Question 1

Using the information given below, prepare the general journal entry to record the March 16 sale assuming a cash sale and the LIFO method is used:

Accepted Answer

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

Question 2

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 3

Louise Company reported the following income statement information for Year 1 and Year 2: The beginning inventory balance for Year 1 is correct. The ending inventory balance for Year 2 is also correct. However, the ending inventory figure for Year 1 was overstated by $20,000. Given this information, the correct gross profit figures for Year 1 and Year 2 would be:

Accepted Answer

A)  $129,000 for Year 1 and $256,000 for Year 2. 
B)  $281,000 for Year 1 and $274,000 for Year 2. 
C)  $129,000 for Year 1 and $276,000 for Year 2. 
D)  $169,000 for Year 1 and $236,000 for Year 2. 
E)  $169,000 for Year 1 and $276,000 for Year 2. 
A)  $129,000 for Year 1 and $256,000 for Year 2. 
B)  $281,000 for Year 1 and $274,000 for Year 2. 
C)  $129,000 for Year 1 and $276,000 for Year 2. 
D)  $169,000 for Year 1 and $236,000 for Year 2. 
E)  $169,000 for Year 1 and $276,000 for Year 2.

Question 4

Advances in technology have greatly reduced the cost of a perpetual inventory system. What advantages does a perpetual inventory system have over periodic?

Accepted Answer

The perpetual inventory system updates t

Question 5

Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

A company can change its inventory costing method without mentioning this change in its financial statements because it is an internal management decision.

Accepted Answer

A) True 
 B)False

Question 8

A company sells a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $276, what inventory method was used?

Accepted Answer

A)  LIFO method. 
B)  FIFO method. 
C)  Weighted average method. 
D)  Specific identification method. 
E)  Retail inventory method. 
A)  LIFO method. 
B)  FIFO method. 
C)  Weighted average method. 
D)  Specific identification method. 
E)  Retail inventory method.

Question 9

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Accepted Answer

A) True 
 B)False

Question 10

Use the following information for Razor Company to compute inventory turnover for 2011.

Accepted Answer

A)  8.33 
B)  5.00 
C)  4.95 
D)  4.54 
E)  7.33 
A)  8.33 
B)  5.00 
C)  4.95 
D)  4.54 
E)  7.33

Question 11

A company has the following per unit original costs and net realizable values for its inventory: Part A: 50 units with a cost of $5, and net realizable value of $4.50
Part B: 75 units with a cost of $6, and net realizable value of $6.50
Part C: 160 units with a cost of $3, and net realizable value of $2.50
Under the lower of cost and net realizable value, the total value of this company's ending inventory is:

Accepted Answer

A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,075.00 or $1,112.50, depending upon whether lower of cost and net realizable value is applied to individual items or the inventory as a whole. 
D)  $1,112.50. 
E)  $1,180.00 or $1,075.00, depending upon whether lower of cost and net realizable value is applied to individual items or to the inventory as a whole. 
A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,075.00 or $1,112.50, depending upon whether lower of cost and net realizable value is applied to individual items or the inventory as a whole. 
D)  $1,112.50. 
E)  $1,180.00 or $1,075.00, depending upon whether lower of cost and net realizable value is applied to individual items or to the inventory as a whole.

Question 12

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

Accepted Answer

Days' sale

Question 13

When applying the lower of cost and net realizable value (NRV) of inventory valuation, NRV is defined as the estimated _____________________ in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Accepted Answer

The answer of When applying the lower of cost and...

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using weighted average.

Accepted Answer

*$1,480/140 units =

Question 16

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Accepted Answer

A) True 
 B)False

Question 17

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

Accepted Answer

A) True 
 B)False

Question 18

Management decisions in accounting for inventory cost include all of the following except:

Accepted Answer

A)  Costing method. 
B)  Inventory system (perpetual or periodic). 
C)  Customer demand for inventory. 
D)  Use of net realizable values or other estimates. 
E)  Items included in inventory and their costs. 
A)  Costing method. 
B)  Inventory system (perpetual or periodic). 
C)  Customer demand for inventory. 
D)  Use of net realizable values or other estimates. 
E)  Items included in inventory and their costs.

Question 19

The consistency concept prescribes that a company use the same accounting methods period after period, so that financial statements are comparable across periods.

Accepted Answer

A) True 
 B)False

Question 20

On December 31 of the current year, Hewett Company reported an ending inventory balance of $215,000. The following additional information is also available: Hewett sold goods costing $38,000 to Trump Enterprises on December 28 and shipped the goods on that date with shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $215,000 because they were not in Hewett's warehouse.
Hewett purchased goods costing $44,000 on December 29. The goods were shipped FOB destination and were received by Hewett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $215,000.
Hewett's ending inventory balance of $215,000 included $15,000 of goods being held on consignment from Rumsfeld Company. (Hewett Company is the consignee.)
Hewett's ending inventory balance of $215,000 did not include goods costing $95,000 that were shipped to Hewett on December 27 with shipping terms of FOB destination and were still in transit at year-end.
Based on the above information, the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $194,000 
B)  $209,000 
C)  $200,000 
D)  $171,000 
E)  $156,000 
A)  $194,000 
B)  $209,000 
C)  $200,000 
D)  $171,000 
E)  $156,000

Exam 6: Inventories and Cost of Sales

Using the information given below, prepare the general journal entry to record the March 16 sale assuming a cash sale and the LIFO method is used:

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

Advances in technology have greatly reduced the cost of a perpetual inventory system. What advantages does a perpetual inventory system have over periodic?

Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance.

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

A company can change its inventory costing method without mentioning this change in its financial statements because it is an internal management decision.

A company sells a climbing kit and uses the perpetual inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $276, what inventory method was used?

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Use the following information for Razor Company to compute inventory turnover for 2011.

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

When applying the lower of cost and net realizable value (NRV) of inventory valuation, NRV is defined as the estimated _____________________ in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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

Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using weighted average.

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

Management decisions in accounting for inventory cost include all of the following except:

The consistency concept prescribes that a company use the same accounting methods period after period, so that financial statements are comparable across periods.

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