Question 1

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 B

Question 2

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:   (a) What is the cost-to-retail ratio using the retail method?
(b) What is the estimated cost of the ending inventory?

Accepted Answer

(a)   (b)

Question 3

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.
15,500/4,500 = 3.4

Accepted Answer

A) True 
 B)False  True

Question 4

Upon taking a physical count of its inventory, Damber Corp. determines that $5,500 of goods have become damaged due to a water leak in the warehouse. It is decided that $2,300 of the goods are not sellable and the remainder can be sold at a reduced price of $2,750. The cost incurred to sell the goods will be $800. The damaged goods should be included in inventory at a value of:

Accepted Answer

A) $3,200 
B) $3,550 
C) $5,050 
D) $1,950 
E) $450 
A) $3,200 
B) $3,550 
C) $5,050 
D) $1,950 
E) $450

Question 5

Given the following information, determine the cost of ending inventory at December 31 using the weighted average perpetual inventory method. Assume this is the first month of the company's operations. December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 12: 2 units were sold.

Accepted Answer

A) $17.20 
B) $111.80 
C) $129.00 
D) $94.00 
E) $8.60 
A) $17.20 
B) $111.80 
C) $129.00 
D) $94.00 
E) $8.60

Question 6

The cost of an inventory item includes the costs of expenditures, directly or indirectly, necessary to bring an item to a salable condition and location.

Accepted Answer

A) True 
 B)False

Question 7

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Accepted Answer

A) True 
 B)False

Question 8

Given the following information, determine the cost of goods sold for 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) $281.25 
B) $332.10 
C) $282.15 
D) $290.70 
E) $210.30 
A) $281.25 
B) $332.10 
C) $282.15 
D) $290.70 
E) $210.30

Question 9

Direct Sales, Inc. had cost of goods sold of $420,000, beginning inventory of $67,000, and ending inventory of $81,000. The inventory turnover equals:

Accepted Answer

A) 5.16 
B) 58.2 days 
C) 6.27 
D) 70.4 days 
E) 5.68 
A) 5.16 
B) 58.2 days 
C) 6.27 
D) 70.4 days 
E) 5.68

Question 10

A company had 270 units of inventory at a cost of $154 each on March 1. On March 5, the company purchased 470 units of inventory for $174 each. On March 10, the company purchased 170 units for $214 each. On March 20, 540 units were sold. Given this information, determine the cost of the 540 units sold using the weighted average periodic inventory method. (Do not round your intermediate calculations; round the final answer to nearest dollar amount.)

Accepted Answer

A) $64,949. 
B) $70,380. 
C) $72,380. 
D) $94,791. 
E) $96,791. 
A) $64,949. 
B) $70,380. 
C) $72,380. 
D) $94,791. 
E) $96,791.

Question 11

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

Accepted Answer

The answer of When applying the lower of cost or...

Question 12

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory.

Accepted Answer

A) $10,000 
B) $6,500 
C) $5,500 
D) $5,000 
E) $4,500 
A) $10,000 
B) $6,500 
C) $5,500 
D) $5,000 
E) $4,500

Question 13

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

Accepted Answer

A) True 
 B)False

Question 14

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Accepted Answer

A) True 
 B)False

Question 15

Given the following information, determine the cost of ending inventory at June 30 using the LIFO perpetual inventory method. Assume this is the first month of the company's operations. June 1: 15 units were purchased at $20 per unit.
June 15: 12 units were sold.
June 29: 8 units were purchased for $25 per unit.

Accepted Answer

A) $200 
B) $220 
C) $260 
D) $275 
E) $300 
A) $200 
B) $220 
C) $260 
D) $275 
E) $300

Question 16

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the FIFO cost of the company's January 31 inventory?

Accepted Answer

The answer of During January, a company that uses a...

Question 17

All incidental costs of inventory acquisition must be assigned to the inventory account.

Accepted Answer

A) True 
 B)False

Question 18

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Accepted Answer

A) True 
 B)False

Question 19

Few companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

Accepted Answer

A) True 
 B)False

Question 20

The conservatism constraint requires that:

Accepted Answer

A) When more than one equally likely estimate of the amount to be received or paid in the future exists, the less optimistic amount should be used. 
B) A company use the same accounting methods period after period. 
C) Revenues and expenses be reported in the period in which they are earned or incurred. 
D) All items of a material nature be included in financial statements. 
E) All inventory items be reported at full cost. 
A) When more than one equally likely estimate of the amount to be received or paid in the future exists, the less optimistic amount should be used. 
B) A company use the same accounting methods period after period. 
C) Revenues and expenses be reported in the period in which they are earned or incurred. 
D) All items of a material nature be included in financial statements. 
E) All inventory items be reported at full cost.

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

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: (a) What is the cost-to-retail ratio using the retail method? (b) What is the estimated cost of the ending inventory?

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4. 15,500/4,500 = 3.4

The cost of an inventory item includes the costs of expenditures, directly or indirectly, necessary to bring an item to a salable condition and location.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Direct Sales, Inc. had cost of goods sold of $420,000, beginning inventory of $67,000, and ending inventory of $81,000. The inventory turnover equals:

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory.

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the FIFO cost of the company's January 31 inventory?

All incidental costs of inventory acquisition must be assigned to the inventory account.

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Few companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

The conservatism constraint requires that:

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 5: Reporting and Analyzing Inventories

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

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: (a) What is the cost-to-retail ratio using the retail method? (b) What is the estimated cost of the ending inventory?

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4. 15,500/4,500 = 3.4

The cost of an inventory item includes the costs of expenditures, directly or indirectly, necessary to bring an item to a salable condition and location.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Direct Sales, Inc. had cost of goods sold of $420,000, beginning inventory of $67,000, and ending inventory of $81,000. The inventory turnover equals:

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory.

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases and sales as follows. What was the FIFO cost of the company's January 31 inventory?

All incidental costs of inventory acquisition must be assigned to the inventory account.

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Few companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

The conservatism constraint requires that:

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters