) $2,086.50. 
C) $2,018.00. 
D) $2,109.00. 
E) $2,053.50. 
A) $2,040.50. 
B) $2,086.50. 
C) $2,018.00. 
D) $2,109.00. 
E) $2,053.50.

Question 20

Use the following information for Shafer Company to compute inventory turnover for year 2.

Accepted Answer

A) 9.98 
B) 5.08 
C) 4.99 
D) 8.30 
E) 8.44 
A) 9.98 
B) 5.08 
C) 4.99 
D) 8.30 
E) 8.44

Exam 5: Inventories and Cost of Sales

An understatement of the ending inventory balance will overstate cost of goods sold and understate net income.

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

Given the following information,determine the cost of the inventory at June 30 using the LIFO perpetual inventory method. The cost of the ending inventory is:

Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.

The LIFO method of inventory costing best matches current costs with revenues.

A company's inventory records indicate the following data for the month of April: If the company uses the first-in,first-out (FIFO)method and the perpetual inventory system,what would be the cost of the ending inventory?

A company had the following ending inventory costs: Required: Calculate the lower of cost or market (LCM)value for each individual item.

Describe the internal controls that must be applied when taking a physical count of inventory.

FIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans,job security,and reputation.

When LIFO is used with the periodic inventory system,cost of goods sold is assigned costs from the most recent purchases at the point of each sale,rather than from the most recent purchases for the period.

Errors in the ending inventory balance only affect the current period's records and financial statements.

An advantage of the ________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Days' sales in inventory:

Perfection Company had cost of goods sold of $853,000,ending inventory of $70,500,and average inventory of $71,600.Its inventory turnover equals:

Underwood had cost of goods sold of $8 million and its ending inventory was $2 million.Therefore,its days' sales in inventory equals 25 days.

Grays Company has inventory of 10 units at a cost of $10 each on August 1.On August 3,it purchased 20 units at $12 each.12 units are sold on August 6.Using the FIFO perpetual inventory method,what amount will be reported as cost of goods sold for the 12 units that were sold?

Raleigh Co.has the following products in its ending inventory.Compute the lower of cost or market total for inventory applied separately to each product.

Use the following information for Shafer Company to compute inventory turnover for year 2.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters