Question 1

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-Last in, is...

Question 2

Interim financial statements:

Accepted Answer

A)  Are statements prepared for periods of less than one year. 
B)  Require the use of the perpetual method for inventories. 
C)  Cannot be prepared if the company follows the conservatism principle. 
D)  Are necessary to achieve full disclosure about a business's operations. 
E)  Are required by the Congress. 
A)  Are statements prepared for periods of less than one year. 
B)  Require the use of the perpetual method for inventories. 
C)  Cannot be prepared if the company follows the conservatism principle. 
D)  Are necessary to achieve full disclosure about a business's operations. 
E)  Are required by the Congress.

Question 3

The ________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

Accepted Answer

first in,

Question 4

To avoid the time-consuming process of taking an inventory each year, most companies use the gross profit method to estimate ending inventory.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Question 7

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.
 $$\begin{array} { | l | l | l | } 
\hline \text { Inventory error: } & \text { Cost af good sold is: } & \text { Net income is: } \
\hline \text { Understatement of beginging inventory } & & \
\hline \text { Understatement of ending inventory } & & \
\hline \text { Overstatement of begining inventory } & & \
\hline \text { Overstatement of ending inventory } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | c | c | } 
\hlin

Question 8

Salmone Company reported the following purchases and sales of its only product. Salmone uses a periodic inventory system. Determine the cost assigned to the ending inventory 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)  $5,440 
B)  $2,850 
C)  $2,980 
D)  $2,590 
E)  $2,460 
A)  $5,440 
B)  $2,850 
C)  $2,980 
D)  $2,590 
E)  $2,460

Question 9

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

Accepted Answer

A)  $3,405. 
B)  $3,270. 
C)  $3,200. 
D)  $3,445. 
E)  $3,540. 
A)  $3,405. 
B)  $3,270. 
C)  $3,200. 
D)  $3,445. 
E)  $3,540.

Question 10

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

Question 11

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

Question 12

Sarbanes Oxley (SOX) demands that companies safeguard inventory and properly report it. List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory.

Accepted Answer

Safeguards include restricted access, us

Question 13

A company reported the following data related to its ending inventory:
 $$\begin{array} { | l | l | r | r | } 
\hline \text { Product } & \text { Units Available } & \text { Cost } & \text { Market } \
\hline 849 & 100 & \$ 10 & \$ 11 \
\hline 842 & 75 & 16 & 14 \
\hline 847 & 60 & 14 & 13 \
\hline 860 & 40 & 16 & 20 \
\hline
\end{array}$$ Calculate the lower-of-cost-or-market on the inventory applied separately to each product.

Accepted Answer

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

Question 14

The understatement of the ending inventory balance causes:

Accepted Answer

A)  Cost of goods sold to be understated and net income to be understated. 
B)  Cost of goods sold to be overstated and net income to be understated. 
C)  Cost of goods sold to be overstated and net income to be overstated. 
D)  Cost of goods sold to be overstated and net income to be correct. 
E)  Cost of goods sold to be understated and net income to be overstated. 
A)  Cost of goods sold to be understated and net income to be understated. 
B)  Cost of goods sold to be overstated and net income to be understated. 
C)  Cost of goods sold to be overstated and net income to be overstated. 
D)  Cost of goods sold to be overstated and net income to be correct. 
E)  Cost of goods sold to be understated and net income to be overstated.

Question 15

When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?

Accepted Answer

A)  Gross margin. 
B)  Weighted average. 
C)  Specific identification. 
D)  FIFO. 
E)  LIFO. 
A)  Gross margin. 
B)  Weighted average. 
C)  Specific identification. 
D)  FIFO. 
E)  LIFO.

Question 16

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

Accepted Answer

A) True 
 B)False

Question 17

Match the inventory valuation method from the list below that is being described in each situation in letters a-e. In all cases, assume a period of rising prices.
 $$\begin{array} { | l | l | } 
\hline \text { FIFO } & \text { First in, first out } \
\hline \text { LIFO } & \text { Last in, first out } \
\hline \text { WA } & \text { Weighted average } \
\hline \text { SI } & \text { Specific identification } \
\hline
\end{array}$$ a. The method that is used if each inventory item can be matched with a specific purchase and invoice.
________ b. The method that will cause the company to have the lowest income taxes.
________ c. The method that will cause the company to have the lowest cost of goods sold.
________ d. The method that will assign a value to inventory that approximates current cost.
________ e. The method that will tend to smooth out erratic changes in costs.

Accepted Answer

a. SI; b.

Question 18

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4.
- Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 11 units that were sold?

Accepted Answer

A)  $2,239. 
B)  $2,228. 
C)  $2,255. 
D)  $2,215. 
E)  $2,200. 
A)  $2,239. 
B)  $2,228. 
C)  $2,255. 
D)  $2,215. 
E)  $2,200.

Question 19

When purchase costs regularly rise, the ________ method of inventory valuation yields the highest gross profit and net income.

Accepted Answer

First in,

Question 20

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between

Accepted Answer

A)  net purchases during the period and ending inventory. 
B)  beginning inventory and cost of goods sold. 
C)  ending inventory and beginning inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and net purchases during the period. 
A)  net purchases during the period and ending inventory. 
B)  beginning inventory and cost of goods sold. 
C)  ending inventory and beginning inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and net purchases during the period.

Interim financial statements:

The ________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

To avoid the time-consuming process of taking an inventory each year, most companies use the gross profit method to estimate ending inventory.

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

Sarbanes Oxley (SOX) demands that companies safeguard inventory and properly report it. List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory.

A company reported the following data related to its ending inventory: Product Units Available Cost Market 849 100 \ 10 \ 11 842 75 16 14 847 60 14 13 860 40 16 20 Calculate the lower-of-cost-or-market on the inventory applied separately to each product.

The understatement of the ending inventory balance causes:

When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. - Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 11 units that were sold?

When purchase costs regularly rise, the ________ method of inventory valuation yields the highest gross profit and net income.

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between

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

Interim financial statements:

The ________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

To avoid the time-consuming process of taking an inventory each year, most companies use the gross profit method to estimate ending inventory.

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

Sarbanes Oxley (SOX) demands that companies safeguard inventory and properly report it. List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory.

A company reported the following data related to its ending inventory: Product Units Available Cost Market 849 100 \ 10 \ 11 842 75 16 14 847 60 14 13 860 40 16 20 Calculate the lower-of-cost-or-market on the inventory applied separately to each product.

The understatement of the ending inventory balance causes:

When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. - Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 11 units that were sold?

When purchase costs regularly rise, the ________ method of inventory valuation yields the highest gross profit and net income.

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between

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