Question 1

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following statements regarding changing inventory methods is true?

Accepted Answer

A) A change in inventory methods can be justified if the change is made to better match profits with revenue. 
B) Changing inventory methods affects consistency. 
C) One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity. 
D) Tax advantages are valid justification for changing inventory methods. 
A) A change in inventory methods can be justified if the change is made to better match profits with revenue. 
B) Changing inventory methods affects consistency. 
C) One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity. 
D) Tax advantages are valid justification for changing inventory methods. B

Question 3

Hound Dog Bisquits reported the following financial data for 2016 and 2017:
$\begin{array}{lrr}
&\underline{2017}&\underline{2018}\
\text { Sales } & \$ 700,000 & \$ 600,000 \
\text { Sales returns and allowances } & \underline{(10,000)} &\underline{\text{D}} \
\text { Net sales } & \underline{690,000} & \underline{580,000}\
 \text { Inventory, January } 1 & 30,000 & \underline{\text { (E) }} \
 \text { Net purchases } & \underline{(A) }& \underline{340,000 }\
\text { Cost of goods avail able for sale } & \$ 250, 000 & \$ 380,000 \
\text { nventory, December } 31 & \underline{(40,000) }&\underline{ (30,000) }\
\text { Cost of goods sold } & \underline{(\mathrm{B}) }& \underline{(\mathrm{F})} \
 \text { Gross profit } &\underline{ \text { (C) }} &\underline{ (G)} \
\end{array}$
Provide the answer for each missing letter above.

Accepted Answer

?
 (A) $\$ 220,000 ( \$ 250,000 - \$ 30,000 )$
(B) $\$ 210,000 ( \$ 250,000 - \$ 40,000 )$
(C) $\$ 480,000 ( \$ 690,000 - \$ 210,000 )$
(D) $\$ 20,000 ( \$ 600,000 - \$ 580,000 )$
(E) $\$ 40,000$ (from 2016 ending inventory)
(F) $\$ 350,000 ( \$ 380,000 - \$ 30,000 )$
(G) $\$ 230,000 ( \$ 580,000 - \$ 350,000 )$

Question 4

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid justification for a change in methods.

Accepted Answer

A) True 
 B)False

Question 5

The three distinct types of costs to a manufacturer are direct materials,direct labor,and manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 6

On the income statement of a merchandising company,cost of goods sold is added to net sales to arrive at gross margin,or gross profit.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would not be included in inventory costs?

Accepted Answer

A) Freight costs incurred by the buyer in shipping inventory to its place of business 
B) The cost of insurance taken out during the time that inventory is in transit 
C) The cost of sales tax paid when purchasing the inventory 
D) Shelving to hold the inventory 
A) Freight costs incurred by the buyer in shipping inventory to its place of business 
B) The cost of insurance taken out during the time that inventory is in transit 
C) The cost of sales tax paid when purchasing the inventory 
D) Shelving to hold the inventory

Question 8

Accountants define the market value of inventory as its __________.

Accepted Answer

The answer of Accountants define the market value of inventory...

Question 9

A customer returned damaged goods and was given an allowance.Which of the seller's accounts decreases?

Accepted Answer

A) Purchase Returns 
B) Accounts Receivable 
C) Sales Returns 
D) Sales Revenue 
A) Purchase Returns 
B) Accounts Receivable 
C) Sales Returns 
D) Sales Revenue

Question 10

Adam Inc.uses a perpetual inventory system and has the following data for January:  
$$\begin{array} { r l r } 
\text { Jan. } 1 & \text { On hand, } 10 \text { units } @ \$ 2 \text { each } & \$ 20 \
4 & \text { Sold } 8 \text { units } @ \$ 10 \text { each } & 80 \
22 & \text { Purchased } 50 \text { units } @ \$ 4 \text { each } & 200 \
26 & \text { Sold } 48 \text { units } @ \$ 10 \text { each } & 480
\end{array}$$ 
-If Adam uses the LIFO method,how much is cost of goods sold for the month of January?

Accepted Answer

A) $204 
B) $208 
C) $212 
D) $560 
A) $204 
B) $208 
C) $212 
D) $560

Question 11

In order to determine inventory for its balance sheet,it is best for a company to count the inventory at the end of its accounting period for

Accepted Answer

A) the periodic inventory system. 
B) the perpetual inventory system. 
C) both the periodic and perpetual inventory systems. 
D) neither the periodic nor perpetual inventory systems. 
A) the periodic inventory system. 
B) the perpetual inventory system. 
C) both the periodic and perpetual inventory systems. 
D) neither the periodic nor perpetual inventory systems.

Question 12

Park,Inc.purchased merchandise from Jay Zee Music Company on June 5,2017.The goods were shipped the same day.The merchandise's selling price was $15,000.The credit terms were 1/10,n/30.The shipping terms were FOB shipping point.Park received the merchandise on June 10,2017.Park paid the amount due on June 13,2017. 
-
Park uses the periodic inventory system.What effect does recording the purchase of merchandise on June 5,2017 have on Park's accounting equation?

Accepted Answer

A) Assets and liabilities increase. 
B) Liabilities increase and stockholders' equity decreases. 
C) Assets and stockholders' equity increase. 
D) Liabilities and stockholders' equity decrease. 
A) Assets and liabilities increase. 
B) Liabilities increase and stockholders' equity decreases. 
C) Assets and stockholders' equity increase. 
D) Liabilities and stockholders' equity decrease.

Question 13

Adam Inc.uses a perpetual inventory system and has the following data for January: 
$$\begin{array} { r l r } 
\text { Jan. } 1 & \text { On hand, } 10 \text { units } @ \$ 2 \text { each } & \$ 20 \
4 & \text { Sold } 8 \text { units } @ \$ 10 \text { each } & 80 \
22 & \text { Purchased } 50 \text { units } @ \$ 4 \text { each } & 200 \
26 & \text { Sold } 48 \text { units } @ \$ 10 \text { each } & 480
\end{array}$$
- If Adam uses the FIFO method,how much is cost of goods sold for the month of January?

Accepted Answer

A) $204 
B) $208 
C) $212 
D) $560 
A) $204 
B) $208 
C) $212 
D) $560

Question 14

The cost of goods purchased is equal to net purchases plus __________.

Accepted Answer

freight-in

Question 15

Several transactions of sales and purchase activities for Genoa Department Store are described below.
?
 (A) Genoa purchases shoes from Nike on credit.
(B) Genoa returns defective shoes to Nike before payment is made to Nike for the shoes purchased in transaction $A$.
(C) Genoa pays for the shoes purchased from Nike.
(D) Genoa sells shoes to its customers for cash and on credit.
(E) Credit customers return shoes to Genoa for a refund.
(F) Credit customers pay their account balances to Genoa. Required
For each transaction described of each transaction listed above on the company under a periodic inventory system.

Accepted Answer

(A)Liabilities increase and stockholders

Question 16

Ending inventory valued under the FIFO method will be the same regardless of whether the periodic system or the perpetual system is used.

Accepted Answer

A) True 
 B)False

Question 17

Cooking Corner

Cooking Corner reported inventory on its balance sheet at December 31, 2016 at $32,000. During 2017, Cooking Corner purchased goods totaling $634,000 on account with terms of 2/10, n/30, FOB shipping point. Total charges paid by Cooking Corner directly to the freight company were $1,000. At the end of 2017, inventory on hand totaled to $45,000. Net sales for 2017 totaled $1,300,000. Cooking Corner employs a periodic inventory system.

-Refer to the information for Grappa,Inc.
 
(A)How much is net sales for 2018?
 
(B)What other components that Grappa did not report could be included in this computation?

Accepted Answer

(A)$951,200 (Sales)-

Question 18

Grinn,Inc.offers terms of 2/10,n/30 to credit customers.Great Buy Corp.purchased 100 tile cutters with a list price of $20 each on March 5,2017,on account.If Great Buy Corp.pays the amount of the invoice for its purchase on March 14,2017,how much cash will Grinn receive from Great Buy Corp.? ​

Accepted Answer

A) $1,764 
B) $1,800 
C) $1,960 
D) $2,000 
A) $1,764 
B) $1,800 
C) $1,960 
D) $2,000

Question 19

The account a manufacturer uses to record the cost of products completed and available for sale is called

Accepted Answer

A) Raw Materials Inventory. 
B) Work in Process Inventory. 
C) Finished Goods Inventory. 
D) Merchandise Inventory. 
A) Raw Materials Inventory. 
B) Work in Process Inventory. 
C) Finished Goods Inventory. 
D) Merchandise Inventory.

Question 20

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Accepted Answer

A) If older,less costly layers are liquidated,a correspondingly lower cost of goods sold will result. 
B) If older,less costly layers are liquidated,a correspondingly higher gross profit will result. 
C) If older,less costly layers are liquidated,the company may be faced with higher taxes for those deferred in previous periods. 
D) All of these could result. 
A) If older,less costly layers are liquidated,a correspondingly lower cost of goods sold will result. 
B) If older,less costly layers are liquidated,a correspondingly higher gross profit will result. 
C) If older,less costly layers are liquidated,the company may be faced with higher taxes for those deferred in previous periods. 
D) All of these could result.

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Which of the following statements regarding changing inventory methods is true?

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid justification for a change in methods.

The three distinct types of costs to a manufacturer are direct materials,direct labor,and manufacturing overhead.

On the income statement of a merchandising company,cost of goods sold is added to net sales to arrive at gross margin,or gross profit.

Which of the following would not be included in inventory costs?

Accountants define the market value of inventory as its __________.

A customer returned damaged goods and was given an allowance.Which of the seller's accounts decreases?

In order to determine inventory for its balance sheet,it is best for a company to count the inventory at the end of its accounting period for

The cost of goods purchased is equal to net purchases plus __________.

Ending inventory valued under the FIFO method will be the same regardless of whether the periodic system or the perpetual system is used.

Grinn,Inc.offers terms of 2/10,n/30 to credit customers.Great Buy Corp.purchased 100 tile cutters with a list price of $20 each on March 5,2017,on account.If Great Buy Corp.pays the amount of the invoice for its purchase on March 14,2017,how much cash will Grinn receive from Great Buy Corp.?

The account a manufacturer uses to record the cost of products completed and available for sale is called

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 5: Inventories and Cost of Goods Sold

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Which of the following statements regarding changing inventory methods is true?

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid justification for a change in methods.

The three distinct types of costs to a manufacturer are direct materials,direct labor,and manufacturing overhead.

On the income statement of a merchandising company,cost of goods sold is added to net sales to arrive at gross margin,or gross profit.

Which of the following would not be included in inventory costs?

Accountants define the market value of inventory as its __________.

A customer returned damaged goods and was given an allowance.Which of the seller's accounts decreases?

In order to determine inventory for its balance sheet,it is best for a company to count the inventory at the end of its accounting period for

The cost of goods purchased is equal to net purchases plus __________.

Ending inventory valued under the FIFO method will be the same regardless of whether the periodic system or the perpetual system is used.

Grinn,Inc.offers terms of 2/10,n/30 to credit customers.Great Buy Corp.purchased 100 tile cutters with a list price of $20 each on March 5,2017,on account.If Great Buy Corp.pays the amount of the invoice for its purchase on March 14,2017,how much cash will Grinn receive from Great Buy Corp.? ​

The account a manufacturer uses to record the cost of products completed and available for sale is called

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Grinn,Inc.offers terms of 2/10,n/30 to credit customers.Great Buy Corp.purchased 100 tile cutters with a list price of $20 each on March 5,2017,on account.If Great Buy Corp.pays the amount of the invoice for its purchase on March 14,2017,how much cash will Grinn receive from Great Buy Corp.?