Question 1

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 2

Which of the following companies would be most likely to use the retail method?

Accepted Answer

A)  A dealer in heavy machinery 
B)  A TV repair company 
C)  A women's dress shop 
D)  A farm supply company 
A)  A dealer in heavy machinery 
B)  A TV repair company 
C)  A women's dress shop 
D)  A farm supply company

Question 3

Use this inventory information for the month of March to answer the following question. $\begin{array}{rlll}
\text { Mar. } &1& \text { Beginning inventory } & 20 \text { units @ } \$ 76 \
&7 & \text { Purchase } & 70 \text { units @ } \$ 80 \
&18 & \text { Sale } & 25 \text { units } \
&22 & \text { Purchase } & 10 \text { units @ } \$ 88 \
&29 & \text { Sale } & 40 \text { units }
\end{array}$

Assuming that a perpetual inventory system is used,what is cost of goods sold (rounded)under the average-cost method?

Accepted Answer

A)  $6,020 
B)  $3,210 
C)  $5,190 
D)  $2,810 
A)  $6,020 
B)  $3,210 
C)  $5,190 
D)  $2,810

Question 4

Use this information to answer the following question.  $ \begin{array}{rlrl}
\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 5

When taking a physical inventory under the retail method,it is necessary to know only the quantity of items on hand.

Accepted Answer

A) True 
 B)False

Question 6

Match between columns
                        Premises:  Interest income
 Outstanding checks
 Check written for $89, but $98 recorded in books
 Customer's NSF check
 Note receivable collected by bank
 Deposit made for $70, but $700 recorded in books
 Bank check-printing charge
 Check written for $52, but $25 recorded in books
 Deposits in transit
 Bank fee for collection on note receivable

Accepted Answer

The Answer of Add to balance per bank and Deduct is...

Question 7

In a period of declining prices,which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Accepted Answer

A)  LIFO 
B)  Cannot tell without more information 
C)  FIFO 
D)  Average-cost 
A)  LIFO 
B)  Cannot tell without more information 
C)  FIFO 
D)  Average-cost

Question 8

Which of the following inventory methods when used for income tax purposes must also be used for reporting purposes?

Accepted Answer

A)  Specific identification 
B)  LIFO 
C)  FIFO 
D)  Average-cost 
A)  Specific identification 
B)  LIFO 
C)  FIFO 
D)  Average-cost

Question 9

In a period of rising prices,which of the following inventory methods generally results in the lowest gross margin figure?

Accepted Answer

A)  Cannot tell without more information 
B)  LIFO 
C)  FIFO 
D)  Average-cost 
A)  Cannot tell without more information 
B)  LIFO 
C)  FIFO 
D)  Average-cost

Question 10

Use this inventory information for the month of June to answer the following question. $\begin{array}{rlll}
\text { June }&1 & \text { Beginning inventory } & 10 \text { units @ } \$ 120 \
&5 & \text { Purchase } & 60 \text { units @ } \$ 112 \
&14 & \text { Sale } & 40 \text { units } \
&21 & \text { Purchase } & 30 \text { units @ } \$ 116 \
&30 & \text { Sale } & 28 \text { units }
\end{array}$

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 11

Inventory is an example of a long-term asset.

Accepted Answer

A) True 
 B)False

Question 12

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Accepted Answer

A) True 
 B)False

Question 13

Periodic and perpetual are examples of inventory costing systems.

Accepted Answer

A) True 
 B)False

Question 14

An overstatement of ending inventory in a period will result in an overstatement of gross margin in that period.

Accepted Answer

A) True 
 B)False

Question 15

Freight charges associated with the purchase of inventory normally are not included in inventory cost.

Accepted Answer

A) True 
 B)False

Question 16

Why will an understated beginning inventory produce an overstated income before income taxes for the same period? Will the understatement have a favorable or unfavorable effect on current year income taxes?

Accepted Answer

An understated beginning inventory will

Question 17

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

Accepted Answer

Under the perpetual system,cost of goods

Question 18

The gross profit method requires that records be kept at both cost and retail.

Accepted Answer

A) True 
 B)False

Question 19

Inventory turnover is expressed in terms of

Accepted Answer

A)  days. 
B)  a percentage. 
C)  dollars. 
D)  times. 
A)  days. 
B)  a percentage. 
C)  dollars. 
D)  times.

Question 20

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.

Exam 6: Inventories

An understatement of year 1's beginning inventory will

Which of the following companies would be most likely to use the retail method?

When taking a physical inventory under the retail method,it is necessary to know only the quantity of items on hand.

In a period of declining prices,which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Which of the following inventory methods when used for income tax purposes must also be used for reporting purposes?

In a period of rising prices,which of the following inventory methods generally results in the lowest gross margin figure?

Use this inventory information for the month of June to answer the following question. June 1 Beginning inventory 10 units @ \ 120 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?

Inventory is an example of a long-term asset.

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Periodic and perpetual are examples of inventory costing systems.

An overstatement of ending inventory in a period will result in an overstatement of gross margin in that period.

Freight charges associated with the purchase of inventory normally are not included in inventory cost.

Why will an understated beginning inventory produce an overstated income before income taxes for the same period? Will the understatement have a favorable or unfavorable effect on current year income taxes?

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

The gross profit method requires that records be kept at both cost and retail.

Inventory turnover is expressed in terms of

An understatement of year 1's ending inventory will

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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