Question 1

Regardless of the inventory costing system used, cost of goods available for sale must be allocated between

Accepted Answer

A)  beginning inventory and net purchases during the period. 
B)  ending inventory and beginning inventory. 
C)  net purchases during the period and ending inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and cost of goods sold. 
A)  beginning inventory and net purchases during the period. 
B)  ending inventory and beginning inventory. 
C)  net purchases during the period and ending inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and cost of goods sold.

Question 2

Goods on consignment:

Accepted Answer

A)  Are goods shipped by the owner to the consignee who sells the goods for the owner. 
B)  Are reported in the consignee's books as inventory. 
C)  Are goods shipped to the consignor who sells the goods for the owner. 
D)  Are not reported in the consignor's inventory since they do not have possession of the inventory. 
E)  Are always paid for by the consignee when they take possession. 
A)  Are goods shipped by the owner to the consignee who sells the goods for the owner. 
B)  Are reported in the consignee's books as inventory. 
C)  Are goods shipped to the consignor who sells the goods for the owner. 
D)  Are not reported in the consignor's inventory since they do not have possession of the inventory. 
E)  Are always paid for by the consignee when they take possession.

Question 3

Damaged and obsolete goods that can be sold:

Accepted Answer

A)  Are never counted as inventory. 
B)  Are included in inventory at their full cost. 
C)  Are included in inventory at their net realizable value. 
D)  Should be disposed of immediately. 
E)  Are assigned a value of zero. 
A)  Are never counted as inventory. 
B)  Are included in inventory at their full cost. 
C)  Are included in inventory at their net realizable value. 
D)  Should be disposed of immediately. 
E)  Are assigned a value of zero.

Question 4

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

Accepted Answer

The answer of Match the following terms a through j...

Question 5

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Accepted Answer

Each purchase of merchandise is debited

Question 8

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

Accepted Answer

First in,

Question 9

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's net realizable value because LIFO inventory leaves the oldest costs in inventory.

Accepted Answer

A) True 
 B)False

Question 10

What is the effect of an error in the ending inventory balance on the income statement?

Accepted Answer

An inventory error causes misstatements

Question 11

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

Accepted Answer

The answer of Using the information given below for a...

Question 12

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale?

Accepted Answer

A)  $140. 
B)  $160. 
C)  $210. 
D)  $380. 
E)  $590. 
A)  $140. 
B)  $160. 
C)  $210. 
D)  $380. 
E)  $590.

Question 13

Identify the inventory valuation method that is being described for each situation below. In all cases, assume a period of rising prices. Use the following to identify the inventory valuation method:
a. The method that can only be used if each inventory item can be matched with a specific purchase and its invoice.
b. The method that will cause the company to have the lowest income taxes.
c. The method that will cause the company to have the lowest cost of goods sold.
d. The method that will assign a value to inventory that approximates its current cost.
e. The method that will tend to smooth out erratic changes in costs.

Accepted Answer

a. SI
b. L

Question 14

LIFO assumes that inventory costs flow in the order incurred.

Accepted Answer

A) True 
 B)False

Question 15

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period.

Accepted Answer

The answer of Apply the retail method to the following...

Question 16

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 LIFO.

Accepted Answer

The answer of A company reported the current month purchase...

Question 17

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

Accepted Answer

A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276 
A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276

Question 18

If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:

Accepted Answer

A)  Cost of goods sold. 
B)  Gross profit. 
C)  Net sales. 
D)  Current assets. 
E)  Net income. 
A)  Cost of goods sold. 
B)  Gross profit. 
C)  Net sales. 
D)  Current assets. 
E)  Net income.

Question 19

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 20

In the retail inventory method of inventory valuation, the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Accepted Answer

A) True 
 B)False

Exam 6: Inventories and Cost of Sales

Regardless of the inventory costing system used, cost of goods available for sale must be allocated between

Goods on consignment:

Damaged and obsolete goods that can be sold:

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

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

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

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's net realizable value because LIFO inventory leaves the oldest costs in inventory.

What is the effect of an error in the ending inventory balance on the income statement?

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

LIFO assumes that inventory costs flow in the order incurred.

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period.

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 LIFO.

If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:

An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold.

In the retail inventory method of inventory valuation, the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

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

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