Question 1

The simple rule for inventory turnover is that a low ratio is preferable.

Accepted Answer

A) True 
 B)False

Question 2

Eastview Company uses a perpetual LIFO inventory system,and has the following purchases and sales:
$$\begin{array} { | l | l | } 
\hline \text { January 1 } & 150 \text { units were purchased at \$9 per unit. } \
\hline \text { January } 17 & 120 \text { units were sold. } \
\hline \text { January 20 } & 160 \text { units were purchased at \$11 per unit. } \
\hline \text { January 29 } & 150 \text { units were sold. } \
\hline
\end{array}$$
-
What is the value of cost of goods sold?

Accepted Answer

A)  $2,730. 
B)  $2,750. 
C)  $2,670. 
D)  $440. 
E)  $380. 
A)  $2,730. 
B)  $2,750. 
C)  $2,670. 
D)  $440. 
E)  $380.

Question 3

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Accepted Answer

A) True 
 B)False

Question 4

A company sells garden hoses and uses the perpetual inventory system to account for its merchandise.The beginning balance of the inventory and its transactions during September were as follows:
September 1: Beginning balance of 18 units at $13 each
September 12: Purchased 30 units at $14 each
September 19: Sold 24 units at $30 selling price each
September 20: Purchased 24 units at $17 each
September 27: Sold 27 units at $30 selling price each
If the ending inventory is reported at $276,what inventory method was used?

Accepted Answer

A)  LIFO method. 
B)  FIFO method. 
C)  Weighted average method. 
D)  Specific identification method. 
E)  Retail inventory method. 
A)  LIFO method. 
B)  FIFO method. 
C)  Weighted average method. 
D)  Specific identification method. 
E)  Retail inventory method.

Question 5

Monarch Company uses a weighted-average perpetual inventory system,and has the following purchases and sales:
$$\begin{array} { | l | l | } 
\hline \text { January } 1 & 20 \text { units were purchased at } \$ 10 \text { per unit. } \
\hline \text { January } 12 & 12 \text { units were sold. } \
\hline \text { January 20 } & 18 \text { units were purchased at } \$ 11 \text { per unit. } \
\hline
\end{array}$$
-
What is the value of ending inventory? (Round average cost per unit to 2 decimal places,and final answer to the nearest dollar.)

Accepted Answer

A)  $278. 
B)  $272. 
C)  $126. 
D)  $398. 
E)  $120. 
A)  $278. 
B)  $272. 
C)  $126. 
D)  $398. 
E)  $120.

Question 6

A company's warehouse contents were destroyed by a flood on September 12.The following information was the only information that was salvaged:
1.Inventory,beginning: $28,000
2.Purchases for the period: $17,000
3.Sales for the period: $55,000
4.Sales returns for the period: $700
The company's average gross profit ratio is 35%.What is the estimated cost of the lost inventory?

Accepted Answer

A)  $9,705. 
B)  $25,995. 
C)  $29,250. 
D)  $44,000. 
E)  $45,000. 
A)  $9,705. 
B)  $25,995. 
C)  $29,250. 
D)  $44,000. 
E)  $45,000.

Question 7

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

Accepted Answer

A) True 
 B)False

Question 8

A company had the following ending inventory costs:
 $$\begin{array} { | c | c | r | r | } 
\hline \text { Product } & \text { Units of Hand } & \text { Unit Cost } & \text { Market Value } \
\hline \text { A } & 10 & \$ 5 & \$6 \
\hline \text { B } & 50 & 8 &7 \
\hline \text { C } & 35 & 10 & 11 \
\hline
\end{array}$$ 
Required:
Calculate the lower of cost or market (LCM)value for each individual item.

Accepted Answer

\[\begin{array} { | l | r | r | r | } 
\

Question 9

Match between columns
                        Premises: The method that is used if each inventory item can be matched with a specific purchase and invoice.
The method that will cause the company to have the lowest income taxes.
The method that will cause the company to have the lowest cost of goods sold.
The method that will assign a value to inventory that approximates current cost.
The method that will tend to smooth out erratic changes in costs.

Accepted Answer

The Answer of FIFO: First in, first out and LIFO: is...

Question 10

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
 $$\begin{array} { | l | l | r | } 
\hline& { \text { At Cost } } & \text { At Retail } \
\hline \text { January 1 beginning inventory } & \$ 167,340 & \$ 304,240 \
\hline \text { Cost of goods purchased } & 561,850 & 1,021,560 \
\hline \text { Sales } & & 940,400 \
\hline \text { Sales returns } & & 40,200 \
\hline
\end{array}$$
 
1.Use the retail inventory method to estimate the company's year-end inventory at cost.
2.A year-end physical count at retail prices yields a total inventory of $404,800.Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

Accepted Answer

1.
 \[\begin{array} { | l | l | } 
\hlin

Question 11

Match the following terms with the appropriate definition.
-An owner of goods who ships them to another party who will then sell the goods for the owner.

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 12

What advantages does a perpetual inventory system have over periodic inventory system?

Accepted Answer

Advances in technology have greatly redu

Question 13

A company had the following purchases and sales during its first month of operations:
$$\begin{array} { | l | l | } 
\hline \text { January } 1 & \text { Purchased } 10 \text { units at } \$ 4.00 \text { per unit } \
\hline \text { January } 9 & \text { Sold } 6 \text { units at } \$ 12.00 \text { per unit } \
\hline \text { January } 17 & \text { Purchased } 8 \text { units at } \$ 5.50 \text { per unit } \
\hline \text { January } 27 & \text { Sold } 7 \text { units at } \$ 12.00 \text { per unit } \
\hline
\end{array}$$
-
Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places.)

Accepted Answer

A)  $84. 
B)  $61. 
C)  $23. 
D)  $27. 
E)  $5. 
A)  $84. 
B)  $61. 
C)  $23. 
D)  $27. 
E)  $5.

Question 14

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 15

An understatement of ending inventory will cause

Accepted Answer

A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet. 
A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet.

Question 16

________ is the estimated sales price of damaged goods minus the cost of making the sale.

Accepted Answer

Net realiz

Question 17

Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000,credit terms 2/10,n/30 that apply only to the $50,000; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000.Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions.Compute the cost that should be assigned to the inventory.

Accepted Answer

A)  $50,000 
B)  $53,000 
C)  $52,000 
D)  $51,500 
E)  $53,200 
A)  $50,000 
B)  $53,000 
C)  $52,000 
D)  $51,500 
E)  $53,200

Question 18

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

Accepted Answer

A) True 
 B)False

Question 19

Hull Company reported the following income statement information for the current year:
$$\begin{array} { | l | r | } 
\hline & \
\hline \text { Sales } & \$ 410,000 \
\hline \text { Cost of goods sold: } & \
\hline \text { Beginning inventory } & \$ 132,000 \
\hline \text { Cost of goods purchased } & \underline { 273,000 } \
\hline \text { Cost of goods available for sale } & 405,000 \
\hline \text { Ending inventory } & 144,000 \
\hline \text { Cost of goods sold } & \underline { 261,000 } \
\hline \text { Gross profit } & \$ 149,000 \
\hline
\end{array}$$
The beginning inventory balance is correct.However,the ending inventory figure was overstated by $20,000.Given this information,the correct gross profit would be:

Accepted Answer

A)  $149,000. 
B)  $169,000. 
C)  $129,000. 
D)  $142,000. 
E)  $112,000. 
A)  $149,000. 
B)  $169,000. 
C)  $129,000. 
D)  $142,000. 
E)  $112,000.

Question 20

The cost of an inventory item includes the ________,plus ________ costs necessary to put it in a place and condition for sale.

Accepted Answer

answers m

The simple rule for inventory turnover is that a low ratio is preferable.

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

A company had the following ending inventory costs: Product Units of Hand Unit Cost Market Value A 10 \ 5 \6 B 50 8 7 C 35 10 11 Required: Calculate the lower of cost or market (LCM)value for each individual item.

Match the following terms with the appropriate definition. -An owner of goods who ships them to another party who will then sell the goods for the owner.

What advantages does a perpetual inventory system have over periodic inventory system?

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.

An understatement of ending inventory will cause

________ is the estimated sales price of damaged goods minus the cost of making the sale.

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

The cost of an inventory item includes the ,plus costs necessary to put it in a place and condition for sale.

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 simple rule for inventory turnover is that a low ratio is preferable.

Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

A company had the following ending inventory costs: Product Units of Hand Unit Cost Market Value A 10 \ 5 \6 B 50 8 7 C 35 10 11 Required: Calculate the lower of cost or market (LCM)value for each individual item.

Match the following terms with the appropriate definition. -An owner of goods who ships them to another party who will then sell the goods for the owner.

What advantages does a perpetual inventory system have over periodic inventory system?

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.

An understatement of ending inventory will cause

________ is the estimated sales price of damaged goods minus the cost of making the sale.

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

The cost of an inventory item includes the ________,plus ________ costs necessary to put it in a place and condition for sale.

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

The cost of an inventory item includes the ,plus costs necessary to put it in a place and condition for sale.