Question 1

In a perpetual inventory system,an inventory cost flow assumption is used primarily for determining which costs to use in:

Accepted Answer

A) Recording purchases of inventory. 
B) Recording the cost of goods sold. 
C) Recording sales revenue. 
D) Forecasts of future operating results. 
A) Recording purchases of inventory. 
B) Recording the cost of goods sold. 
C) Recording sales revenue. 
D) Forecasts of future operating results.

Question 2

When the periodic inventory system is used,determining the cost of the year-end inventory involves two distinct steps: counting the units and pricing the units.

Accepted Answer

A) True 
 B)False

Question 3

Garden World uses the retail method to estimate its monthly cost of goods sold and month-end inventory.At May 31,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 May 31 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 4

Which of the following types of businesses would you expect to have the highest inventory turnover?

Accepted Answer

A) An antique shop. 
B) An electronics store. 
C) A dairy store. 
D) A boat manufacturer. 
A) An antique shop. 
B) An electronics store. 
C) A dairy store. 
D) A boat manufacturer.

Question 5

An advocate of just-in-time inventory system would say:

Accepted Answer

A) Maintain a large inventory selection for customers. 
B) Leave extra time in order to make inventory deadlines. 
C) Maintain a small inventory supply. 
D) LIFO is preferred over FIFO. 
A) Maintain a large inventory selection for customers. 
B) Leave extra time in order to make inventory deadlines. 
C) Maintain a small inventory supply. 
D) LIFO is preferred over FIFO.

Question 6

Kent Company has used the same inventory method for many years.This is an example of which principle?

Accepted Answer

A) Matching. 
B) Realization. 
C) Cost. 
D) Consistency. 
A) Matching. 
B) Realization. 
C) Cost. 
D) Consistency.

Question 7

Inventory:

Accepted Answer

A) Consists of all goods owned and held for sale to customers. 
B) Is a non-financial asset. 
C) Both consists of all goods owned and held for sale to customers and is a non-financial asset. 
D) Both consists of all goods owned and held for sale to customers and is a financial asset. 
A) Consists of all goods owned and held for sale to customers. 
B) Is a non-financial asset. 
C) Both consists of all goods owned and held for sale to customers and is a non-financial asset. 
D) Both consists of all goods owned and held for sale to customers and is a financial asset.

Question 8

Retail method
Global Office Supply uses the retail method to estimate ending inventory in its monthly financial statements.The following information is available for the month ended July 31:   Using the retail method:

Accepted Answer

The answer of Retail method
Global Office Supply uses the retail...

Question 9

The gross profit method of valuing inventory:

Accepted Answer

A) Is the most accurate of the commonly used methods. 
B) Is a satisfactory substitute for taking a physical inventory for annual financial statements. 
C) Assumes that the gross profit rate will remain the same for the current year as it has in the past year or so. 
D) Is not an acceptable method under GAAP. 
A) Is the most accurate of the commonly used methods. 
B) Is a satisfactory substitute for taking a physical inventory for annual financial statements. 
C) Assumes that the gross profit rate will remain the same for the current year as it has in the past year or so. 
D) Is not an acceptable method under GAAP.

Question 10

In the year following an overstatement of ending inventory,the year-end owners' equity will be correctly stated.

Accepted Answer

A) True 
 B)False

Question 11

Because of the consistency principle,inventory should never be written down below cost.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

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

Which of the following statements is not a characteristic of the LIFO method of pricing inventory?

Accepted Answer

A) During a period of rising prices,LIFO tends to minimize the amounts of income taxes owed. 
B) The cost of goods sold is measured in relatively current costs. 
C) Inventory is valued at relatively current costs. 
D) During a period of falling prices,LIFO tends to maximize the amounts of income taxes owed. 
A) During a period of rising prices,LIFO tends to minimize the amounts of income taxes owed. 
B) The cost of goods sold is measured in relatively current costs. 
C) Inventory is valued at relatively current costs. 
D) During a period of falling prices,LIFO tends to maximize the amounts of income taxes owed.

Question 15

In a perpetual inventory system,the flow of inventory cost is:

Accepted Answer

A) First through the income statement,then through the balance sheet. 
B) First through the balance sheet,then through the income statement. 
C) Only through the balance sheet and not the income statement. 
D) Only through the income statement and not the balance sheet. 
A) First through the income statement,then through the balance sheet. 
B) First through the balance sheet,then through the income statement. 
C) Only through the balance sheet and not the income statement. 
D) Only through the income statement and not the balance sheet.

Question 16

Which of the four inventory approaches transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?

Accepted Answer

A) LIFO. 
B) FIFO. 
C) Average. 
D) Specific identification. 
A) LIFO. 
B) FIFO. 
C) Average. 
D) Specific identification.

Question 17

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

Accepted Answer

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

Question 18

During the month of January,Sundown Corporation had sales of $300,000 and a cost of goods available for sale of $600,000.The company consistently earns a gross profit rate of 45%.Using the gross profit method,the estimated inventory at January 31 amounts to:

Accepted Answer

A) $135,000. 
B) $435,000. 
C) $165,000. 
D) $465,000. 
A) $135,000. 
B) $435,000. 
C) $165,000. 
D) $465,000.

Question 19

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 federal 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 federal 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 20

Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

Accepted Answer

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

Exam 8: Inventories and the Cost of Goods Sold

In a perpetual inventory system,an inventory cost flow assumption is used primarily for determining which costs to use in:

When the periodic inventory system is used,determining the cost of the year-end inventory involves two distinct steps: counting the units and pricing the units.

Which of the following types of businesses would you expect to have the highest inventory turnover?

An advocate of just-in-time inventory system would say:

Kent Company has used the same inventory method for many years.This is an example of which principle?

Inventory:

Retail method Global Office Supply uses the retail method to estimate ending inventory in its monthly financial statements.The following information is available for the month ended July 31: Using the retail method:

The gross profit method of valuing inventory:

In the year following an overstatement of ending inventory,the year-end owners' equity will be correctly stated.

Because of the consistency principle,inventory should never be written down below cost.

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

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

Which of the following statements is not a characteristic of the LIFO method of pricing inventory?

In a perpetual inventory system,the flow of inventory cost is:

Which of the four inventory approaches transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?

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

During the month of January,Sundown Corporation had sales of $300,000 and a cost of goods available for sale of $600,000.The company consistently earns a gross profit rate of 45%.Using the gross profit method,the estimated inventory at January 31 amounts to:

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

Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

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

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values

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