Question 1

Physical inventory counts:

Accepted Answer

A)  Are not necessary under the perpetual system 
B)  Are necessary to measure and adjust for inventory shrinkage 
C)  Must be taken at least once a month 
D)  Require the use of hand-held portable computers 
E)  Are not necessary under the cost-to benefit constraint 
A)  Are not necessary under the perpetual system 
B)  Are necessary to measure and adjust for inventory shrinkage 
C)  Must be taken at least once a month 
D)  Require the use of hand-held portable computers 
E)  Are not necessary under the cost-to benefit constraint

Question 2

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

Accepted Answer

A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276 
A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276

Question 3

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

Accepted Answer

The answer of The _____________________ is a measure of how...

Question 4

The understatement of the beginning inventory balance causes:

Accepted Answer

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

Question 5

All incidental costs of inventory acquisition and handling whether necessary or not, are assigned to inventory.

Accepted Answer

A) True 
 B)False

Question 6

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.
$$\begin{array} { | l | l | } 
\hline \text { January 1: } & \text { Purchased } 100 \text { units at } \$ 10 \text { per unit } \
\hline \text { February 5: } & \text { Purchased } 60 \text { units at } \$ 12 \text { per unit } \
\hline \text { March 16: } & \text { Sold } 40 \text { Units for } \$ 16 \text { per unit } \
\hline
\end{array}$$
Prepare general journal entries to record the March 16 sale using the FIFO inventory valuation method.

Accepted Answer

The answer of A company that uses a perpetual inventory...

Question 7

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when the goods arrive at their destination.

Accepted Answer

The answer of If the _______________ is responsible for paying...

Question 8

The inventory turnover ratio:

Accepted Answer

A)  Is used to analyze profitability 
B)  Is used to measure solvency 
C)  Measures how quickly a company turns over its merchandise inventory 
D)  Validates the acid-test ratio 
E)  Calculation depends on the company's inventory valuation method 
A)  Is used to analyze profitability 
B)  Is used to measure solvency 
C)  Measures how quickly a company turns over its merchandise inventory 
D)  Validates the acid-test ratio 
E)  Calculation depends on the company's inventory valuation method

Question 9

Given the following information, determine the cost of goods sold at November 30 using the LIFO perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit
November 18: 30 units were purchased at $10.75 per unit
November 30: 20 units were sold at $55 per

Accepted Answer

The answer of Given the following information, determine the cost...

Question 10

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Accepted Answer

A) True 
 B)False

Question 11

Given the following information, determine the cost of ending inventory at December 31 using the FIFO perpetual inventory method.
 December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit
December 15: 20 units were purchased at $10.15 per unit
December 22: 18 units were sold at $35 per unit

Accepted Answer

A)  $51.75 
B)  $83.22 
C)  $41.30 
D)  $94.00 
E)  $50.75 
A)  $51.75 
B)  $83.22 
C)  $41.30 
D)  $94.00 
E)  $50.75

Question 12

Acme-Jones Corporation uses a FIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit.
August 5, 10 units were purchased at $13 per unit
August 15, 12 units were sold at $25 per unit.
August 18, 15 units were purchased at $14 per unit.
What was the amount of the ending inventory for the month of August?

Accepted Answer

A)  $496.00 
B)  $486.00 
C)  $492.57 
D)  $300.00 
E)  $510.00 
A)  $496.00 
B)  $486.00 
C)  $492.57 
D)  $300.00 
E)  $510.00

Question 13

Interim statements:

Accepted Answer

A)  Are required by the Congress 
B)  Are necessary to achieve full disclosure about a business's operations 
C)  Are usually monthly or quarterly statements prepared in between the traditional, annual statement dates 
D)  Require the use of the perpetual method for inventories 
E)  Cannot be prepared if the company follows the conservatism principle 
A)  Are required by the Congress 
B)  Are necessary to achieve full disclosure about a business's operations 
C)  Are usually monthly or quarterly statements prepared in between the traditional, annual statement dates 
D)  Require the use of the perpetual method for inventories 
E)  Cannot be prepared if the company follows the conservatism principle

Question 14

The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost or stolen.

Accepted Answer

The answer of The _________________ method is commonly used to...

Question 15

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Question 16

The inventory valuation method that tends to smooth out erratic changes in costs is:

Accepted Answer

A)  FIFO 
B)  Weighted average 
C)  LIFO 
D)  Specific identification 
E)  WIFO 
A)  FIFO 
B)  Weighted average 
C)  LIFO 
D)  Specific identification 
E)  WIFO

Question 17

How do the consistency principle and the full disclosure principle affect inventory valuation?

Accepted Answer

The consistency principle requires that

Question 18

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

Accepted Answer

A) True 
 B)False

Question 19

Goods in transit are included in a purchaser's inventory:

Accepted Answer

A)  At any time during transit 
B)  When the purchaser is responsible for paying freight charges 
C)  When the supplier is responsible for freight charges 
D)  If the goods are shipped FOB destination 
E)  After the half-way point between the buyer and seller 
A)  At any time during transit 
B)  When the purchaser is responsible for paying freight charges 
C)  When the supplier is responsible for freight charges 
D)  If the goods are shipped FOB destination 
E)  After the half-way point between the buyer and seller

Question 20

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Accepted Answer

A merchandiser's ability to pay its shor

Exam 5: Inventories and Cost of Sales

Physical inventory counts:

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

The understatement of the beginning inventory balance causes:

All incidental costs of inventory acquisition and handling whether necessary or not, are assigned to inventory.

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when the goods arrive at their destination.

The inventory turnover ratio:

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Interim statements:

The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost or stolen.

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

The inventory valuation method that tends to smooth out erratic changes in costs is:

How do the consistency principle and the full disclosure principle affect inventory valuation?

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

Goods in transit are included in a purchaser's inventory:

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

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

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