Question 1

The inventory turnover ratio is calculated as:

Accepted Answer

A)  Cost of goods sold divided by ending inventory. 
B)  Cost of goods sold divided by average merchandise inventory. 
C)  Ending inventory divided by cost of goods sold. 
D)  Sales divided by cost of goods sold. 
E)  Cost of goods sold divided by ending inventory times 365. 
A)  Cost of goods sold divided by ending inventory. 
B)  Cost of goods sold divided by average merchandise inventory. 
C)  Ending inventory divided by cost of goods sold. 
D)  Sales divided by cost of goods sold. 
E)  Cost of goods sold divided by ending inventory times 365.

Question 2

Determining the unit costs assigned to inventory items is one of the most important decisions in accounting for inventory.

Accepted Answer

A) True 
 B)False

Question 3

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
 $$\begin{array} { | l | l | r |} 
\hline& \text { At Cost } & \text { At Retrail } \ 
\hline   \text { January I beginging inventory } & \$ 167,340 & \$ 304,240 \
\hline\text { Cost of goods purchased } & 561,850 & 1,021,560 \
\hline \text { Sales }  & & 940,400 \
\hline\text { Sales returns }&&40,200\
\hline
\end{array}$$ 
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 4

Eastview Company uses a periodic 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)  $440. 
B)  $2,750. 
C)  $2,730. 
D)  $2,670. 
E)  $380. 
A)  $440. 
B)  $2,750. 
C)  $2,730. 
D)  $2,670. 
E)  $380.

Question 5

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:

Accepted Answer

A)  Lower of cost or market. 
B)  Specific identification. 
C)  FIFO. 
D)  Weighted average. 
E)  LIFO. 
A)  Lower of cost or market. 
B)  Specific identification. 
C)  FIFO. 
D)  Weighted average. 
E)  LIFO.

Question 6

Goods in transit are included in a purchaser's inventory:

Accepted Answer

A)  At any time during transit. 
B)  When the purchaser is responsible for paying freight charges. 
C)  When the supplier is responsible for freight charges. 
D)  After the half-way point between the buyer and seller. 
E)  If the goods are shipped FOB destination. 
A)  At any time during transit. 
B)  When the purchaser is responsible for paying freight charges. 
C)  When the supplier is responsible for freight charges. 
D)  After the half-way point between the buyer and seller. 
E)  If the goods are shipped FOB destination.

Question 7

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

None

Question 8

A company's inventory records report the following in November of the current year: $$\begin{array} { | l | l | l | } 
\hline \text { Beginging } & \text { November 1 } & 5 \text { units @ \$20 } \
\hline \text { Purchase } & \text { November 2 } & 10 \text { units @ \$22 } \
\hline \text { Purchase } & \text { November 12 } & 6 \text { units @ \$25 } \
\hline
\end{array}$$ 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)  $210 
B)  $188 
C)  $282 
D)  $260 
E)  $254 
A)  $210 
B)  $188 
C)  $282 
D)  $260 
E)  $254

Question 9

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

Accepted Answer

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

Question 10

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 11

An inventory error is sometimes said to be self-correcting because it yields an offsetting error in the next period.

Accepted Answer

A) True 
 B)False

Question 12

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge. What are the challenges Patrick refers to?

Accepted Answer

Any entrepreneur who sells inventory mus

The inventory turnover ratio is calculated as:

Determining the unit costs assigned to inventory items is one of the most important decisions in accounting for inventory.

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:

Goods in transit are included in a purchaser's 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.

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

An inventory error is sometimes said to be self-correcting because it yields an offsetting error in the next period.

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge. What are the challenges Patrick refers to?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Exam 6: Inventories and Cost of Sales

The inventory turnover ratio is calculated as:

Determining the unit costs assigned to inventory items is one of the most important decisions in accounting for inventory.

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:

Goods in transit are included in a purchaser's 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.

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

An inventory error is sometimes said to be self-correcting because it yields an offsetting error in the next period.

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge. What are the challenges Patrick refers to?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters