Question 1

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using FIFO.

Accepted Answer

The answer of Using the information given below for a...

Question 2

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

Accepted Answer

A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100 
A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100

Question 3

Errors in the period-end inventory balance only affect the current period's records and financial statements.

Accepted Answer

A) True 
 B)False

Question 4

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

Accepted Answer

A)  FIFO and LIFO 
B)  LIFO and weighted-average cost 
C)  Specific identification and FIFO 
D)  FIFO and weighted-average cost 
E)  LIFO and specific identification 
A)  FIFO and LIFO 
B)  LIFO and weighted-average cost 
C)  Specific identification and FIFO 
D)  FIFO and weighted-average cost 
E)  LIFO and specific identification

Question 6

A company had the following ending inventory costs:   Instructions;
1. Calculate the lower of cost or market (LCM) value for the inventory as a whole.
2. Calculate the lower of cost or market (LCM) value for each individual item.

Accepted Answer

The answer of A company had the following ending inventory...

Question 7

On May 1 of the current year, Peck Company experienced a 500 year flood which destroyed the company's entire inventory. The company had not completed its month end reporting for April and must estimate the amount of inventory lost. At the beginning of April, the company reported beginning inventory of $215,450. Inventory purchased during April (until the date of the disaster) was $192,530. Sales for the month of April were $542,500. Assuming the company's typical gross profit ratio is 40%, estimate the amount of inventory destroyed in the flood.

Accepted Answer

A)  $87,480 
B)  $134,520 
C)  $109,980 
D)  $82,480 
E)  $81,480 
A)  $87,480 
B)  $134,520 
C)  $109,980 
D)  $82,480 
E)  $81,480

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

An overstatement of ending inventory will cause

Accepted Answer

A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet. 
A)  An overstatement of assets and equity on the balance sheet. 
B)  An understatement of assets and equity on the balance sheet. 
C)  An overstatement of assets and an understatement of equity on the balance sheet. 
D)  An understatement of assets and an overstatement of equity on the balance sheet. 
E)  No effect on the balance sheet.

Question 10

Advances in technology have greatly reduced the cost of a perpetual inventory system. What advantages does a perpetual inventory system have over periodic?

Accepted Answer

The perpetual inventory system updates t

Question 11

Days' sales in inventory:

Accepted Answer

A)  Is also called days' stock on hand. 
B)  Focuses on average inventory rather than ending inventory. 
C)  Is used to measure solvency. 
D)  Is calculated by dividing cost of goods sold by ending inventory. 
E)  Is a substitute for the acid-test ratio. 
A)  Is also called days' stock on hand. 
B)  Focuses on average inventory rather than ending inventory. 
C)  Is used to measure solvency. 
D)  Is calculated by dividing cost of goods sold by ending inventory. 
E)  Is a substitute for the acid-test ratio.

Question 12

The ______________________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Accepted Answer

Last in, f

Question 13

Goods on consignment:

Accepted Answer

A)  Are goods shipped by the owner to the consignee who sells the goods for the owner. 
B)  Are reported in the consignee's books as inventory. 
C)  Are goods shipped to the consignor who sells the goods for the owner. 
D)  Are not reported in the consignor's inventory since they do not have possession of the inventory. 
E)  Are always paid for by the consignee when they take possession. 
A)  Are goods shipped by the owner to the consignee who sells the goods for the owner. 
B)  Are reported in the consignee's books as inventory. 
C)  Are goods shipped to the consignor who sells the goods for the owner. 
D)  Are not reported in the consignor's inventory since they do not have possession of the inventory. 
E)  Are always paid for by the consignee when they take possession.

Question 14

On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available: Beginning inventory, July 1: $4,000
Net sales: $40,000
Net purchases: $41,000
The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

Accepted Answer

A)  $4,000. 
B)  $5,000. 
C)  $21,000. 
D)  $25,000. 
E)  $34,000. 
A)  $4,000. 
B)  $5,000. 
C)  $21,000. 
D)  $25,000. 
E)  $34,000.

Question 15

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using LIFO.

Accepted Answer

The answer of Using the information given below for a...

Question 16

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

Accepted Answer

Days' sale

Question 17

Regardless of the inventory costing system used, cost of goods available for sale must be allocated between

Accepted Answer

A)  beginning inventory and net purchases during the period. 
B)  ending inventory and beginning inventory. 
C)  net purchases during the period and ending inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and cost of goods sold. 
A)  beginning inventory and net purchases during the period. 
B)  ending inventory and beginning inventory. 
C)  net purchases during the period and ending inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and cost of goods sold.

Question 18

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO.

Accepted Answer

A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100 
A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100

Question 19

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using FIFO.

Accepted Answer

A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100 
A)  $2,260 
B)  $3,180 
C)  $1,860 
D)  $3,580 
E)  $2,100

Question 20

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Accepted Answer

A) True 
 B)False

Exam 6: Inventories and Cost of Sales

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using FIFO.

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

Errors in the period-end inventory balance only affect the current period's records and financial statements.

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

A company had the following ending inventory costs: Instructions; 1. Calculate the lower of cost or market (LCM) value for the inventory as a whole. 2. Calculate the lower of cost or market (LCM) value for each individual item.

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

An overstatement of ending inventory will cause

Advances in technology have greatly reduced the cost of a perpetual inventory system. What advantages does a perpetual inventory system have over periodic?

Days' sales in inventory:

The ______________________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Goods on consignment:

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using LIFO.

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

Regardless of the inventory costing system used, cost of goods available for sale must be allocated between

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO.

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using FIFO.

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

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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