Question 1

The conservatism constraint prescribes that:

Accepted Answer

A)  When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used. 
B)  A company use the same accounting methods period after period. 
C)  Revenues and expenses are reported in the period in which they are earned or incurred. 
D)  All items of a material nature are included in financial statements. 
E)  All inventory items are reported at full cost. 
A)  When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used. 
B)  A company use the same accounting methods period after period. 
C)  Revenues and expenses are reported in the period in which they are earned or incurred. 
D)  All items of a material nature are included in financial statements. 
E)  All inventory items are reported at full cost.

Question 2

The consistency concept:

Accepted Answer

A)  Prescribes a company use the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting. 
B)  Requires a company to use one method of inventory valuation exclusively. 
C)  Requires that all companies in the same industry use the same accounting methods of inventory valuation. 
D)  Is also called the full disclosure principle. 
E)  Is also called the matching principle. 
A)  Prescribes a company use the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting. 
B)  Requires a company to use one method of inventory valuation exclusively. 
C)  Requires that all companies in the same industry use the same accounting methods of inventory valuation. 
D)  Is also called the full disclosure principle. 
E)  Is also called the matching principle.

Question 3

Match the following terms with the appropriate definition.
-The principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.

Accepted Answer

A) Gross profit method 
B) Inventory turnover 
C) Conservatism principle 
D) Consistency concept 
E) Consignor
F)Consignee
G)Days' sales in inventory
H)Retail inventory method
I)Specific identification method
J)Lower of cost or market 
A) Gross profit method 
B) Inventory turnover 
C) Conservatism principle 
D) Consistency concept 
E) Consignor
F)Consignee
G)Days' sales in inventory
H)Retail inventory method
I)Specific identification method
J)Lower of cost or market

Question 4

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:

Accepted Answer

A)  The expense recognition principle. 
B)  The materiality constraint. 
C)  The cost principle. 
D)  The conservation constraint principle. 
E)  The lower of cost or market principle. 
A)  The expense recognition principle. 
B)  The materiality constraint. 
C)  The cost principle. 
D)  The conservation constraint principle. 
E)  The lower of cost or market principle.

Question 5

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 Periodic FIFO inventory valuation method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A)  $8,670. 
B)  $3,540. 
C)  $5,400. 
D)  $5,130. 
E)  $3,270. 
A)  $8,670. 
B)  $3,540. 
C)  $5,400. 
D)  $5,130. 
E)  $3,270.

Question 6

Explain the reason a company might use the retail inventory method for valuing inventory.

Accepted Answer

The retail method is generally used to p

Question 7

A company's inventory records report the following in November of the current year:
$$\begin{array} { | l | l | l | } 
\hline \text { Beginning } & \text { November 1 } & 5 \text { units @ \$20 } \
\hline \text { Purchase } & \text { November 2 } & 10 \text { units @ \$22 } \
\hline \text { Purchase } & \text { November 12 } & 6 \text { units @ \$25 } \
\hline
\end{array}$$
-
On November 8,it sold 12 units for $54 each.Using the LIFO perpetual inventory method,what amount of gross profit was earned from the 12 units sold?

Accepted Answer

A)  $577 
B)  $260 
C)  $366 
D)  $438 
E)  $388 
A)  $577 
B)  $260 
C)  $366 
D)  $438 
E)  $388

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

When units are purchased at different costs over time,determining the cost per unit assigned to inventory items is simple.

Accepted Answer

A) True 
 B)False

Question 10

The ________ method of assigning costs to inventory and cost of goods sold requires that we divide the cost of goods available for sale by the units of inventory available at the time of each sale.

Accepted Answer

weighted a

Question 11

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 12

In the retail inventory method of inventory valuation,the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Accepted Answer

A) True 
 B)False

Question 13

A company uses the periodic inventory system and had the following activity during the current monthly period.
$$\begin{array} { | l | l | l | } 
\hline \text { November 1: } & \text { Beginning inventory } & 100 \text { units @ \$20 } \
\hline \text { November 5: } & \text { Purchased } & 100 \text { units @ \$22 } \
\hline \text { November 8: } & \text { Purchased } & 50 \text { units @ \$23 } \
\hline \text { November 16: } & \text { Sold } & \text { 200 units @\$45 } \
\hline \text { November 19: } & \text { Purchased } & 50 \text { units @ \$25 } \
\hline
\end{array}$$
Using the weighted-average inventory method,the company's ending inventory would be:

Accepted Answer

A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400 
A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400

Question 14

How do the consistency concept and the full disclosure principle affect inventory valuation?

Accepted Answer

The consistency concept requires that co

Question 15

When purchase costs regularly rise,the ________ method of inventory valuation yields the lowest gross profit and net income,providing a tax advantage.

Accepted Answer

Last in,fi

Question 16

An overstated beginning inventory will ________ cost of goods sold and ________ net income.

Accepted Answer

answers m

Question 17

A company's inventory records report the following in November of the current year:
$$\begin{array} { | l | l | l | } 
\hline \text { Beginning } & \text { November } 1 & 5 \text { units @ \$20 } \
\hline \text { Purchase } & \text { November } 2 & 10 \text { units @ \$22 } \
\hline \text { Purchase } & \text { November } 12 & 6 \text { units @ \$25 } \
\hline
\end{array}$$
-
On November 8,it sold 12 units for $54 each.Using the LIFO perpetual inventory method,what was the amount recorded in the cost of goods sold account for the 12 units sold?

Accepted Answer

A)  $254 
B)  $260 
C)  $282 
D)  $188 
E)  $210 
A)  $254 
B)  $260 
C)  $282 
D)  $188 
E)  $210

Question 18

Salmone Company reported the following purchases and sales of its only product.Salmone uses a periodic inventory system.Determine the cost assigned to cost of goods sold using FIFO.
$$\begin{array} { | c | l | l | l | } 
\hline \text { Date } & { \text { Activities } } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \
\hline \text { May 1}& \text { Beginning Inventory } & 150 \text { units @ } \$ 10.00 & \
\hline 5& \text { Purchase } & 220 \text { units @ } \$ 12.00 & \
\hline 10& \text { Sales } & & 140 \text { units @ \$20.00 } \
\hline 15& \text { Purchase } & 100 \text { units @ } \$ 13.00 & \
\hline 24& \text { Sales } & & 90 \text { units @ \$21.00 } \
\hline
\end{array}$$

Accepted Answer

A)  $2,460 
B)  $2,860 
C)  $2,980 
D)  $2,850 
E)  $2,590 
A)  $2,460 
B)  $2,860 
C)  $2,980 
D)  $2,850 
E)  $2,590

Question 19

Mary's Antiques does not have its own retail location,instead maintains inventory in its warehouse and sells merchandise through Oldtime Antique Mall.Oldtime does not assume responsibility for goods until they are sold to customers at which time it takes a commission for items sold and sends the sale proceeds to Mary's.Identify which company has the role of the consignor and the consignee.Which company should include any unsold goods as part of its inventory?

Accepted Answer

Mary's Antiques is the consign

Question 20

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

Accepted Answer

A) True 
 B)False

The conservatism constraint prescribes that:

The consistency concept:

Match the following terms with the appropriate definition. -The principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:

Explain the reason a company might use the retail inventory method for valuing inventory.

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

When units are purchased at different costs over time,determining the cost per unit assigned to inventory items is simple.

The ________ method of assigning costs to inventory and cost of goods sold requires that we divide the cost of goods available for sale by the units of inventory available at the time of each sale.

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:

In the retail inventory method of inventory valuation,the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

How do the consistency concept and the full disclosure principle affect inventory valuation?

When purchase costs regularly rise,the ________ method of inventory valuation yields the lowest gross profit and net income,providing a tax advantage.

An overstated beginning inventory will cost of goods sold and net income.

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

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 conservatism constraint prescribes that:

The consistency concept:

Match the following terms with the appropriate definition. -The principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:

Explain the reason a company might use the retail inventory method for valuing inventory.

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

When units are purchased at different costs over time,determining the cost per unit assigned to inventory items is simple.

The ________ method of assigning costs to inventory and cost of goods sold requires that we divide the cost of goods available for sale by the units of inventory available at the time of each sale.

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:

In the retail inventory method of inventory valuation,the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

How do the consistency concept and the full disclosure principle affect inventory valuation?

When purchase costs regularly rise,the ________ method of inventory valuation yields the lowest gross profit and net income,providing a tax advantage.

An overstated beginning inventory will ________ cost of goods sold and ________ net income.

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

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

An overstated beginning inventory will cost of goods sold and net income.