Question 1

The understatement of the ending inventory balance causes:

Accepted Answer

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

Question 2

The lower of cost and net realizable value rule for inventory valuation must be applied to each individual unit separately, and not to major categories of inventory.

Accepted Answer

A) True 
 B)False

Question 3

Net realizable value for damaged or obsolete goods is sales price plus the cost of making the sale.

Accepted Answer

A) True 
 B)False

Question 4

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Accepted Answer

A) True 
 B)False

Question 5

IFRS reporting currently does not allow which method of inventory costing?

Accepted Answer

A)  Specific identification. 
B)  FIFO. 
C)  LIFO. 
D)  Weighted average. 
E)  Lower of cost and net realizable value. 
A)  Specific identification. 
B)  FIFO. 
C)  LIFO. 
D)  Weighted average. 
E)  Lower of cost and net realizable value.

Question 6

One of the most important decisions in accounting for inventory is determining the unit costs assigned to inventory items.

Accepted Answer

A) True 
 B)False

Question 7

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Accepted Answer

A)  $120. 
B)  $124. 
C)  $128. 
D)  $130. 
E)  $140. 
A)  $120. 
B)  $124. 
C)  $128. 
D)  $130. 
E)  $140.

Question 8

A company reported the following data:
Required:
1. Calculate the days' sales in inventory for each year.
2. Comment on the trend in inventory management.

Accepted Answer

1.
2. The company has a trend of decreas

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
This company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

Accepted Answer

A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $16,000. 
E)  $34,000. 
A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $16,000. 
E)  $34,000.

Question 11

An error in the period-end inventory causes an offsetting error in the next period and therefore:

Accepted Answer

A)  Managers can ignore the error. 
B)  It is sometimes said to be self-correcting. 
C)  It affects only income statement accounts. 
D)  If affects only balance sheet accounts. 
E)  Is immaterial for managerial decision making. 
A)  Managers can ignore the error. 
B)  It is sometimes said to be self-correcting. 
C)  It affects only income statement accounts. 
D)  If affects only balance sheet accounts. 
E)  Is immaterial for managerial decision making.

Question 12

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

Accepted Answer

A)  Selling Price. 
B)  Historical cost. 
C)  Lower of cost and net realizable value. 
D)  Net realizable value. 
E)  Retail value. 
A)  Selling Price. 
B)  Historical cost. 
C)  Lower of cost and net realizable value. 
D)  Net realizable value. 
E)  Retail value.

Question 13

An overstated beginning inventory will ______________ cost of goods sold and _____________ net income.

Accepted Answer

Overstate;

Question 14

A company reported the following data related to its ending inventory:
Product Units Available Cost NRV
849 100 $10 $11
842 75 16 14
847 60 14 13
860 40 16 20
Calculate the lower of cost and net realizable value on the inventory applied separately to each product.

Accepted Answer

@#IMG-DLM& lower of cost and n

Question 15

A company uses the periodic inventory system and had the following activity during the current monthly period. In a periodic inventory system, using the weighted-average inventory method, the company's ending inventory would be:

Accepted Answer

A)  $2,000. 
B)  $2,200. 
C)  $2,250. 
D)  $2,400. 
E)  $4,400. 
A)  $2,000. 
B)  $2,200. 
C)  $2,250. 
D)  $2,400. 
E)  $4,400.

Question 16

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 17

The cost of an inventory item includes the ____________, plus ______________ costs necessary to put it in a place and condition for sale.

Accepted Answer

Invoice price minus

Question 18

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory turnover of $1,965 million. Its days' sales in inventory 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.

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Gotham Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Gotham was the consignor.
The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Gotham on December 28 and shipped FOB destination on that date. Gotham did not receive the goods until January 2 of the following year.
The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000.
The ending inventory balance of $412,000 included $43,000 of consigned inventory for which Gotham was the consignee.
Based on this information, the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $247,000 
B)  $341,000 
C)  $362,000 
D)  $309,000 
E)  $319,000 
A)  $247,000 
B)  $341,000 
C)  $362,000 
D)  $309,000 
E)  $319,000

Exam 6: Inventories and Cost of Sales

The understatement of the ending inventory balance causes:

The lower of cost and net realizable value rule for inventory valuation must be applied to each individual unit separately, and not to major categories of inventory.

Net realizable value for damaged or obsolete goods is sales price plus the cost of making the sale.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

IFRS reporting currently does not allow which method of inventory costing?

One of the most important decisions in accounting for inventory is determining the unit costs assigned to inventory items.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

A company reported the following data: Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

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

An error in the period-end inventory causes an offsetting error in the next period and therefore:

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

An overstated beginning inventory will ______________ cost of goods sold and _____________ net income.

A company reported the following data related to its ending inventory: Product Units Available Cost NRV 849 100 $10 $11 842 75 16 14 847 60 14 13 860 40 16 20 Calculate the lower of cost and net realizable value on the inventory applied separately to each product.

A company uses the periodic inventory system and had the following activity during the current monthly period. In a periodic inventory system, using the weighted-average inventory method, the company's ending inventory would be:

Days' sales in inventory:

The cost of an inventory item includes the ____________, plus ______________ costs necessary to put it in a place and condition for sale.

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

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.

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

An overstated beginning inventory will __ cost of goods sold and _ net income.

The cost of an inventory item includes the , plus __ costs necessary to put it in a place and condition for sale.