Question 1

The reliability of the gross profit method depends on an accurate and stable estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 2

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 5, 8 units were sold for $55 each. Using the weighted average perpetual inventory method, what was the value of the inventory on November 30?

Accepted Answer

A) $304.00 
B) $404.00 
C) $299.33 
D) $280.00 
E) $276.00 
A) $304.00 
B) $404.00 
C) $299.33 
D) $280.00 
E) $276.00

Question 3

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.
45,000 × .6 = 27,000

Accepted Answer

A) True 
 B)False

Question 4

Days' sales in inventory:

Accepted Answer

A) Is calculated by dividing cost of goods sold by ending inventory. 
B) Focuses on average inventory rather than ending inventory. 
C) Is used to measure solvency. 
D) Measures the adequacy of inventory to meet sales demand. 
E) Is a substitute for the acid-test ratio. 
A) Is calculated by dividing cost of goods sold by ending inventory. 
B) Focuses on average inventory rather than ending inventory. 
C) Is used to measure solvency. 
D) Measures the adequacy of inventory to meet sales demand. 
E) Is a substitute for the acid-test ratio.

Question 5

A company made the following merchandise purchases and sales during the month of May:   There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

Accepted Answer

@#IMG-DLM& Average cost = $16,890/950 un

Question 6

The matching principle requires that the inventory valuation method used match the physical flow of inventory.

Accepted Answer

A) True 
 B)False

Question 7

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

Accepted Answer

A) True 
 B)False

Question 8

A company had 60 units of inventory at a cost of $15 each on January 1. On March 25, the company purchased 40 units for $17 each. On July 10, the company purchased 20 units for $18 each. Given this information, determine the weighted average unit cost under the periodic inventory method. (Do not round your intermediate calculations; round the final answer to nearest whole cent.)

Accepted Answer

A) $16.67 
B) $17.00 
C) $18.00 
D) $16.17 
E) $15.00 
A) $16.67 
B) $17.00 
C) $18.00 
D) $16.17 
E) $15.00

Question 9

The understatement of the beginning inventory balance causes:

Accepted Answer

A) Cost of goods sold to be understated and net income to be understated. 
B) Cost of goods sold to be overstated and net income to be understated. 
C) Cost of goods sold to be overstated and net income to be overstated. 
D) Cost of goods sold to be understated and net income to be overstated. 
E) Cost of goods sold to be overstated and net income to be correct. 
A) Cost of goods sold to be understated and net income to be understated. 
B) Cost of goods sold to be overstated and net income to be understated. 
C) Cost of goods sold to be overstated and net income to be overstated. 
D) Cost of goods sold to be understated and net income to be overstated. 
E) Cost of goods sold to be overstated and net income to be correct.

Question 10

In applying lower of cost or market to inventory valuation, market is defined as:

Accepted Answer

A) Historical cost 
B) Current replacement cost 
C) Current sales price 
D) FIFO 
E) LIFO 
A) Historical cost 
B) Current replacement cost 
C) Current sales price 
D) FIFO 
E) LIFO

Question 11

Given the following information, determine the cost of ending inventory at November 30 using the FIFO perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit.
November 18: 30 units were purchased at $10.75 per unit.
November 30: 20 units were sold at $55 per unit.

Accepted Answer

28 units ×

Question 12

Enter the identifier for the correct inventory valuation method for each situation described below. In all cases, assume a period of rising prices.

Accepted Answer

a. SI; b.

Question 13

Given the following events, what is the per-unit value of ending inventory on November 30 if this company uses a weighted average perpetual inventory system? November 1: 5 units were purchased at $6 per unit.
November 12: 10 units were purchased at $7.50 per unit.
November 14: 7 units were sold for $14 per unit.
November 24: 12 units were purchased at $10 per unit.

Accepted Answer

A) $6.00 
B) $7.00 
C) $8.80 
D) $13.00 
E) $21.80 
A) $6.00 
B) $7.00 
C) $8.80 
D) $13.00 
E) $21.80

Question 14

The _____________________ is a measure of how quickly a merchandiser sells its inventory during a period.

Accepted Answer

The answer of The _____________________ is a measure of how...

Question 15

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, ending inventory at retail can be multiplied by the ratio to estimate ending inventory at cost.

Accepted Answer

A) True 
 B)False

Question 16

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Accepted Answer

A) $120 
B) $124 
C) $128 
D) $130 
E) $140 
A) $120 
B) $124 
C) $128 
D) $130 
E) $140

Question 17

Damaged and obsolete goods:

Accepted Answer

A) Are never included in inventory. 
B) Are included in inventory at their full cost. 
C) Are included in inventory at their net realizable value. 
D) Should be disposed of immediately. 
E) Are assigned a value of zero. 
A) Are never included in inventory. 
B) Are included in inventory at their full cost. 
C) Are included in inventory at their net realizable value. 
D) Should be disposed of immediately. 
E) Are assigned a value of zero.

Question 18

A merchandiser that uses a periodic inventory system made the following cash purchases and sales during the year. There was no beginning inventory.   The company has a calendar year-end and uses the FIFO inventory valuation method. Calculate the ending inventory balance and cost of goods sold for the year.

Accepted Answer

@#IMG-DLM& Ending inventory = 180 × $1,180 = $212,

Question 19

A company markets a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows:   If the ending inventory is reported at $276, which inventory method was used?

Accepted Answer

A) LIFO method 
B) FIFO method 
C) Weighted average method 
D) Specific identification method 
E) Retail inventory method 
A) LIFO method 
B) FIFO method 
C) Weighted average method 
D) Specific identification method 
E) Retail inventory method

Question 20

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Accepted Answer

A) $395 
B) $410 
C) $450 
D) $510 
E) $520 
A) $395 
B) $410 
C) $450 
D) $510 
E) $520

The reliability of the gross profit method depends on an accurate and stable estimate of the gross profit ratio.

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000. 45,000 × .6 = 27,000

Days' sales in inventory:

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

The matching principle requires that the inventory valuation method used match the physical flow of inventory.

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

The understatement of the beginning inventory balance causes:

In applying lower of cost or market to inventory valuation, market is defined as:

Enter the identifier for the correct inventory valuation method for each situation described below. In all cases, assume a period of rising prices.

The _____________________ is a measure of how quickly a merchandiser sells its inventory during a period.

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, ending inventory at retail can be multiplied by the ratio to estimate ending inventory at cost.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Damaged and obsolete goods:

A company markets a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $276, which inventory method was used?

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 reliability of the gross profit method depends on an accurate and stable estimate of the gross profit ratio.

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000. 45,000 × .6 = 27,000

Days' sales in inventory:

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

The matching principle requires that the inventory valuation method used match the physical flow of inventory.

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

The understatement of the beginning inventory balance causes:

In applying lower of cost or market to inventory valuation, market is defined as:

Enter the identifier for the correct inventory valuation method for each situation described below. In all cases, assume a period of rising prices.

The _____________________ is a measure of how quickly a merchandiser sells its inventory during a period.

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, ending inventory at retail can be multiplied by the ratio to estimate ending inventory at cost.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Damaged and obsolete goods:

A company markets a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $276, which inventory method was used?

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