Question 1

Under the Lower of Cost and NRV rules, inventory write-downs are irreversible.

Accepted Answer

A) True 
 B)False

Question 2

The FIFO retail inventory method requires that the inventory valuation be determined first on a(n):

Accepted Answer

A)  Average cost basis. 
B)  NRV basis. 
C)  FIFO, lower-of-cost-or-market basis. 
D)  FIFO basis. 
E)  None of these answers are correct. 
A)  Average cost basis. 
B)  NRV basis. 
C)  FIFO, lower-of-cost-or-market basis. 
D)  FIFO basis. 
E)  None of these answers are correct.

Question 3

When a perpetual inventory system is used:

Accepted Answer

A)  Cost of goods sold is not a residual amount and its amount essentially is verifiable in the inventory records. 
B)  Goods out on consignment are removed from inventory. 
C)  There is apt to be less inventory control than when a periodic inventory system is used. 
D)  One journal entry is made at the time merchandise is sold. 
A)  Cost of goods sold is not a residual amount and its amount essentially is verifiable in the inventory records. 
B)  Goods out on consignment are removed from inventory. 
C)  There is apt to be less inventory control than when a periodic inventory system is used. 
D)  One journal entry is made at the time merchandise is sold.

Question 4

When using the moving average method of inventory flow, it is necessary to re-compute a new average each time units are issued from the inventory.

Accepted Answer

A) True 
 B)False

Question 5

Borrowing costs on qualifying assets which require a substantial amount to construct and prepare for resale must be capitalized under IFRS.

Accepted Answer

A) True 
 B)False

Question 6

A company using the periodic inventory method correctly recorded a December 29 purchase of merchandise, but the merchandise was not included in the physical inventory count on December 31 (end of the accounting period). The error caused an:

Accepted Answer

A)  understatement of inventory, purchases, and accounts payable. 
B)  overstatement of both income and assets by the same amount. 
C)  understatement of both income and assets by the same amount. 
D)  overstatement of inventory, purchases, and accounts payable. 
A)  understatement of inventory, purchases, and accounts payable. 
B)  overstatement of both income and assets by the same amount. 
C)  understatement of both income and assets by the same amount. 
D)  overstatement of inventory, purchases, and accounts payable.

Question 7

A manufacturing company recorded the following data pertaining to raw material X:$\begin{array} { | l | l | l | } 
\hline & \text { Units Received } & \text { Cost } \
\hline 1 / 1 / 2001 \text { Inventory } & 400 & \$ 1.00 \
\hline 1 / 8 / 2001 \text { Purchase } & 600 & \$ 1.10 \
\hline 1 / 12 / 2001 \text { Issue } & 800 & \$ 2.00 \
\hline
\end{array}$
The weighted average unit cost of raw material X at January 12, 2001 for use in costing is:

Accepted Answer

A)  $1.00 
B)  $1.05 
C)  $1.06 
D)  $1.10 
A)  $1.00 
B)  $1.05 
C)  $1.06 
D)  $1.10

Question 8

Using the direct reduction method of reporting a holding loss for lower-of-cost or NRV valuation of inventory, any holding loss is merged into the cost of goods sold amount.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a true statement concerning a perpetual inventory system:

Accepted Answer

A)  Physical inventory is counted from time to time primarily to verify the inventory records. 
B)  Detailed subsidiary records are maintained and the inventory account is a control account. 
C)  Information concerning the physical quantity of goods on hand is available from the accounting records at any time. 
D)  Shrinkage cannot be measured directly. 
A)  Physical inventory is counted from time to time primarily to verify the inventory records. 
B)  Detailed subsidiary records are maintained and the inventory account is a control account. 
C)  Information concerning the physical quantity of goods on hand is available from the accounting records at any time. 
D)  Shrinkage cannot be measured directly.

Question 10

A corporation's records reflected the following with respect to one of the items that it regularly sells: $\begin{array} { | l | l | l | l | } 
\hline & & \text { Units Cost } & \text { Total } \
\hline \text { July 1 } & \text { Beginning inventory } & 400 & \$ 12,000 \
\hline \text { July 10 } & \text { Purchases } & 800 & 26,400 \
\hline \text { July 15 } & \text { Sales (at } \$ 50 \text { each) } & 600 & \
\hline \text { July 20 } & \text { Purchases } & 400 & 14,000 \
\hline \text { July 31 } & \text { Sales (at } \$ 60 \text { each) } & 400 & \
\hline
\end{array}$
 Complete the following schedule, assuming a periodic inventory system is used: $\begin{array} { | l | l | l | } 
\hline & \text { FIFO } & \text { Weighted Average } \
\hline \text { Balance Sheet As of July 31 } & & \
\hline \text { End. Inv. } & & \
\hline \text { Income Statement } & & \
\hline \text { Sales } & & \
\hline \text { Cost of Goods Sold } & & \
\hline \text { Gross Margin } & & \
\hline
\end{array}$

Accepted Answer

*Costed at the end of the period. @#IMG-DLM&
(a) (

Question 11

To compute inventory on a lower-of-cost or market basis using the retail inventory method:

Accepted Answer

A)  Markups are excluded in the computation of the cost ratio. 
B)  Markups and markdowns are included in the computation of the cost ratio. 
C)  Markups and markdowns are excluded in the computation of the cost ratio. 
D)  Markdowns are excluded in the computation of the cost ratio. 
A)  Markups are excluded in the computation of the cost ratio. 
B)  Markups and markdowns are included in the computation of the cost ratio. 
C)  Markups and markdowns are excluded in the computation of the cost ratio. 
D)  Markdowns are excluded in the computation of the cost ratio.

Question 12

The following tabulation gives data pertinent to the inventory valuation of five different items of raw material. For each item, compute a) unit net realizable value, b)"market," and c) unit inventory value under lower-of-cost-or-market. Normal profit in each instance is 10 percent of selling price.$\begin{array}{|l|l|l|l|l|}
\hline & {\text { Items }} \
\hline & \text { A } & \text { B } & \text { C } & \text { D } \
\hline \text { Cost } & \$ 13 & \$ 76 & \$ 16 & \$ 35 \
\hline \text { Selling price } & 20 & 80 & 17 & 50 \
\hline \text { Replacement cost } & 14 & 70 & 15 & 32 \
\hline \text { Estimated cost to complete and sell } & 4 & 6 & 3 & 10 \
\hline
\end{array}$

$\begin{array}{|l|l|l|l|l|}
\hline \text { (a) Unit realizable value (net) } &&&& \
\hline \text { (b) Market } & \
\hline \text { (c) Unit inventory value under lower-of-cost-or-market } & \\hline
\end{array}$

Accepted Answer

The answer of The following tabulation gives data pertinent to...

Question 13

The same inventory costing method must be used on the income tax return, on the income statement, and in the ledger accounts of the company.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would not be included in the merchandise inventory amount reported on X Company's balance sheet?

Accepted Answer

A)  Items out on consignment to another company 
B)  Items purchased from a supplier and en route directly to a customer of X Company; the term is FOB destination; invoice received but not yet paid 
C)  Items shipped today FOB shipping point, invoice has been mailed to the customer 
D)  Items in the receiving department of X Company, returned by the customer, invoice has been mailed 
A)  Items out on consignment to another company 
B)  Items purchased from a supplier and en route directly to a customer of X Company; the term is FOB destination; invoice received but not yet paid 
C)  Items shipped today FOB shipping point, invoice has been mailed to the customer 
D)  Items in the receiving department of X Company, returned by the customer, invoice has been mailed

Question 15

Seaton's of Canada Ltd. uses the retail inventory method to approximate average cost at lower-of-cost-or-market. The following information is available for the month of April 2008 (in 000's): $\begin{array} { | l | l | l | } 
\hline & \text { Retail } & \text { Cost } \
\hline \text { Cost of goods available for sale } & \$ 4,500 & \$ 3,600 \
\hline \text { Net mark-ups } & & \$ 500 \
\hline \text { Net markdowns } & & \$ 200 \
\hline \text { Sales } & & \$ 3,400 \
\hline
\end{array}$
The inventory approximation at April 30, 2008, was:

Accepted Answer

A)  $1,008 
B)  $1,050 
C)  $1,120 
D)  $1,152 
A)  $1,008 
B)  $1,050 
C)  $1,120 
D)  $1,152

Question 16

Items on Harris's ledger for inventory that are purchased and correctly debited to 2013 purchases, but improperly included in 2013 ending inventory would have overstated both asset and pre-tax income of 2013.

Accepted Answer

A) True 
 B)False

Question 17

A company completed the following transactions in the order given in its first year of operations: $\begin{array} { | l | l | l | } 
\hline \text { Transaction } & \text { Units } & \text { Unit Costs } \
\hline \text { Purchase } & 300 & \$ 4.00 \
\hline \text { Purchase } & 200 & 4.20 \
\hline \text { Sales (@ \$8.00) } & 280 & \
\hline \text { Purchase } & 400 & 4.40 \
\hline \text { Sales (@ \$8.00) } & 360 & \
\hline
\end{array}$
 Using the weighted-average inventory cost method (rounding each calculation to the nearest cent) the gross margin would be:

Accepted Answer

A)  $2,463.78 
B)  $2,422.84 
C)  $2,433.20 
D)  $2,376.00 
A)  $2,463.78 
B)  $2,422.84 
C)  $2,433.20 
D)  $2,376.00

Question 18

A company has just completed its second year of operations. It will use the FIFO, LCM retail method for external reporting. The following information is available $\begin{array} { | l | l | l | } 
\hline & \text { Cost } & \text { Retail } \
\hline \text { Beginning inventory, January 1, 2002 } & \$ 7,200 & \$ 12,000 \
\hline \text { Sales revenues } & 35,200 & \
\hline \text { Purchases } & 31,200 & 48,000 \
\hline \text { Net markdowns } & 12,800 & \
\hline \text { Net mark-ups } & 4,000 & \
\hline
\end{array}$
 The 2002 cost of goods sold will be:

Accepted Answer

A)  $25,787 
B)  $27,663 
C)  $25,600 
D)  $28,333 
A)  $25,787 
B)  $27,663 
C)  $25,600 
D)  $28,333

Question 19

A company's 2013 income statement reported the following for the year ended December 31, 2013: $\begin{array} { | l | l | } 
\hline \text { Sales revenue } & \$ 453 \
\hline \text { Sales returns } & 6 \
\hline \text { Cost of goods sold } & 270 \
\hline \text { Expenses } & 126 \
\hline \text { Net income } & \$ 51 \
\hline
\end{array}$
Based only on the above data, the (a) average markup on cost, and (b) the average markup on selling price were: $\begin{array}{|l|l|l|}
\hline &\text { (a) Mark-up on a cost } & \text { (b) Mark-up on selling price } \
\hline 1&13.60 \% & 7.40 \% \
\hline 2&59.60 \% & 39.70 \% \\hline 3&60.00 \% & 40.00 \% \
\hline 4&65.56 \% & 39.60 \% \
\hline
\end{array}$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4

Question 20

The weighted-average cost inventory cost flow method can be described by all of the following except:

Accepted Answer

A)  Is generally used with a perpetual inventory system. 
B)  Is not subject to income manipulation. 
C)  Assigns the same unit cost to cost of goods sold and to ending inventory. 
D)  Involves assignment of the total cost of goods available for sale to cost of goods sold and ending inventory only at the end of the period. 
A)  Is generally used with a perpetual inventory system. 
B)  Is not subject to income manipulation. 
C)  Assigns the same unit cost to cost of goods sold and to ending inventory. 
D)  Involves assignment of the total cost of goods available for sale to cost of goods sold and ending inventory only at the end of the period.

Under the Lower of Cost and NRV rules, inventory write-downs are irreversible.

The FIFO retail inventory method requires that the inventory valuation be determined first on a(n):

When a perpetual inventory system is used:

When using the moving average method of inventory flow, it is necessary to re-compute a new average each time units are issued from the inventory.

Borrowing costs on qualifying assets which require a substantial amount to construct and prepare for resale must be capitalized under IFRS.

A company using the periodic inventory method correctly recorded a December 29 purchase of merchandise, but the merchandise was not included in the physical inventory count on December 31 (end of the accounting period). The error caused an:

A manufacturing company recorded the following data pertaining to raw material X: Units Received Cost 1/1/2001 Inventory 400 \ 1.00 1/8/2001 Purchase 600 \ 1.10 1/12/2001 Issue 800 \ 2.00 The weighted average unit cost of raw material X at January 12, 2001 for use in costing is:

Using the direct reduction method of reporting a holding loss for lower-of-cost or NRV valuation of inventory, any holding loss is merged into the cost of goods sold amount.

Which of the following is not a true statement concerning a perpetual inventory system:

To compute inventory on a lower-of-cost or market basis using the retail inventory method:

The same inventory costing method must be used on the income tax return, on the income statement, and in the ledger accounts of the company.

Which of the following would not be included in the merchandise inventory amount reported on X Company's balance sheet?

Items on Harris's ledger for inventory that are purchased and correctly debited to 2013 purchases, but improperly included in 2013 ending inventory would have overstated both asset and pre-tax income of 2013.

The weighted-average cost inventory cost flow method can be described by all of the following except:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 8: Cost-Based Inventories and Cost of Sales

Under the Lower of Cost and NRV rules, inventory write-downs are irreversible.

The FIFO retail inventory method requires that the inventory valuation be determined first on a(n):

When a perpetual inventory system is used:

When using the moving average method of inventory flow, it is necessary to re-compute a new average each time units are issued from the inventory.

Borrowing costs on qualifying assets which require a substantial amount to construct and prepare for resale must be capitalized under IFRS.

A company using the periodic inventory method correctly recorded a December 29 purchase of merchandise, but the merchandise was not included in the physical inventory count on December 31 (end of the accounting period). The error caused an:

A manufacturing company recorded the following data pertaining to raw material X: Units Received Cost 1/1/2001 Inventory 400 \ 1.00 1/8/2001 Purchase 600 \ 1.10 1/12/2001 Issue 800 \ 2.00 The weighted average unit cost of raw material X at January 12, 2001 for use in costing is:

Using the direct reduction method of reporting a holding loss for lower-of-cost or NRV valuation of inventory, any holding loss is merged into the cost of goods sold amount.

Which of the following is not a true statement concerning a perpetual inventory system:

To compute inventory on a lower-of-cost or market basis using the retail inventory method:

The same inventory costing method must be used on the income tax return, on the income statement, and in the ledger accounts of the company.

Which of the following would not be included in the merchandise inventory amount reported on X Company's balance sheet?

Items on Harris's ledger for inventory that are purchased and correctly debited to 2013 purchases, but improperly included in 2013 ending inventory would have overstated both asset and pre-tax income of 2013.

The weighted-average cost inventory cost flow method can be described by all of the following except:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters