Question 1

Identify and describe the four inventory valuation methods.

Accepted Answer

The specific identification method assigns costs to each inventory item based on specific invoice costs. The weighted average method assigns costs by using the total balance in inventory and dividing it by the number of units to arrive at a cost per unit at each sale. The first-in-first-out method assigns cost to items sold assuming that the first units purchased are the first to be sold. The last-in-first-out method assumes that the last units purchased are the first to be sold.

Question 2

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the LIFO cost of the company's January 31 inventory?

Accepted Answer

The answer of During January, a company that uses a...

Question 3

A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory using the gross profit method is:

Accepted Answer

A)  $30,000 
B)  $21,000 
C)  $20,000 
D)  $18,000 
E)  $27,000 
A)  $30,000 
B)  $21,000 
C)  $20,000 
D)  $18,000 
E)  $27,000 C

Question 4

A company uses the periodic inventory system and had the following activity during the current monthly period.
$\begin{array}{|l|l|r|}
\hline \text { November 1: } & \text { Beginning inventory } & 100 \text { units@\$20 } \
\hline \text { November 5: } & \text { Purchased } & 100 \text { units@\$22 } \
\hline \text { November 8: } & \text { Purchased } & 50 \text { units@\$23 } \
\hline \text { November 16: } & \text { Sold } & 200 \text { units@\$45 } \
\hline \text { November 19: } & \text { Purchased } & 50 \text { units@\$25 } \
\hline
\end{array}$
 Using the weighted-average inventory method, the company's ending inventory would be reported at:

Accepted Answer

A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400 
A)  $2,000 
B)  $2,200 
C)  $2,250 
D)  $2,400 
E)  $4,400

Question 5

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used

Accepted Answer

A) True 
 B)False

Question 6

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, customer-made inventory.

Accepted Answer

Specific i

Question 7

Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?

Accepted Answer

A)  FIFO 
B)  Weighted average 
C)  LIFO 
D)  Specific identification 
E)  First In Still Here 
A)  FIFO 
B)  Weighted average 
C)  LIFO 
D)  Specific identification 
E)  First In Still Here

Question 8

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Accepted Answer

A)  LIFO method 
B)  FIFO method 
C)  Weighted-average cost method 
D)  Specific identification method 
E)  Gross profit method 
A)  LIFO method 
B)  FIFO method 
C)  Weighted-average cost method 
D)  Specific identification method 
E)  Gross profit method

Question 9

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Accepted Answer

A)  $395 
B)  $410 
C)  $450 
D)  $510 
E)  $520 
A)  $395 
B)  $410 
C)  $450 
D)  $510 
E)  $520

Question 10

A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

Accepted Answer

A) True 
 B)False

Question 11

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

Accepted Answer

A)  Weighted-average inventory method 
B)  First-in, first-out method 
C)  Last-in, first-out method 
D)  Specific identification method 
E)  Retail inventory method 
A)  Weighted-average inventory method 
B)  First-in, first-out method 
C)  Last-in, first-out method 
D)  Specific identification method 
E)  Retail inventory method

Question 12

Generally accepted accounting principles require that the inventory of a company be reported at:

Accepted Answer

A)  Market value 
B)  Historical cost 
C)  Lower of cost or market 
D)  Replacement cost 
E)  Retail value 
A)  Market value 
B)  Historical cost 
C)  Lower of cost or market 
D)  Replacement cost 
E)  Retail value

Question 13

The understatement of the ending inventory balance causes:

Accepted Answer

A)  Cost of goods sold to be overstated and net income to be understated 
B)  Cost of goods sold to be overstated and net income to be overstated 
C)  Cost of goods sold to be understated and net income to be understated 
D)  Cost of goods sold to be understated and net income to be overstated 
E)  Cost of goods sold to be overstated and net income to be correct 
A)  Cost of goods sold to be overstated and net income to be understated 
B)  Cost of goods sold to be overstated and net income to be overstated 
C)  Cost of goods sold to be understated and net income to be understated 
D)  Cost of goods sold to be understated and net income to be overstated 
E)  Cost of goods sold to be overstated and net income to be correct

Question 14

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

Accepted Answer

A) True 
 B)False

Question 15

A company had the following purchases during the current year:
$$\begin{array} { | l | l | } 
\hline \text { January: } & 10 \text { units at } \$ 120 \
\hline \text { February: } & 20 \text { units at } \$ 130 \
\hline \text { May: } & 15 \text { units at } \$ 140 \
\hline \text { September: } & 12 \text { units at } \$ 150 \
\hline \text { November: } & 10 \text { units at } \$ 160 \
\hline
\end{array}$$
 On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September and 10 from November. Using the specific identification method, what is the cost of the ending inventory?

Accepted Answer

A)  $3,500 
B)  $3,800 
C)  $3,960 
D)  $3,280 
E)  $3,640 
A)  $3,500 
B)  $3,800 
C)  $3,960 
D)  $3,280 
E)  $3,640

Question 16

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

Accepted Answer

A) True 
 B)False

Question 17

A company made the following purchases during the year:
$$\begin{array} { | l | l | l | l | } 
\hline \text { Jan. 10 } & 15 & \text { units at } & \$ 360 \text { each } \
\hline \text { Mar. 15 } & 25 & \text { units at } & \$ 390 \text { each } \
\hline \text { Apr. } 25 & 10 & \text { units at } & \$ 420 \text { each } \
\hline \text { July } 30 & 20 & \text { units at } & \$ 450 \text { each } \
\hline \text { Oet. } 10 & 15 & \text { units at } & \$ 480 \text { each } \
\hline
\end{array}$$
On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase and 5 from the October 10 purchase. Using specific identification, calculate the cost of the ending inventory.

Accepted Answer

The answer of A company made the following purchases during...

Question 18

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available:
 Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000 
A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000

Question 19

A company made the following merchandise purchases and sales during the month of May:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { May 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 purchased } & 270 & \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 purchased } & 300 & \text { units at } & \$ 22 \text { each } \
\hline \text { May } 25 \text { sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$$
There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

Accepted Answer

Average cost = $16,890/950 uni

Question 20

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Accepted Answer

A) True 
 B)False

Identify and describe the four inventory valuation methods.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the LIFO cost of the company's January 31 inventory?

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, customer-made inventory.

Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

Generally accepted accounting principles require that the inventory of a company be reported at:

The understatement of the ending inventory balance causes:

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters

Exam 5: Inventories and Cost of Sales

Identify and describe the four inventory valuation methods.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the LIFO cost of the company's January 31 inventory?

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, customer-made inventory.

Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

Generally accepted accounting principles require that the inventory of a company be reported at:

The understatement of the ending inventory balance causes:

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters