Question 1

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 2

Managers are able to make important decisions correctly using erroneous inventory balances because inventory errors are self-correcting and,as a result,are less serious.

Accepted Answer

A) True 
 B)False

Question 3

The FIFO inventory method assumes that costs for the most recently purchased items are the first to be charged to the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

A company has inventory of 15 units at a cost of $12 each on August 1.On August 5,they purchased 10 units at $13 per unit.On August 12,they purchased 20 units at $14 per unit.On August 15,they sold 30 units.Using the FIFO periodic inventory method,what is the value of the inventory at August 15 after the sale?

Accepted Answer

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

Question 5

Acme-Jones Corporation uses a weighted-average perpetual inventory system.
August 2,10 units were purchased at $12 per unit.
August 18,15 units were purchased at $14 per unit.
August 29,12 units were sold.
What was the amount of the cost of goods sold for this sale?

Accepted Answer

A)  $148.00 
B)  $150.50 
C)  $158.40 
D)  $210.00 
E)  $330.00 
A)  $148.00 
B)  $150.50 
C)  $158.40 
D)  $210.00 
E)  $330.00

Question 6

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

Accepted Answer

A) True 
 B)False

Question 7

On December 31,a company needed to estimate its ending inventory to prepare its fourth quarter financial statements.The following information is currently available:
Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%.Ending Inventory under the gross profit method would be:

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000 
A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000

Question 8

An overstatement of ending inventory will cause

Accepted Answer

A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet. 
A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet.

Question 9

The four methods of inventory valuation are SIFO,FIFO,LIFO,and average cost.

Accepted Answer

A) True 
 B)False

Question 10

Three key variables determine the dollar value of inventory: (1)inventory quantity,(2)costs of inventory,and (3)cost flow assumption.

Accepted Answer

A) True 
 B)False

Question 11

How do the consistency concept and the full disclosure principle affect inventory valuation?

Accepted Answer

The consistency concept requires that co

Question 12

Given the following information,determine the cost of goods sold at December 31 using the weighted-average perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.

Accepted Answer

A)  $282.30 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30 
A)  $282.30 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30

Question 13

A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first 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 using the gross profit method is:

Accepted Answer

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

Question 14

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Accepted Answer

A) True 
 B)False

Question 15

A company uses the periodic inventory system and had the following activity during the
Current monthly period:.
$\begin{array}{|l|l|r|}
\hline\text { November } 1: & \text { Beginning inventory } & 100 \text { units @\$20 } \
\hline \text { November } 5: & \text { Purchased } & 100 \text { units @\$22 } \
\hline \text { November } 8: & \text { Purchased } & 50 \text { units@\$23 } \
\hline \text { November } 16: & \text { Sold } & 200 \text { units@\$45 } \
\hline \text { November } 19: & \text { Purchased } & 50 \text { units@\$25 }\
\hline
\end{array}$ 
Using the weighted-average inventory method,the company's ending inventory would be reported at:

Accepted Answer

A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400 
A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400

Question 16

Merchandise inventory includes:

Accepted Answer

A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only items that are on the shelf. 
A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only items that are on the shelf.

Question 17

The assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic systems.

Accepted Answer

A) True 
 B)False

Question 18

Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.

Accepted Answer

The retail method is generally used to p

Question 19

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 20

There is no simple rule for inventory turnover,except that a high ratio is preferable provided inventory is adequate to meet demand.

Accepted Answer

A) True 
 B)False

Exam 5: Inventories and Cost of Sales

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

Managers are able to make important decisions correctly using erroneous inventory balances because inventory errors are self-correcting and,as a result,are less serious.

The FIFO inventory method assumes that costs for the most recently purchased items are the first to be charged to the cost of goods sold.

Acme-Jones Corporation uses a weighted-average perpetual inventory system. August 2,10 units were purchased at $12 per unit. August 18,15 units were purchased at $14 per unit. August 29,12 units were sold. What was the amount of the cost of goods sold for this sale?

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

An overstatement of ending inventory will cause

The four methods of inventory valuation are SIFO,FIFO,LIFO,and average cost.

Three key variables determine the dollar value of inventory: (1)inventory quantity,(2)costs of inventory,and (3)cost flow assumption.

How do the consistency concept and the full disclosure principle affect inventory valuation?

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Merchandise inventory includes:

The assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic systems.

Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

There is no simple rule for inventory turnover,except that a high ratio is preferable provided inventory is adequate to meet demand.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

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