Question 1

The full disclosure principle:

Accepted Answer

A)  Prescribes that the notes to the financial statements report the change from one inventory valuation method to another. 
B)  Requires that companies use the same accounting method for inventory valuation period after period. 
C)  Is not subject to the consideration of materiality. 
D)  Is only applied to retailers and manufacturers. 
E)  Is also called the consistency principle. 
A)  Prescribes that the notes to the financial statements report the change from one inventory valuation method to another. 
B)  Requires that companies use the same accounting method for inventory valuation period after period. 
C)  Is not subject to the consideration of materiality. 
D)  Is only applied to retailers and manufacturers. 
E)  Is also called the consistency principle. A

Question 2

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Accepted Answer

A)  LIFO method. 
B)  FIFO method. 
C)  Weighted-average cost method. 
D)  Specific identification method. 
E)  Gross profit method. 
A)  LIFO method. 
B)  FIFO method. 
C)  Weighted-average cost method. 
D)  Specific identification method. 
E)  Gross profit method. A

Question 3

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Accepted Answer

A) True 
 B)False  True

Question 4

A company's inventory records indicate the following data for the month of January:
 $$\begin{array} { | l | l | l | } 
\hline \text { Jan. } 1 & \text { beginning } & 180 \text { units at } \$ 9 \text { each } \
\hline \text { Jan. } 5 & \text { purchased } & 170 \text { units at } \$ 10 \text { each } \
\hline \text { Jan. } 9 & \text { sold } & 300 \text { units at } \$ 35 \text { each } \
\hline \text {Jan. } 14 & \text { purchased } & 200 \text { units at } \$ 11 \text { each } \
\hline \text { Jan. } 20 & \text { sold } & 150 \text { units at } \$ 35 \text { each } \
\hline \text { Jan. } 30 & \text { purchased } & 230 \text { units at } \$ 12 \text { each } \
\hline
\end{array}$$ 
If the company uses the last-in,first-out 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 5

Use the following information for Shafer Company to compute inventory turnover for year 2.
$$\begin{array} { | l | r | r | } 
\hline & \text { Year 2 } & \text { Year 1 } \
\hline \text { Net sales } & \$ 647,500 & \$ 582,000 \
\hline \text { Cost of goods sold } & 389,500 & 360,840 \
\hline \text { Ending inventory } & 76,700 & 79,380 \
\hline
\end{array}$$

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

Question 6

A company has the following per unit original costs and replacement costs for its inventory.LCM is applied to individual items.
Part A: 50 units with a cost of $5,and replacement cost of $4.50
Part B: 75 units with a cost of $6,and replacement cost of $6.50
Part C: 160 units with a cost of $3,and replacement cost of $2.50
Under the lower of cost or market method,the total value of this company's ending inventory is:

Accepted Answer

A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,112.50. 
D)  $1,217.50. 
E)  $1,137.50. 
A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,112.50. 
D)  $1,217.50. 
E)  $1,137.50.

Question 7

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Accepted Answer

Each purchase of merchandise is debited

Question 8

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 9

Under FIFO,the most recent costs are assigned to ending inventory.

Accepted Answer

A) True 
 B)False

Question 10

A company had beginning inventory of 10 units at a cost of $20 each on March 1.On March 2,it purchased 10 units at $22 each.On March 6 it purchased 6 units at $25 each.On March 8,it sold 22 units for $54 each.Using the FIFO perpetual inventory method,what was the cost of the 22 units sold?

Accepted Answer

A)  $470 
B)  $490 
C)  $450 
D)  $570 
E)  $520 
A)  $470 
B)  $490 
C)  $450 
D)  $570 
E)  $520

Question 11

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Accepted Answer

last in,fi

Question 12

Some companies use the ________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

Accepted Answer

answers c

Question 13

Merchandise inventory includes:

Accepted Answer

A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only non-damaged goods. 
A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only non-damaged goods.

Question 14

Match each of the following terms with the appropriate definition.
-A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail price.

Accepted Answer

A) Conservatism constraint 
B) Inventory turnover 
C) Net realizable value 
D) Retail inventory method 
E) Days' sales in inventory
F)Weighted average inventory method
G)Interim statements
H)LIFO method
I)FIFO method
J)Specific identification method 
A) Conservatism constraint 
B) Inventory turnover 
C) Net realizable value 
D) Retail inventory method 
E) Days' sales in inventory
F)Weighted average inventory method
G)Interim statements
H)LIFO method
I)FIFO method
J)Specific identification method

Question 15

A company had the following purchases and sales during its first year of operations:
$$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sales } \
\hline \text { January: } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February: } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May: } & 15 \text { units at } \$ 130 & 9 \text { units } \
\hline \text { September: } & 12 \text { units at } \$ 135 & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$
On December 31,there were 26 units remaining in ending inventory.Using the Perpetual FIFO inventory valuation method,what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

Accepted Answer

A)  $3,405. 
B)  $3,200. 
C)  $3,365. 
D)  $3,540. 
E)  $3,270. 
A)  $3,405. 
B)  $3,200. 
C)  $3,365. 
D)  $3,540. 
E)  $3,270.

Question 16

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.

Accepted Answer

A) True 
 B)False

Question 17

Decisions management must make in accounting for inventory cost include all of the following except:

Accepted Answer

A)  Costing method. 
B)  Perpetual or periodic inventory system. 
C)  Customer demand for inventory. 
D)  Use of market values or other estimates. 
E)  Items included in inventory and their costs. 
A)  Costing method. 
B)  Perpetual or periodic inventory system. 
C)  Customer demand for inventory. 
D)  Use of market values or other estimates. 
E)  Items included in inventory and their costs.

Question 18

Explain why the lower of cost or market rule is used to value inventory.

Accepted Answer

The concept of conservatism requires tha

Question 19

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Accepted Answer

A merchandiser's ability to pay its shor

Question 20

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000.If the gross profit ratio is typically 30%,the estimated cost of the ending inventory under the gross profit method would be:

Accepted Answer

A)  $60,000 
B)  $180,000 
C)  $30,000 
D)  $90,000 
E)  $120,000 
A)  $60,000 
B)  $180,000 
C)  $30,000 
D)  $90,000 
E)  $120,000

The full disclosure principle:

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Use the following information for Shafer Company to compute inventory turnover for year 2. Year 2 Year 1 Net sales \ 647,500 \ 582,000 Cost of goods sold 389,500 360,840 Ending inventory 76,700 79,380

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

Under FIFO,the most recent costs are assigned to ending inventory.

A company had beginning inventory of 10 units at a cost of $20 each on March 1.On March 2,it purchased 10 units at $22 each.On March 6 it purchased 6 units at $25 each.On March 8,it sold 22 units for $54 each.Using the FIFO perpetual inventory method,what was the cost of the 22 units sold?

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Some companies use the ________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

Merchandise inventory includes:

Match each of the following terms with the appropriate definition. -A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail price.

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.

Decisions management must make in accounting for inventory cost include all of the following except:

Explain why the lower of cost or market rule is used to value inventory.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000.If the gross profit ratio is typically 30%,the estimated cost of the ending inventory under the gross profit method would be:

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 5: Inventories and Cost of Sales

The full disclosure principle:

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Use the following information for Shafer Company to compute inventory turnover for year 2. Year 2 Year 1 Net sales \ 647,500 \ 582,000 Cost of goods sold 389,500 360,840 Ending inventory 76,700 79,380

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

Under FIFO,the most recent costs are assigned to ending inventory.

A company had beginning inventory of 10 units at a cost of $20 each on March 1.On March 2,it purchased 10 units at $22 each.On March 6 it purchased 6 units at $25 each.On March 8,it sold 22 units for $54 each.Using the FIFO perpetual inventory method,what was the cost of the 22 units sold?

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Some companies use the ________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

Merchandise inventory includes:

Match each of the following terms with the appropriate definition. -A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail price.

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.

Decisions management must make in accounting for inventory cost include all of the following except:

Explain why the lower of cost or market rule is used to value inventory.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000.If the gross profit ratio is typically 30%,the estimated cost of the ending inventory under the gross profit method would be:

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters