Question 1

Management decisions in accounting for inventory cost include all of the following except:

Accepted Answer

A)  Costing method. 
B)  Inventory system (perpetual or periodic). 
C)  Customer demand for inventory. 
D)  Use of market values or other estimates. 
E)  Items included in inventory and their costs. 
A)  Costing method. 
B)  Inventory system (perpetual or periodic). 
C)  Customer demand for inventory. 
D)  Use of market values or other estimates. 
E)  Items included in inventory and their costs.

Question 2

Few companies take a physical count of inventory each year, and rely on inventory records alone to determine the inventory value.

Accepted Answer

A) True 
 B)False

Question 3

Use the following information for Razor Company to compute days' sales in inventory for 2011.

Accepted Answer

A)  73.0 
B)  80.3 
C)  43.8 
D)  70.0 
E)  49.8 
A)  73.0 
B)  80.3 
C)  43.8 
D)  70.0 
E)  49.8

Question 4

On December 31 of the current year, Hewett Company reported an ending inventory balance of $215,000. The following additional information is also available: Hewett sold goods costing $38,000 to Trump Enterprises on December 28 and shipped the goods on that date with shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $215,000 because they were not in Hewett's warehouse.
Hewett purchased goods costing $44,000 on December 29. The goods were shipped FOB destination and were received by Hewett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $215,000.
Hewett's ending inventory balance of $215,000 included $15,000 of goods being held on consignment from Rumsfeld Company. (Hewett Company is the consignee.)
Hewett's ending inventory balance of $215,000 did not include goods costing $95,000 that were shipped to Hewett on December 27 with shipping terms of FOB destination and were still in transit at year-end.
Based on the above information, the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $194,000 
B)  $209,000 
C)  $200,000 
D)  $171,000 
E)  $156,000 
A)  $194,000 
B)  $209,000 
C)  $200,000 
D)  $171,000 
E)  $156,000

Question 5

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

Question 6

Tops had cost of goods sold of $8,321 million and its ending inventory was $2,027 million. Therefore its days' sales in inventory equals 89 days.
2,027/8,321*365 = 89

Accepted Answer

A) True 
 B)False

Question 7

In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost.

Accepted Answer

A) True 
 B)False

Question 8

Generally accepted accounting principles require that the inventory of a company be reported at:

Accepted Answer

A)  Market value. 
B)  Historical cost. 
C)  Lower of cost or market. 
D)  Replacement cost. 
E)  Retail value. 
A)  Market value. 
B)  Historical cost. 
C)  Lower of cost or market. 
D)  Replacement cost. 
E)  Retail value.

Question 9

A company reported the current month purchase and sales data for its only product and uses the perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold using FIFO.

Accepted Answer

The answer of A company reported the current month purchase...

Question 10

Days' sales in inventory is calculated as:

Accepted Answer

A)  Ending inventory divided by cost of goods sold. 
B)  Cost of goods sold divided by ending inventory. 
C)  Ending inventory divided by cost of goods sold times 365. 
D)  Cost of goods sold divided by ending inventory times 365. 
E)  Ending inventory times cost of goods sold. 
A)  Ending inventory divided by cost of goods sold. 
B)  Cost of goods sold divided by ending inventory. 
C)  Ending inventory divided by cost of goods sold times 365. 
D)  Cost of goods sold divided by ending inventory times 365. 
E)  Ending inventory times cost of goods sold.

Question 11

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

Accepted Answer

Last in, f

Question 12

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

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 13

The ______________________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Accepted Answer

Specific i

Question 14

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 12 after the sale?

Accepted Answer

A)  $140. 
B)  $160. 
C)  $210. 
D)  $380. 
E)  $590. 
A)  $140. 
B)  $160. 
C)  $210. 
D)  $380. 
E)  $590.

Question 16

Fun Land Toy Stores has taken a physical count of its inventory at January 31, its fiscal year-end. After reviewing the accounting records and documentation, the following items have been discovered: (a) An invoice from Fleck Co. indicates that $30,000 of toys were shipped to Fun Land on January 27, terms FOB shipping point. The toys and invoice did not arrive at Fun Land until February 2 and were not included in the physical count. (b) An invoice from Grande indicates that $8,000 of toys were shipped to Fun Land on January 29, terms FOB destination. The toys and invoice did not arrive at Fun Land until February 2 and were not included in the physical count. The physical count and cost assignment on January 31 prior to these two items is $440,000. The cost of goods sold for Fun Land is $2,100,000.
1. Calculate the amount that should be reported as ending inventory for Fun Land.
2. Calculate the days' sales in inventory before and after the appropriate adjustments for inventory.

Accepted Answer

The answer of Fun Land Toy Stores has taken a...

Question 17

The FIFO inventory method assumes that costs for the earliest units purchased are the first to be charged to the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory.

Accepted Answer

A) True 
 B)False

Question 20

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:

Accepted Answer

A)  0.21. 
B)  4.51. 
C)  4.79. 
D)  76.1 days. 
E)  80.9 days. 
A)  0.21. 
B)  4.51. 
C)  4.79. 
D)  76.1 days. 
E)  80.9 days.

Exam 6: Inventories and Cost of Sales

Management decisions in accounting for inventory cost include all of the following except:

Few companies take a physical count of inventory each year, and rely on inventory records alone to determine the inventory value.

Use the following information for Razor Company to compute days' sales in inventory for 2011.

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

Tops had cost of goods sold of $8,321 million and its ending inventory was $2,027 million. Therefore its days' sales in inventory equals 89 days. 2,027/8,321*365 = 89

In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost.

Generally accepted accounting principles require that the inventory of a company be reported at:

A company reported the current month purchase and sales data for its only product and uses the perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold using FIFO.

Days' sales in inventory is calculated as:

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

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

The ______________________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

The FIFO inventory method assumes that costs for the earliest units purchased are the first to be charged to the cost of goods sold.

The understatement of the beginning inventory balance causes:

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory.

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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