Question 1

In a periodic inventory system,recording a sale on account involves debiting which of the following accounts?

Accepted Answer

A) Only Accounts Receivable. 
B) Accounts Receivable and Inventory. 
C) Accounts Receivable and Cost of Goods Sold. 
D) Accounts Receivable,Cost of Goods Sold,and Inventory. 
A) Only Accounts Receivable. 
B) Accounts Receivable and Inventory. 
C) Accounts Receivable and Cost of Goods Sold. 
D) Accounts Receivable,Cost of Goods Sold,and Inventory.

Question 2

The write-down of inventory:

Accepted Answer

A) Only affects the balance sheet and not the income statement. 
B) Only affects the income statement and not the balance sheet. 
C) Affects both the income statement and the balance sheet. 
D) Affects neither the income statement nor the balance sheet. 
A) Only affects the balance sheet and not the income statement. 
B) Only affects the income statement and not the balance sheet. 
C) Affects both the income statement and the balance sheet. 
D) Affects neither the income statement nor the balance sheet.

Question 3

Gross profit method
Horizon Company had sales of $1,750,000 during the current period and a gross profit rate of 40%.The company's cost of goods available for sale during the period was $1,400,000.The company's ending inventory must have amounted to $_______________.

Accepted Answer

Horizon's ending inv

Question 4

For the last several years Conway Corporation has operated with a gross profit rate of 40%.On January 1 of the current year,the company had on hand inventory with a cost of $600,000.Purchases of merchandise during January amounted to $150,000,and sales for the month were $360,000.Using the gross profit method,what is the estimated inventory at January 31?

Accepted Answer

A) $144,000. 
B) $216,000. 
C) $360,000. 
D) $534,000. 
A) $144,000. 
B) $216,000. 
C) $360,000. 
D) $534,000.

Question 5

The primary advantage of a just-in-time inventory system is:

Accepted Answer

A) The amount of money tied up in inventory is minimized. 
B) Customers are afforded a wider selection of merchandise available for immediate delivery. 
C) The company is able to use the specific identification method of inventory pricing. 
D) The risks of losing sales opportunities or of having to shut down manufacturing operations because of inventory shortages are minimized. 
A) The amount of money tied up in inventory is minimized. 
B) Customers are afforded a wider selection of merchandise available for immediate delivery. 
C) The company is able to use the specific identification method of inventory pricing. 
D) The risks of losing sales opportunities or of having to shut down manufacturing operations because of inventory shortages are minimized.

Question 6

Which of the following methods of measuring the cost of goods sold most closely parallels the actual physical flow of the merchandise?

Accepted Answer

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

Question 7

Gross profit method
The Walnut Shop is a furniture company that uses a periodic inventory system.On February 8,2015,a fire destroyed all the furniture on display in the company's main showroom.Fortunately,$35,000 of the company's inventory was located in a separate warehouse and was not damaged by the fire.
Walnut Shop now is attempting to determine the cost of the merchandise destroyed in the fire from the following information:   Compute the following (show computations):

Accepted Answer

The answer of Gross profit method
The Walnut Shop is a...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A physical inventory is usually taken during a period of high activity.

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

The cost flow assumption selected by a company must correspond to the actual physical movement of the company's merchandise.

Accepted Answer

A) True 
 B)False

Question 12

Inventory turnover
In the spaces provided,indicate the likely effect of each of the following events or strategies upon the inventory turnover rate in the coming period.Use the following code letters: I for Increase,D for Decrease,and NE for No Effect.
____ (a)Reduced sales prices in order to increase sales volume.
______ (b)Ordered substantially larger amounts of merchandise in order to receive a volume discount from the supplier.
______ (c)Switched from the FIFO flow assumptions to LIFO during a period of rising prices.
______ (d)Placed sales clerks on commission,rather than a fixed monthly salary.
______ (e)Decided to offer customers a wider selection of merchandise available for immediate delivery.

Accepted Answer

The answer of Inventory turnover
In the spaces provided,indicate the likely...

Question 13

The logic behind the lower-of-cost-or-market rule is:

Accepted Answer

A) Inventory gradually becomes obsolete. 
B) Inventory that is unsalable should be written down to zero (or its scrap value). 
C) An asset is not worth more than it would cost the owner to replace it. 
D) Inventory that is unsalable should be written down to its replacement cost. 
A) Inventory gradually becomes obsolete. 
B) Inventory that is unsalable should be written down to zero (or its scrap value). 
C) An asset is not worth more than it would cost the owner to replace it. 
D) Inventory that is unsalable should be written down to its replacement cost.

Question 14

Periodic inventory systems
Tres Chic uses a periodic inventory system.The beginning inventory of a particular product,and the purchases during the current year,were as follows:   At December 31,the ending inventory of this product consisted of 850 units.
Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation (Rounded):

Accepted Answer

The answer of Periodic inventory systems
Tres Chic uses a periodic...

Question 15

During periods of inflation,the FIFO cost flow assumption will yield a higher cost of goods sold than LIFO.

Accepted Answer

A) True 
 B)False

Question 16

Inventory flow assumptions
Briefly discuss the factors management should consider in deciding:
(a)Whether to use specific identification or a cost flow assumption in measuring the cost of goods sold.
(b)Whether to use FIFO or LIFO.(Assume a long-run trend of slowly rising prices.)

Accepted Answer

(a)In large part,the decision of whether

Question 17

An advantage to the LIFO method of accounting for inventory is that it values the cost of goods sold at current replacement costs.

Accepted Answer

A) True 
 B)False

Question 18

With respect to the valuation of inventory and measurement of the cost of goods sold,the principle of consistency means that the same method should be applied:

Accepted Answer

A) In successive accounting periods. 
B) By all companies in a given industry. 
C) To all products in the inventory. 
D) In financial statements and income tax returns. 
A) In successive accounting periods. 
B) By all companies in a given industry. 
C) To all products in the inventory. 
D) In financial statements and income tax returns.

Question 19

The principle of consistency prohibits a company from changing an inventory valuation method once one is selected.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following will cause net income to be overstated for the following year?

Accepted Answer

A) Current year's ending inventory is understated. 
B) Current year's ending inventory is overstated. 
C) Next year's beginning inventory is overstated. 
D) Next year's ending inventory is understated. 
A) Current year's ending inventory is understated. 
B) Current year's ending inventory is overstated. 
C) Next year's beginning inventory is overstated. 
D) Next year's ending inventory is understated.

Exam 8: Inventories and the Cost of Goods Sold

In a periodic inventory system,recording a sale on account involves debiting which of the following accounts?

The write-down of inventory:

Gross profit method Horizon Company had sales of $1,750,000 during the current period and a gross profit rate of 40%.The company's cost of goods available for sale during the period was $1,400,000.The company's ending inventory must have amounted to $_______________.

The primary advantage of a just-in-time inventory system is:

Which of the following methods of measuring the cost of goods sold most closely parallels the actual physical flow of the merchandise?

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

A physical inventory is usually taken during a period of high activity.

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

The cost flow assumption selected by a company must correspond to the actual physical movement of the company's merchandise.

The logic behind the lower-of-cost-or-market rule is:

During periods of inflation,the FIFO cost flow assumption will yield a higher cost of goods sold than LIFO.

Inventory flow assumptions Briefly discuss the factors management should consider in deciding: (a)Whether to use specific identification or a cost flow assumption in measuring the cost of goods sold. (b)Whether to use FIFO or LIFO.(Assume a long-run trend of slowly rising prices.)

An advantage to the LIFO method of accounting for inventory is that it values the cost of goods sold at current replacement costs.

With respect to the valuation of inventory and measurement of the cost of goods sold,the principle of consistency means that the same method should be applied:

The principle of consistency prohibits a company from changing an inventory valuation method once one is selected.

Which of the following will cause net income to be overstated for the following year?

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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