Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) Invoice price 
B) Cost of goods held on consignment 
C) Freight-in 
D) Sales tax 
A) Invoice price 
B) Cost of goods held on consignment 
C) Freight-in 
D) Sales tax

Question 3

Use this inventory information for the month of March to answer the following question.   
-Assuming that a periodic inventory system is used,what is ending inventory (rounded)under the average-cost method?

Accepted Answer

A) $2,079 
B) $2,685 
C) $3,861 
D) $5,940 
A) $2,079 
B) $2,685 
C) $3,861 
D) $5,940

Question 4

To increase their levels of inventory,many merchandisers and manufacturers use supply-chain management in conjunction with a just-in-time operating environment.

Accepted Answer

A) True 
 B)False

Question 5

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Accepted Answer

A) Full disclosure 
B) Matching 
C) Materiality 
D) Conservatism 
A) Full disclosure 
B) Matching 
C) Materiality 
D) Conservatism

Question 6

A retail store prices its goods to achieve a gross margin of 35 percent.Up to the date of a fire that destroyed the store's inventory,sales were $250,000 and cost of goods available for sale was $175,000.The estimated cost of the inventory destroyed is

Accepted Answer

A) $12,500. 
B) $43,750. 
C) $62,500. 
D) $75,000. 
A) $12,500. 
B) $43,750. 
C) $62,500. 
D) $75,000.

Question 7

The specific identification method is well suited for a discount department store.

Accepted Answer

A) True 
 B)False

Question 8

A cost-to-retail percentage must be calculated when applying the gross profit method.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an inventory costing method?

Accepted Answer

A) Perpetual 
B) Lower-of-cost-or-market 
C) Specific identification 
D) Periodic 
A) Perpetual 
B) Lower-of-cost-or-market 
C) Specific identification 
D) Periodic

Question 10

How is the matching rule applied when accounting for merchandise inventory?

Accepted Answer

Merchandise inventory is classified as a

Question 11

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

Accepted Answer

A) $3,036. 
B) $3,168. 
C) $3,384. 
D) $8,556. 
A) $3,036. 
B) $3,168. 
C) $3,384. 
D) $8,556.

Question 12

Which inventory method generally best follows the matching principle?

Accepted Answer

A) Average-cost 
B) LIFO 
C) Whichever method is used for tax purposes 
D) FIFO 
A) Average-cost 
B) LIFO 
C) Whichever method is used for tax purposes 
D) FIFO

Question 13

When the average-cost method is applied to a perpetual inventory system,the sale of goods will not change the unit cost of the goods that remain in inventory.

Accepted Answer

A) True 
 B)False

Question 14

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Accepted Answer

A) True 
 B)False

Question 15

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

Accepted Answer

A) True 
 B)False

Question 16

Which inventory method generally results in the most realistic balance sheet valuation?

Accepted Answer

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

Question 17

An overstatement of beginning inventory in a period will result in an overstatement of gross margin in the next period.

Accepted Answer

A) True 
 B)False

Question 18

Both the retail method and the gross profit method are useful in estimating the inventory cost.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Which costing method will produce different results under perpetual and periodic systems?

Accepted Answer

A) Specific identification 
B) Average-cost 
C) FIFO 
D) Both FIFO and specific identification 
A) Specific identification 
B) Average-cost 
C) FIFO 
D) Both FIFO and specific identification

Exam 6: Inventories

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

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

Use this inventory information for the month of March to answer the following question. -Assuming that a periodic inventory system is used,what is ending inventory (rounded)under the average-cost method?

To increase their levels of inventory,many merchandisers and manufacturers use supply-chain management in conjunction with a just-in-time operating environment.

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

A retail store prices its goods to achieve a gross margin of 35 percent.Up to the date of a fire that destroyed the store's inventory,sales were $250,000 and cost of goods available for sale was $175,000.The estimated cost of the inventory destroyed is

The specific identification method is well suited for a discount department store.

A cost-to-retail percentage must be calculated when applying the gross profit method.

Which of the following is an inventory costing method?

How is the matching rule applied when accounting for merchandise inventory?

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

Which inventory method generally best follows the matching principle?

When the average-cost method is applied to a perpetual inventory system,the sale of goods will not change the unit cost of the goods that remain in inventory.

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

Which inventory method generally results in the most realistic balance sheet valuation?

An overstatement of beginning inventory in a period will result in an overstatement of gross margin in the next period.

Both the retail method and the gross profit method are useful in estimating the inventory cost.

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

Which costing method will produce different results under perpetual and periodic systems?

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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