Question 1

Merchandise inventory includes:

Accepted Answer

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

Question 2

All of the following statements regarding U.S. GAAP and IFRS are true except:

Accepted Answer

A)  Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory. 
B)  Both U.S. GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. 
C)  Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost. 
D)  For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company owns and holds for sale. 
E)  With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost. 
A)  Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory. 
B)  Both U.S. GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. 
C)  Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost. 
D)  For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company owns and holds for sale. 
E)  With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.

Question 3

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 Periodic LIFO 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)  $5,470. 
B)  $3,200. 
C)  $5,130. 
D)  $5,400. 
E)  $8,670. 
A)  $5,470. 
B)  $3,200. 
C)  $5,130. 
D)  $5,400. 
E)  $8,670.

Question 4

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

Accepted Answer

matching;

Question 5

Monarch Company uses a weighted-average perpetual inventory system, and has the following purchases and sales: $$\begin{array} { | l | l | } 
\hline \text { January 1 } & 20 \text { units were purchased at \$10 per unit. } \
\hline \text { January 12 } & 12 \text { units were sold. } \
\hline \text { January 20 } & 18 \text { units were purchased at \$11 per unit. } \
\hline
\end{array}$$
- 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)  $272. 
B)  $120. 
C)  $278. 
D)  $398. 
E)  $126. 
A)  $272. 
B)  $120. 
C)  $278. 
D)  $398. 
E)  $126.

Question 6

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%. 
-Using the gross profit method, the cost of goods sold would be:

Accepted Answer

A)  $19,500. 
B)  $63,000. 
C)  $60,000. 
D)  $58,500. 
E)  $20,000. 
A)  $19,500. 
B)  $63,000. 
C)  $60,000. 
D)  $58,500. 
E)  $20,000.

Question 7

Raleigh Co. has the following products in its ending inventory. Compute the lower of cost or market total for inventory applied separately to each product. $$\begin{array} { | l | l | l | l | } 
\hline \text { Praduct } & \text { Quantity } & \text { Cast per unit } & \text { Market per unit } \
\hline \text { Jelly } & 150 & \$ 2.00 & 2.15 \
\hline \text { Jam } & 370 & \$ 2.65 & 2.50 \
\hline \text { Marmal ade } & 260 & \$ 3.10 & 3.05 \
\hline
\end{array}$$

Accepted Answer

A)  $2,086.50. 
B)  $2,053.50. 
C)  $2,040.50. 
D)  $2,018.00. 
E)  $2,109.00. 
A)  $2,086.50. 
B)  $2,053.50. 
C)  $2,040.50. 
D)  $2,018.00. 
E)  $2,109.00.

Question 8

A company's inventory records report the following: $$\begin{array} { | l | l | l | } 
\hline \text { August 1 } & \text { Begining balance } & 15 \text { units @ \$12 } \
\hline \text { August 5 } & \text { Purchase } & 10 \text { units @ \$13 } \
\hline \text { August 12 } & \text { Purchase } & 20 \text { units @ \$14 } \
\hline
\end{array}$$ On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?

Accepted Answer

A)  $140 
B)  $590 
C)  $380 
D)  $160 
E)  $210 
A)  $140 
B)  $590 
C)  $380 
D)  $160 
E)  $210

Question 9

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is
$145,000, then estimated ending inventory at cost is $207,143.

Accepted Answer

A) True 
 B)False

Question 10

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Accepted Answer

A) True 
 B)False

Question 11

Physical counts of inventory:

Accepted Answer

A)  Are necessary to adjust the Inventory account to the actual inventory available. 
B)  Requires the use of hand-held portable computers. 
C)  Are not necessary under the cost-to benefit constraint. 
D)  Are not necessary under the perpetual system. 
E)  Must be taken at least once a month. 
A)  Are necessary to adjust the Inventory account to the actual inventory available. 
B)  Requires the use of hand-held portable computers. 
C)  Are not necessary under the cost-to benefit constraint. 
D)  Are not necessary under the perpetual system. 
E)  Must be taken at least once a month.

Question 12

The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.

Accepted Answer

A) True 
 B)False

Question 13

Accounting principles require that inventory be reported at the market value (cost) of replacing inventory when market value is lower than cost.

Accepted Answer

A) True 
 B)False

Question 14

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

Accepted Answer

A) True 
 B)False

Question 15

Jammer Company uses a weighted average perpetual inventory system and reports the following: $$\begin{array} { | l l | l | l | } 
\hline \text { August } & 2 & \text { Purchase } & 10 \text { units at } \$ 12 \text { per unit. } \
\hline \text { August } & 18 & \text { Purchase } & 15 \text { units at } \$ 15 \text { per unit. } \
\hline \text { August } & 29 & \text { Sale } & 20 \text { units. } \
\hline \text { August } & 31 & \text { Purchase } & 14 \text { units at } \$ 16 \text { per unit. } \
\hline
\end{array}$$ What is the per-unit value of ending inventory on August 31?

Accepted Answer

A)  $17.74 
B)  $13.80 
C)  $12.00 
D)  $16.00 
E)  $15.42 
A)  $17.74 
B)  $13.80 
C)  $12.00 
D)  $16.00 
E)  $15.42

Question 16

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Accepted Answer

A) True 
 B)False

Question 17

On December 31 of the current year, Plunkett Company reported an ending inventory balance of $215,000. The following additional information is also available:
• Plunkett sold and shipped goods costing $38,000 to Savannah Enterprises on December 28 with shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $215,000.
• Plunkett purchased goods costing $44,000 on December 29. The goods were shipped FOB destination and were received by Plunkett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $215,000.
• Plunkett's ending inventory balance of $215,000 included $15,000 of goods being held on consignment from Carole Company. (Plunkett Company is the consignee.)
• Plunkett's ending inventory balance of $215,000 did not include goods costing $95,000 that were shipped to Plunkett on December 27 with shipping terms of FOB destination and were still in transit at year-end.
Based on the above information, the amount that Plunkett should report in ending inventory on December 31 is:

Accepted Answer

A)  $209,000 
B)  $156,000 
C)  $200,000 
D)  $171,000 
E)  $194,000 
A)  $209,000 
B)  $156,000 
C)  $200,000 
D)  $171,000 
E)  $194,000

Question 18

Hasham purchases inventory from overseas and incurs the following costs: the merchandise cost is $80,000, credit terms 1/10, n/30, applicable only to the $80,000; FOB shipping point freight charges are $2,500; insurance during transit is $300; and import duties are $1,500. Hasham paid within the discount period. Compute the cost that should be assigned to the inventory.

Accepted Answer

A)  $83,500 
B)  $81,700 
C)  $84,300 
D)  $79,200 
E)  $81,000 
A)  $83,500 
B)  $81,700 
C)  $84,300 
D)  $79,200 
E)  $81,000

Question 19

Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $100,000 in sales during the second quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:

Accepted Answer

A)  $30,000. 
B)  $20,000. 
C)  $21,000. 
D)  $18,000. 
E)  $27,000. 
A)  $30,000. 
B)  $20,000. 
C)  $21,000. 
D)  $18,000. 
E)  $27,000.

Question 20

Since an error in the period-end inventory causes an offsetting error in the next period:

Accepted Answer

A)  Is immaterial for managerial decision making. 
B)  It is said to be self-correcting. 
C)  Managers can ignore the error. 
D)  If affects only balance sheet accounts. 
E)  It affects only income statement accounts. 
A)  Is immaterial for managerial decision making. 
B)  It is said to be self-correcting. 
C)  Managers can ignore the error. 
D)  If affects only balance sheet accounts. 
E)  It affects only income statement accounts.

Merchandise inventory includes:

All of the following statements regarding U.S. GAAP and IFRS are true except:

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

Raleigh Co. has the following products in its ending inventory. Compute the lower of cost or market total for inventory applied separately to each product. Praduct Quantity Cast per unit Market per unit Jelly 150 \ 2.00 2.15 Jam 370 \ 2.65 2.50 Marmal ade 260 \ 3.10 3.05

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $145,000, then estimated ending inventory at cost is $207,143.

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Physical counts of inventory:

The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.

Accounting principles require that inventory be reported at the market value (cost) of replacing inventory when market value is lower than cost.

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Since an error in the period-end inventory causes an offsetting error in the next period:

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

Merchandise inventory includes:

All of the following statements regarding U.S. GAAP and IFRS are true except:

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

Raleigh Co. has the following products in its ending inventory. Compute the lower of cost or market total for inventory applied separately to each product. Praduct Quantity Cast per unit Market per unit Jelly 150 \ 2.00 2.15 Jam 370 \ 2.65 2.50 Marmal ade 260 \ 3.10 3.05

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $145,000, then estimated ending inventory at cost is $207,143.

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Physical counts of inventory:

The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.

Accounting principles require that inventory be reported at the market value (cost) of replacing inventory when market value is lower than cost.

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Since an error in the period-end inventory causes an offsetting error in the next period:

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