Question 1

When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Gross margin. 
A)  FIFO. 
B)  LIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Gross margin.

Question 2

Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows: Thelma Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods sold figure for Year 2 would be:

Accepted Answer

A)  $291,000 
B)  $276,000 
C)  $264,000 
D)  $285,000 
E)  $249,000 
A)  $291,000 
B)  $276,000 
C)  $264,000 
D)  $285,000 
E)  $249,000

Question 3

Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between ___________________ and __________________.

Accepted Answer

Cost of go

Question 4

A company reported the following data:
Required:
1. Calculate the company's merchandise inventory turnover for each year.
2. Comment on the company's efficiency in managing its inventory.

Accepted Answer

1.
2. The company's efficiency

Question 5

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

Accepted Answer

A) True 
 B)False

Question 6

Pettis needs to determine its year-end inventory. The warehouse contains 20,000 units, of which 3,000 were damaged by flood and cannot be sold. Another 2,000 units, shipped FOB shipping point, are in transit. The company also consigns goods and has 4,000 units at a consignee's location. How many units should Pettis include in its year-end inventory?

Accepted Answer

A)  29,000 
B)  21,000 
C)  23,000 
D)  19,000 
E)  26,000 
A)  29,000 
B)  21,000 
C)  23,000 
D)  19,000 
E)  26,000

Question 7

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 8

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

Accepted Answer

The answer of The _____________________ is a measure of how...

Question 9

A company reported the following information regarding its inventory. Beginning inventory: cost is $70,000; retail is $130,000
Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory showed $105,000 worth of merchandise available at retail prices. What is the cost of the ending inventory?

Accepted Answer

A)  $48,300. 
B)  $56,700. 
C)  $56,441. 
D)  $78,300. 
E)  $105,000. 
A)  $48,300. 
B)  $56,700. 
C)  $56,441. 
D)  $78,300. 
E)  $105,000.

Question 10

On May 1 of the current year, Peck Company experienced a 500 year flood which destroyed the company's entire inventory. The company had not completed its month end reporting for April and must estimate the amount of inventory lost. At the beginning of April, the company reported beginning inventory of $215,450. Inventory purchased during April (until the date of the disaster) was $192,530. Sales for the month of April were $542,500. Assuming the company's typical gross profit ratio is 40%, estimate the amount of inventory destroyed in the flood.

Accepted Answer

A)  $87,480 
B)  $134,520 
C)  $109,980 
D)  $82,480 
E)  $81,480 
A)  $87,480 
B)  $134,520 
C)  $109,980 
D)  $82,480 
E)  $81,480

Question 11

All of the following statements related to goods on consignment are except:

Accepted Answer

A)  Goods on consignment are goods provided by the owner, call the consignor. 
B)  A consignee sells goods for the owner. 
C)  The consignor continues to own the consigned goods. 
D)  The consignee reports the goods in its inventory until sold. 
E)  The consignor reports the goods in its inventory until sold. 
A)  Goods on consignment are goods provided by the owner, call the consignor. 
B)  A consignee sells goods for the owner. 
C)  The consignor continues to own the consigned goods. 
D)  The consignee reports the goods in its inventory until sold. 
E)  The consignor reports the goods in its inventory until sold.

Question 12

How do the consistency concept and the full disclosure principle affect inventory valuation?

Accepted Answer

The consistency concept requires that co

Question 13

When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Gross margin. 
A)  FIFO. 
B)  LIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Gross margin.

Question 14

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 15

The full disclosure principle:

Accepted Answer

A)  Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income. 
B)  Requires that companies use the same accounting method for inventory valuation period after period. 
C)  Is not subject to the materiality principle. 
D)  Is only applied to retailers. 
E)  Is also called the consistency principle. 
A)  Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income. 
B)  Requires that companies use the same accounting method for inventory valuation period after period. 
C)  Is not subject to the materiality principle. 
D)  Is only applied to retailers. 
E)  Is also called the consistency principle.

Question 16

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover 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 17

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

Accepted Answer

A) True 
 B)False

Question 18

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

Accepted Answer

Last in, f

Question 19

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 perpetual 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 20

_______________________ is the estimated sales price of damaged goods minus the cost of making the sale.

Accepted Answer

Net realiz

Exam 6: Inventories and Cost of Sales

When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?

Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between ___________________ and __________________.

A company reported the following data: Required: 1. Calculate the company's merchandise inventory turnover for each year. 2. Comment on the company's efficiency in managing its inventory.

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

All of the following statements related to goods on consignment are except:

How do the consistency concept and the full disclosure principle affect inventory valuation?

When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest gross profit and income?

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

The full disclosure principle:

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

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

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 perpetual inventory method, what is the cost of the 12 units that were sold?

_______________________ is the estimated sales price of damaged goods minus the cost of making the sale.

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

Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between _ and .