Question 1

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. B

Question 2

A company has cost of goods available for sale of $250,000,sales of $305,000,and a gross profit percentage of 30 percent.Using the gross profit method,what is the ending inventory?

Accepted Answer

A) $95,000 
B) $50,000 
C) $36,500 
D) $158,500 
A) $95,000 
B) $50,000 
C) $36,500 
D) $158,500 C

Question 3

Manufacturing overhead would not include which of the following costs?

Accepted Answer

A) Plant utilities 
B) Supervisory salaries 
C) Depreciation of plant assets 
D) Raw materials 
A) Plant utilities 
B) Supervisory salaries 
C) Depreciation of plant assets 
D) Raw materials D

Question 4

All of the following are inventory costing methods except

Accepted Answer

A) first-in,first-out. 
B) average-cost. 
C) periodic. 
D) specific identification. 
A) first-in,first-out. 
B) average-cost. 
C) periodic. 
D) specific identification.

Question 5

A retail store had goods available for sale during the period of $250,000 at retail and $100,000 at cost.It has ending inventory of $28,500 at retail.What is the estimated cost of goods sold?

Accepted Answer

A) $71,500 
B) $94,300 
C) $88,600 
D) $82,900 
A) $71,500 
B) $94,300 
C) $88,600 
D) $82,900

Question 6

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 7

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

Accepted Answer

A) An auto dealer 
B) A computer service company 
C) A clothing store 
D) A restaurant supply company 
A) An auto dealer 
B) A computer service company 
C) A clothing store 
D) A restaurant supply company

Question 8

Goods held on consignment should be included in the consignee's ending inventory.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Inventory methods such as LIFO and FIFO deal more with cost flow than with goods flow.

Accepted Answer

A) True 
 B)False

Question 11

The costs of an automated perpetual inventory system are considerable because they include the costs of automating the system,maintaining the system,and taking a physical inventory.

Accepted Answer

A) True 
 B)False

Question 12

Valuation of inventory on the balance sheet impacts cost of goods sold on the income statement.

Accepted Answer

A) True 
 B)False

Question 13

The higher the value assigned to ending inventory,the lower the gross margin.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following methods generally is used to determine the loss when inventory is destroyed or stolen?

Accepted Answer

A) Retail method 
B) FIFO 
C) LIFO 
D) Gross profit method 
A) Retail method 
B) FIFO 
C) LIFO 
D) Gross profit method

Question 15

Use this information to answer the following question.   
-A periodic inventory system is used;ending inventory is 150 units.
What is ending inventory under the average-cost method?

Accepted Answer

A) $900 
B) $1,050 
C) $1,350 
D) $1,200 
A) $900 
B) $1,050 
C) $1,350 
D) $1,200

Question 16

Use this information to answer the following question.   
A periodic inventory system is used.
-Using FIFO,the cost assigned to ending inventory is

Accepted Answer

A) $8,112. 
B) $2,664. 
C) $3,480. 
D) $8,928. 
A) $8,112. 
B) $2,664. 
C) $3,480. 
D) $8,928.

Question 17

Inventory on hand is considered

Accepted Answer

A) a current asset. 
B) a current liability. 
C) a long-term asset. 
D) an expense. 
A) a current asset. 
B) a current liability. 
C) a long-term asset. 
D) an expense.

Question 18

Which of the following is a reason for not using the specific identification method?

Accepted Answer

A) It is impractical to keep track of the purchase and sale of individual items. 
B) Deciding which of many identical items sold would be arbitrary. 
C) Deciding whether lower or higher-priced identical items sold could be a means of manipulating income. 
D) All of these are reasons for not using the specific identification method. 
A) It is impractical to keep track of the purchase and sale of individual items. 
B) Deciding which of many identical items sold would be arbitrary. 
C) Deciding whether lower or higher-priced identical items sold could be a means of manipulating income. 
D) All of these are reasons for not using the specific identification method.

Question 19

In general,in times of rising prices,using FIFO has a favorable effect on cash flows.

Accepted Answer

A) True 
 B)False

Question 20

Lee Sisters reports income before income taxes of $20,000 during 2014.If beginning inventory was understated by $6,000 and ending inventory was overstated by $2,400,calculate corrected income before income taxes for the year.(Show your work. )

Accepted Answer

$11,600 ($

Exam 6: Inventories

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

A company has cost of goods available for sale of $250,000,sales of $305,000,and a gross profit percentage of 30 percent.Using the gross profit method,what is the ending inventory?

Manufacturing overhead would not include which of the following costs?

All of the following are inventory costing methods except

A retail store had goods available for sale during the period of $250,000 at retail and $100,000 at cost.It has ending inventory of $28,500 at retail.What is the estimated cost of goods sold?

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?

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

Goods held on consignment should be included in the consignee's ending inventory.

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

Inventory methods such as LIFO and FIFO deal more with cost flow than with goods flow.

The costs of an automated perpetual inventory system are considerable because they include the costs of automating the system,maintaining the system,and taking a physical inventory.

Valuation of inventory on the balance sheet impacts cost of goods sold on the income statement.

The higher the value assigned to ending inventory,the lower the gross margin.

Which of the following methods generally is used to determine the loss when inventory is destroyed or stolen?

Use this information to answer the following question. -A periodic inventory system is used;ending inventory is 150 units. What is ending inventory under the average-cost method?

Use this information to answer the following question. A periodic inventory system is used. -Using FIFO,the cost assigned to ending inventory is

Inventory on hand is considered

Which of the following is a reason for not using the specific identification method?

In general,in times of rising prices,using FIFO has a favorable effect on cash flows.

Lee Sisters reports income before income taxes of $20,000 during 2014.If beginning inventory was understated by $6,000 and ending inventory was overstated by $2,400,calculate corrected income before income taxes for the year.(Show your work. )

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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