Question 1

In the year of an overstatement of ending inventory, cost of goods sold will be understated and net income will be overstated.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

Accepted Answer

A) An automobile dealer. 
B) A custom jewelry store. 
C) A grocery store. 
D) An art dealer. 
A) An automobile dealer. 
B) A custom jewelry store. 
C) A grocery store. 
D) An art dealer.

Question 3

Tinker's cost of goods sold in the year of sale (2016) was $750,000 and 2015 cost of goods sold was $770,000. The inventory at the end of 2016 was $188,000 and at the end of 2015 the inventory was $208,000. Tinker's inventory turnover during 2016 was closest to:

Accepted Answer

A) 3.79 
B) 3.99 
C) 3.84 
D) 3.89 
A) 3.79 
B) 3.99 
C) 3.84 
D) 3.89

Question 4

Which of the following journal entries is not consistent with the use of a periodic inventory system?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

Under the FIFO cost flow assumption during a period of rising costs, which of the following is false?

Accepted Answer

A) Income tax expense will be higher under FIFO than under LIFO. 
B) Net income will be higher under FIFO than under LIFO. 
C) Ending inventory will be lower under FIFO than under LIFO. 
D) Cost of goods sold will be lower under FIFO than under LIFO. 
A) Income tax expense will be higher under FIFO than under LIFO. 
B) Net income will be higher under FIFO than under LIFO. 
C) Ending inventory will be lower under FIFO than under LIFO. 
D) Cost of goods sold will be lower under FIFO than under LIFO.

Question 6

An increase in accounts payable is added to net income when determining cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 7

Carp Corporation has provided the following information for its most recent month of operation: sales $16,000; ending inventory $4,000, purchases $8,000 and gross profit $10,000. How much was Carp's beginning inventory?

Accepted Answer

A) $2,000. 
B) $18,000. 
C) $6,000. 
D) $12,000. 
A) $2,000. 
B) $18,000. 
C) $6,000. 
D) $12,000.

Question 8

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following costs does not become a part of inventory of a manufacturer?

Accepted Answer

A) The cost of raw materials used. 
B) The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) Rent on corporate headquarters. 
A) The cost of raw materials used. 
B) The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) Rent on corporate headquarters.

Question 10

RJ Corporation has provided the following information about one of its inventory items:   During the year, RJ sold 3,000 units. What was ending inventory using the average cost flow assumption under a periodic inventory system?

Accepted Answer

A) $640,000. 
B) $840,000. 
C) $770,000. 
D) $880,000. 
A) $640,000. 
B) $840,000. 
C) $770,000. 
D) $880,000.

Question 11

Given a particular set of facts and assumptions, the following pairs of amounts were computed using FIFO and LIFO. For each pair of amounts, indicate which amount resulted from applying FIFO, and which amount resulted from applying LIFO.

Accepted Answer

A. 1. FIFO 2. LIFO

Question 12

During the audit of Montane Company's 2016 financial statements, the auditors discovered that the 2016 ending inventory had been overstated by $8,000 and that the 2016 beginning inventory was overstated by $5,000. Before the effect of these errors, 2016 pretax income had been computed as $100,000. What should be reported as the correct 2016 pretax income before taxes?

Accepted Answer

A) $113,000. 
B) $87,000. 
C) $105,000. 
D) $97,000. 
A) $113,000. 
B) $87,000. 
C) $105,000. 
D) $97,000.

Question 13

Required:
A.Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.)
   
B.Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

Accepted Answer

The answer of Required:
A.Compute the missing amounts in the income...

Question 14

Cranchey Company reported a LIFO ending inventory of $670,000 on its balance sheet at December 31, 2016. Cranchey's disclosure notes to the financial statements reported that the LIFO Reserve at December 31, 2015 was $32,000 and the LIFO Reserve at December 31, 2016 was $40,000. Which of the following statements is correct for Cranchey Company for the effect of the LIFO Reserve in 2016 in converting LIFO amounts to FIFO amounts?

Accepted Answer

A) Cost of goods sold would have been higher by $40,000 under FIFO. 
B) Pretax income would have been higher by $32,000 under FIFO. 
C) Pretax income would have been higher by $8,000 under FIFO. 
D) Cost of goods sold would have been higher by $8,000 under FIFO. 
A) Cost of goods sold would have been higher by $40,000 under FIFO. 
B) Pretax income would have been higher by $32,000 under FIFO. 
C) Pretax income would have been higher by $8,000 under FIFO. 
D) Cost of goods sold would have been higher by $8,000 under FIFO.

Question 15

Which of the following statements is correct when inventory unit costs are decreasing?

Accepted Answer

A) LIFO will result in lower net income and a higher inventory valuation than will FIFO. 
B) LIFO will result in higher net income and a higher inventory valuation than will FIFO. 
C) FIFO will result in higher net income and a higher inventory valuation than will LIFO. 
D) FIFO will result in higher net income and a lower inventory valuation than will LIFO. 
A) LIFO will result in lower net income and a higher inventory valuation than will FIFO. 
B) LIFO will result in higher net income and a higher inventory valuation than will FIFO. 
C) FIFO will result in higher net income and a higher inventory valuation than will LIFO. 
D) FIFO will result in higher net income and a lower inventory valuation than will LIFO.

Question 16

Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Accepted Answer

A) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period. 
B) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. 
C) In a periodic inventory system, cost of goods sold is developed only from a comparison of beginning inventory and ending inventory. 
D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting perioD.Cost of goods sold is debited when inventory is sold when using a perpetual inventory system. 
A) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period. 
B) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. 
C) In a periodic inventory system, cost of goods sold is developed only from a comparison of beginning inventory and ending inventory. 
D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting perioD.Cost of goods sold is debited when inventory is sold when using a perpetual inventory system.

Question 17

Of the following, which is not a reason for having controls to safeguard inventories?

Accepted Answer

A) Protect inventory items from theft. 
B) Avoid stock-outs from not having enough inventory on hand. 
C) Reduce costs of maintaining the LIFO Reserve. 
D) Keep track of overstocked items. 
A) Protect inventory items from theft. 
B) Avoid stock-outs from not having enough inventory on hand. 
C) Reduce costs of maintaining the LIFO Reserve. 
D) Keep track of overstocked items.

Question 18

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a decrease in both ending inventory and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 19

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Accepted Answer

A) True 
 B)False

Question 20

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a credit to cost of goods sold and a debit to inventory.

Accepted Answer

A) True 
 B)False

In the year of an overstatement of ending inventory, cost of goods sold will be understated and net income will be overstated.

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

Tinker's cost of goods sold in the year of sale (2016) was $750,000 and 2015 cost of goods sold was $770,000. The inventory at the end of 2016 was $188,000 and at the end of 2015 the inventory was $208,000. Tinker's inventory turnover during 2016 was closest to:

Which of the following journal entries is not consistent with the use of a periodic inventory system?

Under the FIFO cost flow assumption during a period of rising costs, which of the following is false?

An increase in accounts payable is added to net income when determining cash flows from operating activities.

Carp Corporation has provided the following information for its most recent month of operation: sales $16,000; ending inventory $4,000, purchases $8,000 and gross profit $10,000. How much was Carp's beginning inventory?

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

Which of the following costs does not become a part of inventory of a manufacturer?

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was ending inventory using the average cost flow assumption under a periodic inventory system?

Given a particular set of facts and assumptions, the following pairs of amounts were computed using FIFO and LIFO. For each pair of amounts, indicate which amount resulted from applying FIFO, and which amount resulted from applying LIFO.

Required: A.Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.) B.Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

Which of the following statements is correct when inventory unit costs are decreasing?

Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Of the following, which is not a reason for having controls to safeguard inventories?

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a decrease in both ending inventory and cost of goods sold.

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a credit to cost of goods sold and a debit to inventory.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

In the year of an overstatement of ending inventory, cost of goods sold will be understated and net income will be overstated.

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

Tinker's cost of goods sold in the year of sale (2016) was $750,000 and 2015 cost of goods sold was $770,000. The inventory at the end of 2016 was $188,000 and at the end of 2015 the inventory was $208,000. Tinker's inventory turnover during 2016 was closest to:

Which of the following journal entries is not consistent with the use of a periodic inventory system?

Under the FIFO cost flow assumption during a period of rising costs, which of the following is false?

An increase in accounts payable is added to net income when determining cash flows from operating activities.

Carp Corporation has provided the following information for its most recent month of operation: sales $16,000; ending inventory $4,000, purchases $8,000 and gross profit $10,000. How much was Carp's beginning inventory?

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

Which of the following costs does not become a part of inventory of a manufacturer?

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was ending inventory using the average cost flow assumption under a periodic inventory system?

Given a particular set of facts and assumptions, the following pairs of amounts were computed using FIFO and LIFO. For each pair of amounts, indicate which amount resulted from applying FIFO, and which amount resulted from applying LIFO.

Required: A.Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.) B.Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

Which of the following statements is correct when inventory unit costs are decreasing?

Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Of the following, which is not a reason for having controls to safeguard inventories?

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a decrease in both ending inventory and cost of goods sold.

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a credit to cost of goods sold and a debit to inventory.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

PPA: Reporting and Interpreting Investments in Other Corporations

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