Question 1

The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost, or stolen.

Accepted Answer

The answer of The _________________ method is commonly used to...

Question 2

Using the information given below, prepare general journal entries to record the March 16 sale assuming a cash sale and the FIFO method is used.

Accepted Answer

The answer of Using the information given below, prepare general...

Question 3

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 4

Use the following information for Razor Company to compute days' sales in inventory for 2011.

Accepted Answer

A)  73.0 
B)  80.3 
C)  43.8 
D)  70.0 
E)  49.8 
A)  73.0 
B)  80.3 
C)  43.8 
D)  70.0 
E)  49.8

Question 5

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory.

Accepted Answer

A) True 
 B)False

Question 6

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.

Accepted Answer

A) True 
 B)False

Question 7

The understatement of the beginning inventory balance causes:

Accepted Answer

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

Question 8

Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method. The cost of the ending inventory is

Accepted Answer

A)  $200. 
B)  $220. 
C)  $380. 
D)  $275. 
E)  $300. 
A)  $200. 
B)  $220. 
C)  $380. 
D)  $275. 
E)  $300.

Question 9

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

Accepted Answer

The answer of If the _______________ is responsible for paying...

Question 10

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
1. What is the cost-to-retail ratio using the retail method?
2. What is the estimated cost of the ending inventory?

Accepted Answer

The answer of A company uses the retail inventory method...

Question 12

A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:

Accepted Answer

A)  $30,000. 
B)  $21,000. 
C)  $20,000. 
D)  $18,000. 
E)  $27,000. 
A)  $30,000. 
B)  $21,000. 
C)  $20,000. 
D)  $18,000. 
E)  $27,000.

Question 13

Some companies use the _________________ principle or the __________________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

Accepted Answer

Matching;

Question 14

The ______________________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Accepted Answer

Specific i

Question 15

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio, we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Accepted Answer

A) True 
 B)False

Question 16

Goods in transit are included in a purchaser's inventory:

Accepted Answer

A)  At any time during transit. 
B)  When the purchaser is responsible for paying freight charges. 
C)  When the supplier is responsible for freight charges. 
D)  If the goods are shipped FOB destination. 
E)  After the half-way point between the buyer and seller. 
A)  At any time during transit. 
B)  When the purchaser is responsible for paying freight charges. 
C)  When the supplier is responsible for freight charges. 
D)  If the goods are shipped FOB destination. 
E)  After the half-way point between the buyer and seller.

Question 17

When units are purchased at different costs over time, determining the cost per unit assigned to inventory items is simple.

Accepted Answer

A) True 
 B)False

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

The City Store reported the following amounts on their financial statements for Year 1, Year 2, and Year 3:
It was discovered early in Year 4 that the ending inventory on December 31, Year 1 was overstated by $6,000, and the ending inventory on December 31, Year 2 was understated by $2,500. The ending inventory on December 31, Year 3 was correct. Ignoring income taxes determine the correct amounts of cost of goods sold, net income, total current assets, and equity for each of the years Year 1, Year 2, and Year 3.

Accepted Answer

The answer of The City Store reported the following amounts...

Question 20

A company made the following merchandise purchases and sales during the month of July:
There was no beginning inventory. If the company uses the first-in, first-out method and the perpetual system, what would be the cost of the ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Exam 6: Inventories and Cost of Sales

The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost, or stolen.

Using the information given below, prepare general journal entries to record the March 16 sale assuming a cash sale and the FIFO method is used.

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

Use the following information for Razor Company to compute days' sales in inventory for 2011.

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory.

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.

The understatement of the beginning inventory balance causes:

Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method. The cost of the ending inventory is

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: 1. What is the cost-to-retail ratio using the retail method? 2. What is the estimated cost of the ending inventory?

Some companies use the _________________ principle or the __________________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

The ______________________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio, we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Goods in transit are included in a purchaser's inventory:

When units are purchased at different costs over time, determining the cost per unit assigned to inventory items is simple.

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.

A company made the following merchandise purchases and sales during the month of July: There was no beginning inventory. If the company uses the first-in, first-out method and the perpetual system, what would be the cost of the ending inventory?

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

Some companies use the _ principle or the __ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.