Question 1

Which of the following is not considered an acceptable inventory cost method according to IFRS?

Accepted Answer

A)  First-in, first-out. 
B)  Last-in, last-out. 
C)  Specific cost identification. 
D)  Weighted average cost.. 
A)  First-in, first-out. 
B)  Last-in, last-out. 
C)  Specific cost identification. 
D)  Weighted average cost.. B

Question 2

Overstating the ending inventory will result in understating the cost of good sold and overstating profits for the period.

Accepted Answer

A) True 
 B)False  True

Question 3

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:

Accepted Answer

A)  Specific cost identification. 
B)  Weighted average cost. 
C)  First-in, first-out. 
D)  Last-in, last-out. 
A)  Specific cost identification. 
B)  Weighted average cost. 
C)  First-in, first-out. 
D)  Last-in, last-out. A

Question 4

The higher a company's inventory turnover rate, the higher its gross profit.

Accepted Answer

A) True 
 B)False

Question 5

Castle TV, Inc. purchased 1,000 monitors on 5 January at a per-unit cost of $185, and another 1,000 units on 31 January at a per-unit cost of $230. In the period from 1 February through year-end, the company sold 1,800 units of this product. At year-end, 200 units remained in inventory.
-Assume that the net realizable value of this monitor at year-end is $210 per unit. Using weighted average cost flow assumption and the lower-of-cost-and-net-realizable-value rule, the ending inventory amounts to:

Accepted Answer

A)  $46,000. 
B)  $42,000. 
C)  $41,500. 
D)  $83,000. 
A)  $46,000. 
B)  $42,000. 
C)  $41,500. 
D)  $83,000.

Question 6

Which of the following results in the cost of goods sold being stated at the most earliest acquisition costs?

Accepted Answer

A)  Weighted average cost. 
B)  Specific cost identification. 
C)  LIFO. 
D)  FIFO. 
A)  Weighted average cost. 
B)  Specific cost identification. 
C)  LIFO. 
D)  FIFO.

Question 7

If the ending inventory is overstated in the current year:

Accepted Answer

A)  Profit will also be overstated in the current year. 
B)  Next year's beginning inventory will also be overstated. 
C)  Next year's profit will be understated. 
D)  All three of the above statements are correct. 
A)  Profit will also be overstated in the current year. 
B)  Next year's beginning inventory will also be overstated. 
C)  Next year's profit will be understated. 
D)  All three of the above statements are correct.

Question 8

The "just-in-time" concept of inventory management is best illustrated by:

Accepted Answer

A)  A clothing manufacturer that sells all of its finished goods before they go out of style. 
B)  A defense contractor that completes its projects within the deadlines set by its customer (the government). 
C)  A pharmaceutical firm that consistently brings new products to market ahead of its competitors. 
D)  A homebuilder who has its suppliers deliver lumber and other building materials to the building site the night before these materials will be used by the company's construction crews. 
A)  A clothing manufacturer that sells all of its finished goods before they go out of style. 
B)  A defense contractor that completes its projects within the deadlines set by its customer (the government). 
C)  A pharmaceutical firm that consistently brings new products to market ahead of its competitors. 
D)  A homebuilder who has its suppliers deliver lumber and other building materials to the building site the night before these materials will be used by the company's construction crews.

Question 9

Garden World uses the retail method to estimate its monthly cost of goods sold and month-end inventory. At 31 May, the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases) totaled $540,000. These goods had been priced for resale at $900,000. Sales in May totaled $480,000. The estimated inventory at 31 May is:

Accepted Answer

A)  $540,000. 
B)  $252,000. 
C)  $420,000. 
D)  $288,000. 
A)  $540,000. 
B)  $252,000. 
C)  $420,000. 
D)  $288,000.

Question 10

The Multi-Tech uses the gross profit method to estimate inventories. Fill in the missing amounts. $$\begin{array} { | l | r | r | } 
\hline \text { Gross Sales } & \text { a } & \
\hline \text { Returns and Allowances } & & 1,500 \
\hline \text { Sales Discounts } & & 3,250 \
\hline \text { Net Sales } & & \$ 300,000 \
\hline & & \
\hline \text { Cost of Goods Sold } & & \
\hline \text { Beginning Inventory } & 60,000 & \
\hline \text { Purchases } & 175,000 & \
\hline \text { Goods Available } & \mathrm { b } & \
\hline \text { Ending Inventory } & \mathrm { c } & \
\hline \text { Cost of Goods Sold } & & \mathrm { d } \
\hline \text { Gross Profit (43\%) } & & \mathrm { e } \
\hline & & \
\hline
\end{array}$$

Accepted Answer

(a) $304,750
(b) $23

Question 11

Harding Systems, Inc. uses a periodic inventory system. The purchases of a particular product during the year are shown below:
$\begin{array}{|l|l|r|r|r|}
\hline&& \text { Ouantity } & \text { Unit Cost }(\$) & \text { Total Cost (\$) } \
\hline \text { 1 Jan } & \text { Beginning inventory } & 1100 & 7.25 & 7,975 \
\hline \text { 7 Feb. } & \text { Purchases } & 1450 & 7.50 & 10,875 \
\hline \text { 10 July } & \text { Purchases } & 1600 & 8.00 & 12,800 \
\hline \text { 25 Nov. } & \text { Purchases } & \underline{1000} & 8.50 & \underline{8,500} \
\hline & \text { Total } & \underline{5150} & & \underline{40,150} \
\hline
\end{array}$

At 31 December the ending inventory consisted of 1,500 units.
-Compute the cost of the ending inventory based on the weighted average cost method of inventory valuation. (Rounded)

Accepted Answer

A)  $10,590. 
B)  $11,694. 
C)  $29,560. 
D)  $28,450. 
A)  $10,590. 
B)  $11,694. 
C)  $29,560. 
D)  $28,450.

Question 12

Inventory

Accepted Answer

A)  Consists of all goods owned and held for sale to customers. 
B)  Is a non-financial asset 
C)  Both A and B 
D)  Neither A nor B 
A)  Consists of all goods owned and held for sale to customers. 
B)  Is a non-financial asset 
C)  Both A and B 
D)  Neither A nor B

Question 13

In a periodic inventory system, overstating the amount of ending inventory will cause an understatement of gross profit in the following year.

Accepted Answer

A) True 
 B)False

Question 14

An advantage of the weighted average cost method of accounting for inventory is that it values the statement of financial position inventory at current replacement costs.

Accepted Answer

A) True 
 B)False

Question 15

Midwest Office Products uses the retail method to estimate ending inventory in its monthly financial statements. The following information is available for the month ended 31 May: 
$\begin{array} { | l | l | l | } 
\hline & \text { Cost } & \text { Retail } \
\hline \text { Sales } & & \$ 300,000 \
\hline \text { Inventory, 1 May } & \$ 137,400 & \$ 198,000 \
\hline \text { Net purchases } & \$ 184,800 & \$ 273,000 \
\hline \text { Goods available for sale } & \$ 322,200 & \$ 471,000 \
\hline
\end{array}$
-Estimate the cost of goods sold for May using the retail method.

Accepted Answer

A)  $137,400. 
B)  $150,400. 
C)  $205,236. 
D)  $319,600. 
A)  $137,400. 
B)  $150,400. 
C)  $205,236. 
D)  $319,600.

Question 16

During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely to result in the lowest taxable income?

Accepted Answer

A)  LIFO. 
B)  FIFO. 
C)  Weighted average cost. 
D)  Specific cost identification. 
A)  LIFO. 
B)  FIFO. 
C)  Weighted average cost. 
D)  Specific cost identification.

Question 17

Inventory flow assumptions
The perpetual inventory records of Handy Hardware show 150 units of a particular product on hand, acquired at the following dates and costs:
 $$\begin{array} { | l | r | r | r | } 
\hline \text { Purchase Date } & \text { Quantity } & \text { Unit Cost (\$) } & \text { Total Cost (\$) } \
\hline \text { 10 May } & 50 & 85 & 4,250 \
\hline \text { 1 June } & \underline { 100 } & 100 & \underline { 10,000 } \
\hline \text { Total on harnd } & 150 & & 14,250 \
\hline
\end{array}$$ On 3 June, Handy sold 120 units of this product.
Instructions: Prepare a journal entry to record the cost of goods sold relating to the sale on 3 June, assuming that Handy uses:
(a) A FIFO flow assumption.
(b) The weighted average cost (or moving average) flow assumption.

Accepted Answer

None

Question 18

Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:

Accepted Answer

A)  $500. 
B)  $550. 
C)  $660. 
D)  The answer will depend upon the inventory flow assumption in use. 
A)  $500. 
B)  $550. 
C)  $660. 
D)  The answer will depend upon the inventory flow assumption in use.

Question 19

Venus Wholesale Co. started carrying a new product in December. Purchases and sales of this product during the month were:
$\begin{array} { | l | l | } 
\hline 20 \mathrm { Dec } & \text { Purchased } 100 \text { units at } \$ 80 \text { per unit } \
\hline 26 \mathrm { Dec } & \text { Sold } 80 \text { units } \
\hline 28 \mathrm { Dec } & \text { Purchased } 100 \text { units at } \$ 90 \text { per unit } \
\hline
\end{array}$

-Assuming the FIFO flow assumption is in use, the perpetual inventory records will indicate an ending inventory of this product of:

Accepted Answer

A)  $9,800. 
B)  $10,600. 
C)  $10,800. 
D)  $8,000. 
A)  $9,800. 
B)  $10,600. 
C)  $10,800. 
D)  $8,000.

Question 20

In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:

Accepted Answer

A)  Receiving deliveries of materials from suppliers just before the materials are used in the production process. 
B)  Completing the manufacturing process just before the deadline established by the customer. 
C)  An automated factory that reduces production time below that of other companies in the industry. 
D)  Selling finished products before they go out of style. 
A)  Receiving deliveries of materials from suppliers just before the materials are used in the production process. 
B)  Completing the manufacturing process just before the deadline established by the customer. 
C)  An automated factory that reduces production time below that of other companies in the industry. 
D)  Selling finished products before they go out of style.

Which of the following is not considered an acceptable inventory cost method according to IFRS?

Overstating the ending inventory will result in understating the cost of good sold and overstating profits for the period.

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:

The higher a company's inventory turnover rate, the higher its gross profit.

Which of the following results in the cost of goods sold being stated at the most earliest acquisition costs?

If the ending inventory is overstated in the current year:

The "just-in-time" concept of inventory management is best illustrated by:

Inventory

In a periodic inventory system, overstating the amount of ending inventory will cause an understatement of gross profit in the following year.

An advantage of the weighted average cost method of accounting for inventory is that it values the statement of financial position inventory at current replacement costs.

During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely to result in the lowest taxable income?

Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:

In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Property, Plant, and Equipment, Intangible Assets and Natural Resources

Liabilities

Shareholders Equity: Capital

Profit and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

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Exam 8: Inventories and the Cost of Goods Sold

Which of the following is not considered an acceptable inventory cost method according to IFRS?

Overstating the ending inventory will result in understating the cost of good sold and overstating profits for the period.

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:

The higher a company's inventory turnover rate, the higher its gross profit.

Which of the following results in the cost of goods sold being stated at the most earliest acquisition costs?

If the ending inventory is overstated in the current year:

The "just-in-time" concept of inventory management is best illustrated by:

Inventory

In a periodic inventory system, overstating the amount of ending inventory will cause an understatement of gross profit in the following year.

An advantage of the weighted average cost method of accounting for inventory is that it values the statement of financial position inventory at current replacement costs.

During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely to result in the lowest taxable income?

Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:

In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Property, Plant, and Equipment, Intangible Assets and Natural Resources

Liabilities

Shareholders Equity: Capital

Profit and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Filters