Question 1

In general,when prices are rising,use of the FIFO method will result in a lower tax liability than the other methods.

Accepted Answer

A) True 
 B)False

Question 2

A manufacturer's inventory consists of raw materials,work in process,and finished goods.

Accepted Answer

A) True 
 B)False

Question 3

Emily Holmes owns and operates a large antique shop.She uses the specific identification method to account for transactions that affect inventory.Holmes recently completed a physical inventory of the merchandise in her shop as part of her year-end work.Today,her accountant called to inform her that it would be necessary to adjust the inventory figure shown on the balance sheet,which will increase Holme's tax liability.Holmes argued that the inventory had to be correct,because she counted it twice and matched every item to an invoice.Cite reasons why the accountant would find it necessary to adjust the inventory even if Holme's count is accurate.

Accepted Answer

The inventory could have been adjusted f

Question 4

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

Question 5

When taking a physical inventory under the retail method,it is necessary to know only the quantity of items on hand.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following accounts would not appear as an asset on a manufacturer's balance sheet?

Accepted Answer

A) Finished Goods 
B) Work in Process 
C) Factory Overhead 
D) Raw Materials 
A) Finished Goods 
B) Work in Process 
C) Factory Overhead 
D) Raw Materials

Question 7

Powell's inventory turnover is 4.8.What is Powell's day's inventory on hand?

Accepted Answer

A) 6 days 
B) 13 days 
C) 34 days 
D) 76 days 
A) 6 days 
B) 13 days 
C) 34 days 
D) 76 days

Question 8

Inventory turnover is expressed in terms of

Accepted Answer

A) days. 
B) a percentage. 
C) dollars. 
D) times. 
A) days. 
B) a percentage. 
C) dollars. 
D) times.

Question 9

Specific identification is a very popular inventory method because it is very easy to apply.

Accepted Answer

A) True 
 B)False

Question 10

Use this information to answer the following question.   
A periodic inventory system is used.
-Using the specific identification method and assuming that 50 of the items left are from the October 13 purchase and the rest are from the October 20 purchase,the cost assigned to ending inventory is

Accepted Answer

A) $3,840. 
B) $3,312. 
C) $3,372. 
D) $3,176. 
A) $3,840. 
B) $3,312. 
C) $3,372. 
D) $3,176.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Use this information to answer the following question.   
-Assuming that the specific identification method is used and that ending inventory consists of 15 units from each of the three purchases and five units from the January 1 inventory,cost of goods sold is

Accepted Answer

A) $221. 
B) $418. 
C) $338. 
D) $445. 
A) $221. 
B) $418. 
C) $338. 
D) $445.

Question 13

In a period of rising prices,which inventory method is best to use for tax purposes?

Accepted Answer

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

Question 14

A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost,and ending inventory of $160,000 at retail.What is the estimated cost of ending inventory?

Accepted Answer

A) $128,000 
B) $160,000 
C) $110,000 
D) $88,000 
A) $128,000 
B) $160,000 
C) $110,000 
D) $88,000

Question 15

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Accepted Answer

A) True 
 B)False

Question 16

In practice,why is it often difficult to apply the retail method in determining the cost of ending inventory?

Accepted Answer

The retail method is often made complica

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

The costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Exam 7: Inventories

In general,when prices are rising,use of the FIFO method will result in a lower tax liability than the other methods.

A manufacturer's inventory consists of raw materials,work in process,and finished goods.

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?

When taking a physical inventory under the retail method,it is necessary to know only the quantity of items on hand.

Which of the following accounts would not appear as an asset on a manufacturer's balance sheet?

Powell's inventory turnover is 4.8.What is Powell's day's inventory on hand?

Inventory turnover is expressed in terms of

Specific identification is a very popular inventory method because it is very easy to apply.

Use this information to answer the following question. A periodic inventory system is used. -Using the specific identification method and assuming that 50 of the items left are from the October 13 purchase and the rest are from the October 20 purchase,the cost assigned to ending inventory is

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

Use this information to answer the following question. -Assuming that the specific identification method is used and that ending inventory consists of 15 units from each of the three purchases and five units from the January 1 inventory,cost of goods sold is

In a period of rising prices,which inventory method is best to use for tax purposes?

A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost,and ending inventory of $160,000 at retail.What is the estimated cost of ending inventory?

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

In practice,why is it often difficult to apply the retail method in determining the cost of ending inventory?

All of the following are inventory costing methods except

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

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

The costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.

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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