Question 1

Direct material costs are a component of the cost of the work-in process inventory.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is correct?

Accepted Answer

A) Cost of goods available for sale is allocated between costs of goods sold and inventory at year-end. 
B) A purchase of inventory on credit increases both cost of goods available for sale and cost of goods sold. 
C) Purchases of inventory during a period less that period's cost of goods sold equals ending inventory regardless of the beginning inventory amount. 
D) Cost of goods available for sale equals ending inventory plus purchases. 
A) Cost of goods available for sale is allocated between costs of goods sold and inventory at year-end. 
B) A purchase of inventory on credit increases both cost of goods available for sale and cost of goods sold. 
C) Purchases of inventory during a period less that period's cost of goods sold equals ending inventory regardless of the beginning inventory amount. 
D) Cost of goods available for sale equals ending inventory plus purchases.

Question 3

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

Accepted Answer

A) $11,680,000. 
B) $11,590,000. 
C) $11,480,000. 
D) $11,550,000. 
A) $11,680,000. 
B) $11,590,000. 
C) $11,480,000. 
D) $11,550,000.

Question 4

Carrie Company sold merchandise with an invoice price of $1,000 to Underwood, Inc., with terms of 2/10, n/30. Which of the following is the correct entry to record the payment by Underwood Inc., within the 10 days if the company uses the periodic inventory system and the gross method to record purchases?

Accepted Answer

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

Question 5

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Accepted Answer

A) 2016 net income would be overstated. 
B) 2016 net income would be understated. 
C) 2016 ending retained earnings would be understated. 
D) 2016 cost of goods sold would be overstateD.The overstatement of the ending inventory causes cost of goods sold to be understated and net income to be overstated. 
A) 2016 net income would be overstated. 
B) 2016 net income would be understated. 
C) 2016 ending retained earnings would be understated. 
D) 2016 cost of goods sold would be overstateD.The overstatement of the ending inventory causes cost of goods sold to be understated and net income to be overstated.

Question 6

Which of the following statements is incorrect?

Accepted Answer

A) Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold. 
B) Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory. 
C) Cost of goods available for sale will always be equal to or greater than cost of goods sold. 
D) Ending inventory is greater than beginning inventory when purchases are less than cost of goods solD.Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold. 
A) Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold. 
B) Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory. 
C) Cost of goods available for sale will always be equal to or greater than cost of goods sold. 
D) Ending inventory is greater than beginning inventory when purchases are less than cost of goods solD.Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold.

Question 7

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Accepted Answer

A) $385,000. 
B) $355,000. 
C) $345,000. 
D) $145,000. 
A) $385,000. 
B) $355,000. 
C) $345,000. 
D) $145,000.

Question 8

LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would not be a component of the year-end inventory balance?

Accepted Answer

A) Freight-in costs. 
B) Inventory inspection costs. 
C) Inventory preparation costs. 
D) Inventory-related selling costs. 
A) Freight-in costs. 
B) Inventory inspection costs. 
C) Inventory preparation costs. 
D) Inventory-related selling costs.

Question 10

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

Accepted Answer

A) Net income is correct. 
B) Stockholders' equity is understated. 
C) Net income is overstated. 
D) Current assets are understateD.The 2016 purchases are understated, which causes cost of goods sold to be understated and net income to be overstated in 2016. 
A) Net income is correct. 
B) Stockholders' equity is understated. 
C) Net income is overstated. 
D) Current assets are understateD.The 2016 purchases are understated, which causes cost of goods sold to be understated and net income to be overstated in 2016.

Question 11

The inventory records of Martin Corporation reflected the following information for the month of August:   Required: 
A.Determine the amount of the ending inventory and cost of goods sold under each of the following methods assuming the periodic inventory system.   
B.Why would cash flow considerations relate to the choice of an inventory method?

Accepted Answer

A. @#IMG-DLM& B. Cash flow considerations would re

Question 12

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Accepted Answer

A) True 
 B)False

Question 13

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016:   Required:
Calculate each of the following: 
A.Cost of goods available for sale
B.Cost of goods sold
C.Gross profit

Accepted Answer

A. Cost of goods available for sale, $85

Question 14

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Accepted Answer

The answer of For each independent situation given below, determine...

Question 15

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value) valuation method for inventory?

Accepted Answer

A) The journal entry to write-down inventory decreases gross profit. 
B) The journal entry to write-down inventory decreases current assets. 
C) The journal entry to write-down inventory does not affect pretax income. 
D) The journal entry to write-down inventory increases cost of goods solD.The journal entry increases cost of goods sold and therefore decreases gross profit and pretax income.The journal entry also decreases inventory. 
A) The journal entry to write-down inventory decreases gross profit. 
B) The journal entry to write-down inventory decreases current assets. 
C) The journal entry to write-down inventory does not affect pretax income. 
D) The journal entry to write-down inventory increases cost of goods solD.The journal entry increases cost of goods sold and therefore decreases gross profit and pretax income.The journal entry also decreases inventory.

Question 16

Hopkins Company reported the following information related to inventory and sales:   Sales-8,000 units at $35 per unit.
Required:
Compute the following amounts assuming a periodic inventory system:

Accepted Answer

The answer of Hopkins Company reported the following information related...

Question 17

Of the following, which is not a control for safeguarding inventories?

Accepted Answer

A) Storing inventory in a locked warehouse. 
B) Having only a person responsible for receiving inventory purchases also be responsible for shipping inventory sales. 
C) Limiting inventory access to authorized employees. 
D) Separating inventory accounting from inventory handling duties. 
A) Storing inventory in a locked warehouse. 
B) Having only a person responsible for receiving inventory purchases also be responsible for shipping inventory sales. 
C) Limiting inventory access to authorized employees. 
D) Separating inventory accounting from inventory handling duties.

Direct material costs are a component of the cost of the work-in process inventory.

Which of the following statements is correct?

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

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Which of the following statements is incorrect?

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Which of the following would not be a component of the year-end inventory balance?

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016: Required: Calculate each of the following: A.Cost of goods available for sale B.Cost of goods sold C.Gross profit

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value) valuation method for inventory?

Hopkins Company reported the following information related to inventory and sales: Sales-8,000 units at $35 per unit. Required: Compute the following amounts assuming a periodic inventory system:

Of the following, which is not a control for safeguarding inventories?

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

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

Direct material costs are a component of the cost of the work-in process inventory.

Which of the following statements is correct?

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

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Which of the following statements is incorrect?

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Which of the following would not be a component of the year-end inventory balance?

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016: Required: Calculate each of the following: A.Cost of goods available for sale B.Cost of goods sold C.Gross profit

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value) valuation method for inventory?

Hopkins Company reported the following information related to inventory and sales: Sales-8,000 units at $35 per unit. Required: Compute the following amounts assuming a periodic inventory system:

Of the following, which is not a control for safeguarding inventories?

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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