Question 1

An understatement of year 1's ending inventory will

Accepted Answer

A)  cause year 2's cost of goods sold to be overstated. 
B)  result in an understatement of year 2's beginning inventory. 
C)  not affect year 2's ending owner's equity. 
D)  have no effect on year 2's gross margin. 
A)  cause year 2's cost of goods sold to be overstated. 
B)  result in an understatement of year 2's beginning inventory. 
C)  not affect year 2's ending owner's equity. 
D)  have no effect on year 2's gross margin.

Question 2

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Accepted Answer

FIFO will provide the same valuation res

Question 3

Use this information to answer the following question. $\begin{array}{llll}
\text { Jan. } & 1 & \text { Inventory } &15 \text { units @ } \$4.00 \
& 8 & \text { Purchase } & 60 \text { units } @ \$ 4.40\
&17 & \text { Purchase } & 30 \text { units } @ \$ 4.20 \
&25 & \text { Purchase } & 45 \text { units @ } \$ 8.40 \
&&\text { Total sales }& 100 \text { units }
\end{array}$

A periodic inventory system is used.
Cost of goods sold under FIFO is

Accepted Answer

A)  $429. 
B)  $426. 
C)  $452. 
D)  $237. 
A)  $429. 
B)  $426. 
C)  $452. 
D)  $237.

Question 4

Condensed income statements for Newlon Company are shown below for two years.
 $\begin{array}{lcc}
& {2010} & 2009 \
\text { Net sales }  & \$ 75,000 & \$ 90,000 \
\text { Cost of goods sold }& 45,000 & 54,000\\text { Gross margin } & \$ 30,000 & \$ 36,000 \
\text { Operating expenses } & 15,000 & 15,000 \\text { Income before income taxes }&\$15,000&\$21,000
\end{array}$ Compute the corrected income before income taxes for 2009 and 2010 assuming that the inventory as of the end of 2009 was mistakenly understated by $3,000.

Accepted Answer

2009 = $24,000 (EI understated

Question 5

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Accepted Answer

A) True 
 B)False

Question 6

Use this information to answer the following question. $\begin{array}{llll}
\text { Jan. } & 1 & \text { Inventory } &15 \text { units @ } \$4.00 \
& 8 & \text { Purchase } & 60 \text { units } @ \$ 4.40\
&17 & \text { Purchase } & 30 \text { units } @ \$ 4.20 \
&25 & \text { Purchase } & 45 \text { units @ } \$ 8.40 \
&&\text { Total sales }& 100 \text { units }
\end{array}$

A periodic inventory system is used.
Ending inventory under LIFO is

Accepted Answer

A)  $452. 
B)  $429. 
C)  $214. 
D)  $237. 
A)  $452. 
B)  $429. 
C)  $214. 
D)  $237.

Question 7

Use this inventory information for the month of June to answer the following question. $\begin{array}{llll}
\text { June } & 1 & \text { Beginning inventory } & 10 \text { units @ } \$120\
& 5 & \text { Purchase } & 60 \text { units } @ \$ 112\
&14 & \text { Sale } & 40 \text { units } \
&21 & \text { Purchase } & 30 \text { units @ } \$ 116 \
&30 & \text { Sale } & 28 \text { units }
\end{array}$
  Assuming that a periodic inventory system is used,what is cost of goods sold under the average-cost method?

Accepted Answer

A)  $3,648 
B)  $7,752 
C)  $3,712 
D)  $7,888 
A)  $3,648 
B)  $7,752 
C)  $3,712 
D)  $7,888

Question 8

When applying the lower-of-cost-or-market rule to inventory valuation,market generally means

Accepted Answer

A)  original cost, less physical deterioration. 
B)  replacement cost. 
C)  original cost. 
D)  resale value. 
A)  original cost, less physical deterioration. 
B)  replacement cost. 
C)  original cost. 
D)  resale value.

Question 9

The specific identification method and the FIFO method produce the same results under both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 10

An understatement of year 1's beginning inventory will

Accepted Answer

A)  cause year 2's gross margin to be overstated. 
B)  cause year 1's cost of goods sold to be understated. 
C)  cause year 2's gross margin to be understated. 
D)  have no effect on year 1's gross margin. 
A)  cause year 2's gross margin to be overstated. 
B)  cause year 1's cost of goods sold to be understated. 
C)  cause year 2's gross margin to be understated. 
D)  have no effect on year 1's gross margin.

Question 11

Use this inventory information for the month of June to answer the following question. $\begin{array}{llll}
\text { June } & 1 & \text { Beginning inventory } & 10 \text { units @ } \$120\
& 5 & \text { Purchase } & 60 \text { units } @ \$ 112\
&14 & \text { Sale } & 40 \text { units } \
&21 & \text { Purchase } & 30 \text { units @ } \$ 116 \
&30 & \text { Sale } & 28 \text { units }
\end{array}$
  What is cost of goods sold under the specific identification method?

Accepted Answer

A)  More information is needed. 
B)  $3,704 
C)  $7,696 
D)  $7,736 
A)  More information is needed. 
B)  $3,704 
C)  $7,696 
D)  $7,736

Question 12

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.Assume the periodic inventory system is used.(Show your work.)
 $\begin{array}{lrl}
\text { Jan. } & 1 & \text { Beginning inventory }&\text {150 items@\$3=}&\$450\
\text { May } & 1 & \text { Purchases } &\text {450 items $ \$ 6= $}&2700\
& & \text { Totals } & \text { 600 items}&\$3,150\
& & \text { Total sales }& \text { 300 items} \
\text { Dec. } & 31 & \text { Ending inventory }& \text { 300 items}
\end{array}$

Accepted Answer

a.Average-cost: $1,575 [($3,15

Question 13

Marina Sailboats reports income before income taxes of $80,000 during 2010.If beginning inventory was overstated by $7,000 and ending inventory was understated by $8,000,calculate corrected income before income taxes for the year.(Show your work.)

Accepted Answer

$95,000 ($

Question 14

During the first quarter of 20xx,Blake Company sold 12,000 cases of Product T for $120,000.Facts related to its beginning inventory and purchases are as follows:
 $\begin{array}{lrll}
\text { Jan. } & 1 & \text { Beginning inventory } & 5,000 \text { cases @ } \$ 4.00 \
& 10 & \text { Purchases } & 3,000 \text { cases } @ \$ 5.00\ 
\text { Feb. } & 13 & \text { Purchases } & 8,000 \text { cases @ } \$ 4.50 \
\text { Mar. } & 5 & \text { Purchases } & 2,000 \text { cases } @ \$ 5.00
\end{array}$
 For the quarter ended March 31,20xx,compute the ending inventory,cost of goods sold,and gross margin under three methods: (a)average-cost,(b)FIFO,and (c)LIFO.Assume the periodic inventory system is used.(Show your work.)

Accepted Answer

None

Question 15

When the average-cost method is applied to a perpetual inventory system,the sale and purchase of goods will change the unit cost of the goods that remain in inventory.

Accepted Answer

A) True 
 B)False

Question 16

Use the following information to calculate cost of goods sold under each of three methods: (a)FIFO,(b)LIFO,and (c)average-cost.Assume the periodic inventory system is used.(Show your work.)
 $\begin{array}{llll}
\text { Apr. } &1 & \text { Beginning inventory } & 90 \text { units @ } \$ 40 \
& 8 & \text { Sales } & 70 \text { units } \
&17 & \text { Purchases } & 150 \text { units @, \$42 }\
&24 & \text { Sales } & 110 \text { units } \
&30 & \text { Purchases } & 60 \text { units @\$44 } 
\end{array}$

Accepted Answer

a.FIFO: $7,380[(90 * $40)+ (90

Question 17

Inventory turnover is a measure expressed in terms of a percentage.

Accepted Answer

A) True 
 B)False

Question 18

The LIFO method agrees with the actual physical goods flow in most businesses.

Accepted Answer

A) True 
 B)False

Question 19

Use this information to answer the following question. $\begin{array}{llll}
\text { Feb. } & 1 & \text { Inventory } & 200 \text { units @ } \$ 6.00 \
& 6 & \text { Purchase } & 300 \text { units } @ \$ 6.60\
&13 & \text { Purchase } & 100 \text { units } @ \$ 7.20 \
&20 & \text { Purchase } & 200 \text { units } @ \$ 7.80 \
&25 & \text { Purchase } & 40 \text { units @ } \$ 8.40 \
&&\text { Total sales }& 620 \text { units }
\end{array}$

A periodic inventory system is used.
Using LIFO,the cost assigned to ending inventory is

Accepted Answer

A)  $1,740. 
B)  $4,056. 
C)  $1,332. 
D)  $4,464. 
A)  $1,740. 
B)  $4,056. 
C)  $1,332. 
D)  $4,464.

Question 20

Supply-chain management helps companies maintain higher levels of inventory.

Accepted Answer

A) True 
 B)False

Exam 6: Inventories

An understatement of year 1's ending inventory will

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Use this information to answer the following question. Jan. 1 Inventory 15 units @ \4 .00 8 Purchase 60 units @\ 4.40 17 Purchase 30 units @\ 4.20 25 Purchase 45 units @ \ 8.40 Total sales 100 units A periodic inventory system is used. Cost of goods sold under FIFO is

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Use this information to answer the following question. Jan. 1 Inventory 15 units @ \4 .00 8 Purchase 60 units @\ 4.40 17 Purchase 30 units @\ 4.20 25 Purchase 45 units @ \ 8.40 Total sales 100 units A periodic inventory system is used. Ending inventory under LIFO is

When applying the lower-of-cost-or-market rule to inventory valuation,market generally means

The specific identification method and the FIFO method produce the same results under both the perpetual and periodic inventory systems.

An understatement of year 1's beginning inventory will

Use this inventory information for the month of June to answer the following question. June 1 Beginning inventory 10 units @ \1 20 5 Purchase 60 units @\ 112 14 Sale 40 units 21 Purchase 30 units @ \ 116 30 Sale 28 units What is cost of goods sold under the specific identification method?

Marina Sailboats reports income before income taxes of $80,000 during 2010.If beginning inventory was overstated by $7,000 and ending inventory was understated by $8,000,calculate corrected income before income taxes for the year.(Show your work.)

When the average-cost method is applied to a perpetual inventory system,the sale and purchase of goods will change the unit cost of the goods that remain in inventory.

Inventory turnover is a measure expressed in terms of a percentage.

The LIFO method agrees with the actual physical goods flow in most businesses.

Supply-chain management helps companies maintain higher levels of inventory.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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