Question 1

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work in process.

Accepted Answer

A) True 
 B)False

Question 2

What is a LIFO liquidation,and what is its effect on income before income taxes?

Accepted Answer

Under LIFO,ending inventory is assumed t

Question 3

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 4

Use this inventory information for the month of July to answer the following question.   
-Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

Accepted Answer

A) $7,696 
B) $7,736 
C) $3,664 
D) $3,704 
A) $7,696 
B) $7,736 
C) $3,664 
D) $3,704

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

A company has goods available for sale of $500,000 at retail and $350,000 at cost.It also had sales of $420,000 for the period.What is the estimated cost of ending inventory,using the retail method?

Accepted Answer

A) $56,000 
B) $76,000 
C) $80,000 
D) $126,000 
A) $56,000 
B) $76,000 
C) $80,000 
D) $126,000

Question 8

Assume that during the physical count of the inventory of a large corporation last year,$650,000 of merchandise was not counted.The error was not detected,and the financial statements for the current fiscal year were prepared.Identify the individual statements that would be affected and explain the effect the error would have on each of these statements.

Accepted Answer

By understating last year's ending inven

Question 9

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

$11,600 ($

Question 10

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 11

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

Merchandise inventory is classified as a

Question 15

Use this information to answer the following question.   
A periodic inventory system is used.
-Ending inventory under LIFO is

Accepted Answer

A) $452. 
B) $429. 
C) $214. 
D) $237. 
A) $452. 
B) $429. 
C) $214. 
D) $237.

Question 16

In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.

Accepted Answer

A) True 
 B)False

Question 17

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Accepted Answer

A) True 
 B)False

Question 18

The LIFO method tends to create peaks and valleys in the business cycle.

Accepted Answer

A) True 
 B)False

Question 19

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 20

An understatement of ending inventory in one period results in

Accepted Answer

A) an overstatement of the ending inventory of the next period. 
B) an understatement of gross margin of the next period. 
C) an overstatement of gross margin of the next period. 
D) no effect on gross margin of the next period. 
A) an overstatement of the ending inventory of the next period. 
B) an understatement of gross margin of the next period. 
C) an overstatement of gross margin of the next period. 
D) no effect on gross margin of the next period.

Exam 7: Inventories

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work in process.

What is a LIFO liquidation,and what is its effect on income before income taxes?

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

Use this inventory information for the month of July to answer the following question. -Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

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

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

A company has goods available for sale of $500,000 at retail and $350,000 at cost.It also had sales of $420,000 for the period.What is the estimated cost of ending inventory,using the retail method?

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. )

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

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

An understatement of year 1's ending inventory will

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

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. -Ending inventory under LIFO is

In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

The LIFO method tends to create peaks and valleys in the business cycle.

Inventory on hand is considered

An understatement of ending inventory in one period results in

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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