Question 1

Merchandise inventory includes:

Accepted Answer

A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only non-damaged goods. 
A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only non-damaged goods. A

Question 2

Match each of the following terms a through j with the appropriate definition.

Accepted Answer

The answer of Match each of the following terms a...

Question 3

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  True

Question 4

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 5

Axme Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.
What was the amount of the cost of goods sold for this sale?

Accepted Answer

A)  $148.00. 
B)  $150.50. 
C)  $158.40. 
D)  $210.00. 
E)  $330.00. 
A)  $148.00. 
B)  $150.50. 
C)  $158.40. 
D)  $210.00. 
E)  $330.00.

Question 6

LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Accepted Answer

A) True 
 B)False

Question 7

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to the ending inventory 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 8

Describe the internal controls that must be applied when taking a physical count of inventory.

Accepted Answer

The internal controls should include (1)

Question 9

Jackson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

Accepted Answer

A)  $60,000 
B)  $180,000 
C)  $30,000 
D)  $90,000 
E)  Impossible to determine from the information provided. 
A)  $60,000 
B)  $180,000 
C)  $30,000 
D)  $90,000 
E)  Impossible to determine from the information provided.

Question 10

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Accepted Answer

The answer of An advantage of the _________________ method of...

Question 11

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it 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.

Question 12

The inventory turnover ratio:

Accepted Answer

A)  Is used to analyze profitability. 
B)  Is used to measure solvency. 
C)  Reveals how many times a company turns over (sells) its merchandise inventory. 
D)  Validates the acid-test ratio. 
E)  Calculation depends on the company's inventory valuation method. 
A)  Is used to analyze profitability. 
B)  Is used to measure solvency. 
C)  Reveals how many times a company turns over (sells) its merchandise inventory. 
D)  Validates the acid-test ratio. 
E)  Calculation depends on the company's inventory valuation method.

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Accepted Answer

A)  LIFO method. 
B)  FIFO method. 
C)  Weighted-average cost method. 
D)  Specific identification method. 
E)  Gross profit method. 
A)  LIFO method. 
B)  FIFO method. 
C)  Weighted-average cost method. 
D)  Specific identification method. 
E)  Gross profit method.

Question 17

Goods on consignment are goods that are shipped by the owner, called the ______________, to another party called the _____________________.

Accepted Answer

Consignor;

Question 18

Fast Auto Parts is an auto parts wholesaler that stocks several major brand names for Complete Auto Parts stores across the country. Complete Auto Parts does not assume responsibility for parts until they are sold to the customer. Identify the consignor and the consignee. Which company should include any unsold goods as part of its inventory?

Accepted Answer

Fast Auto Parts is the consign

Question 19

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 20

Axme uses a weighted average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $15 per unit.
August 29, 20 units were sold.
August 31, 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?

Accepted Answer

A)  $12.00. 
B)  $13.80. 
C)  $15.42. 
D)  $16.00. 
E)  $17.74. 
A)  $12.00. 
B)  $13.80. 
C)  $15.42. 
D)  $16.00. 
E)  $17.74.

Exam 6: Inventories and Cost of Sales

Merchandise inventory includes:

Match each of the following terms a through j with the appropriate definition.

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

An overstatement of ending inventory will cause

Axme Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale?

LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

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

Describe the internal controls that must be applied when taking a physical count of inventory.

Jackson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

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

The inventory turnover ratio:

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.

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

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.

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Goods on consignment are goods that are shipped by the owner, called the ______________, to another party called the _____________________.

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters

Goods on consignment are goods that are shipped by the owner, called the , to another party called the _______.