Question 1

Cost of goods sold equals $250,000,and average inventory equals $100,000.Days' inventory on hand equals

Accepted Answer

A) 91.3 days. 
B) 146.0 days. 
C) 821.9 days. 
D) 912.5 days. 
A) 91.3 days. 
B) 146.0 days. 
C) 821.9 days. 
D) 912.5 days.

Question 2

Why are cost flow assumptions made when accounting for merchandise inventory?

Accepted Answer

With changing prices,one would have to c

Question 3

Under the perpetual inventory system,cost of goods sold is not recorded until the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 4

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 5

In a period of rising prices,which of the following inventory methods generally results in the highest 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 6

A jeweler probably would use which of the following inventory methods?

Accepted Answer

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

Question 7

Which costing method will produce the same result under both a perpetual and periodic system?

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

Question 8

During periods of consistently falling prices,the FIFO inventory method will produce the highest possible amount of net income.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.

Accepted Answer

A) True 
 B)False

Question 11

Assume that during the physical count of the inventory of a large corporation for this year,$450,000 of merchandise was counted twice.The error was not detected,and the financial statements were prepared.Identify the individual statements that would be affected and explain the effect the count error would have on each.(Omit income tax considerations. )

Accepted Answer

The double-counting of merchandise would

Question 12

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 13

The detailed records of purchases and sales maintained under the perpetual inventory system make which costing method more practical than when a periodic system is used?

Accepted Answer

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

Question 14

Use the following information to calculate ending inventory on (a)a LIFO basis, (b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.

Accepted Answer

a.LIFO: 50 × $28 = $1,400.00
b.FIFO: (5

Question 15

Which costing method can only be used when it is possible to identify units as coming from specific purchases?

Accepted Answer

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

Question 16

An unrealistic picture of the inventory's current value on the balance sheet is an argument against using

Accepted Answer

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

Question 17

A retail store has beginning inventory of $30,000,purchases of $220,000,sales of $200,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

Accepted Answer

A) $50,000 
B) $150,000 
C) $100,000 
D) $200,000 
A) $50,000 
B) $150,000 
C) $100,000 
D) $200,000

Question 18

The matching of revenue with inventory costs is best achieved with the FIFO method.

Accepted Answer

A) True 
 B)False

Question 19

If cost of goods sold is understated by $6,000 for this year,what effect will this have on income before income taxes in the following year?

Accepted Answer

A) understated by $3,000 
B) overstated by $6,000 
C) understated by $6,000 
D) no effect 
A) understated by $3,000 
B) overstated by $6,000 
C) understated by $6,000 
D) no effect

Question 20

Use this inventory information for the month of May to answer the following questions.   Assuming that a perpetual inventory system is used.
-What is ending inventory on a LIFO basis?

Accepted Answer

A) More information is needed. 
B) $10,240 
C) $5,440 
D) $5,760 
A) More information is needed. 
B) $10,240 
C) $5,440 
D) $5,760

Exam 7: Inventories

Cost of goods sold equals $250,000,and average inventory equals $100,000.Days' inventory on hand equals

Why are cost flow assumptions made when accounting for merchandise inventory?

Under the perpetual inventory system,cost of goods sold is not recorded until the end of the accounting period.

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

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

A jeweler probably would use which of the following inventory methods?

Which costing method will produce the same result under both a perpetual and periodic system?

During periods of consistently falling prices,the FIFO inventory method will produce the highest possible amount of net income.

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

In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.

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?

The detailed records of purchases and sales maintained under the perpetual inventory system make which costing method more practical than when a periodic system is used?

Use the following information to calculate ending inventory on (a)a LIFO basis, (b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.

Which costing method can only be used when it is possible to identify units as coming from specific purchases?

An unrealistic picture of the inventory's current value on the balance sheet is an argument against using

A retail store has beginning inventory of $30,000,purchases of $220,000,sales of $200,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

The matching of revenue with inventory costs is best achieved with the FIFO method.

If cost of goods sold is understated by $6,000 for this year,what effect will this have on income before income taxes in the following year?

Use this inventory information for the month of May to answer the following questions. Assuming that a perpetual inventory system is used. -What is ending inventory on a LIFO basis?

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

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

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

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 and Capital Budgeting

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