Question 1

The inventory method used by a company will affect profitability by affecting the amount of income tax a company owes.

Accepted Answer

A) True 
 B)False

Question 2

Busch,Inc.is a successful company,but has a lower inventory turnover rate than the industry average.Of the following,the most likely explanation is that Busch:

Accepted Answer

A) Has a just-in-time inventory system. 
B) Uses LIFO (assume rising purchase costs). 
C) Offers its customers an unusually large selection of merchandise. 
D) Sells unusually popular items. 
A) Has a just-in-time inventory system. 
B) Uses LIFO (assume rising purchase costs). 
C) Offers its customers an unusually large selection of merchandise. 
D) Sells unusually popular items.

Question 3

Periodic inventory systems
Funky Fashions uses a periodic inventory system.The beginning inventory of a particular product,and the purchases during the current year,were as follows:   At December 31,the ending inventory of this product consisted of 1,300 units.
Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation:

Accepted Answer

The answer of Periodic inventory systems
Funky Fashions uses a periodic...

Question 4

In a periodic inventory system,understating the amount of ending inventory will cause an understatement of gross profit in the current year.

Accepted Answer

A) True 
 B)False

Question 5

Assume ending inventory is overstated at the end of Year 1 and correctly stated at the end of Year 2.Owners' equity will be correctly stated at the end of Year 2.

Accepted Answer

A) True 
 B)False

Question 6

Colonial uses the retail method to estimate its monthly cost of goods sold and month-end inventory.At August 31,the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases)totaled $270,000.These goods had been priced for resale at $675,000.Sales in August totaled $450,000.The estimated inventory at August 31 is:

Accepted Answer

A) $48,000. 
B) $90,000. 
C) $120,000. 
D) $270,000. 
A) $48,000. 
B) $90,000. 
C) $120,000. 
D) $270,000.

Question 7

[The following information applies to the questions displayed below.]
Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250).Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%.
-Refer to the information above.What was the cost of goods sold for the month?

Accepted Answer

A) $129,000 
B) $171,000 
C) $235,000 
D) $304,750 
A) $129,000 
B) $171,000 
C) $235,000 
D) $304,750

Question 8

Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?

Accepted Answer

A) LIFO 
B) FIFO 
C) Specific identification 
D) Average cost 
A) LIFO 
B) FIFO 
C) Specific identification 
D) Average cost

Question 9

[The following information applies to the questions displayed below.]
Harding Systems,Inc.uses a periodic inventory system.The purchases of a particular product during the year are shown below:
   At December 31 the ending inventory consisted of 1,500 units.
-Compute the cost of the ending inventory based on the average-cost method of inventory valuation.(Round your final answer to the nearest dollar value. )

Accepted Answer

A) $14,512 
B) $11,694 
C) $29,560 
D) $28,450 
A) $14,512 
B) $11,694 
C) $29,560 
D) $28,450

Question 10

[The following information applies to the questions displayed below.]
Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250).Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%.
-Refer to the information above.What were the goods available for sale for the month?

Accepted Answer

A) $129,000 
B) $171,000 
C) $235,000 
D) $304,750 
A) $129,000 
B) $171,000 
C) $235,000 
D) $304,750

Question 11

A physical inventory is usually taken during a period of high activity.

Accepted Answer

A) True 
 B)False

Question 12

Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

Accepted Answer

A) LIFO 
B) FIFO 
C) Average cost. 
D) Specific identification 
A) LIFO 
B) FIFO 
C) Average cost. 
D) Specific identification

Question 13

In a perpetual inventory system,the flow of inventory cost is:

Accepted Answer

A) First through the income statement,then through the balance sheet. 
B) First through the balance sheet,then through the income statement. 
C) Only through the balance sheet and not the income statement. 
D) Only through the income statement and not the balance sheet. 
A) First through the income statement,then through the balance sheet. 
B) First through the balance sheet,then through the income statement. 
C) Only through the balance sheet and not the income statement. 
D) Only through the income statement and not the balance sheet.

Question 14

A clothing store would logically have a higher inventory turnover rate than would a doughnut shop.

Accepted Answer

A) True 
 B)False

Question 15

[The following information applies to the questions displayed below.]
Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250).Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%.
-Refer to the information above.What were the gross sales for the month?

Accepted Answer

A) $129,000 
B) $171,000 
C) $300,000 
D) $304,750 
A) $129,000 
B) $171,000 
C) $300,000 
D) $304,750

Question 16

[The following information applies to the questions displayed below.]
Beech Soda,Inc.uses a perpetual inventory system.The company's beginning inventory of a particular product and its purchases during the month of January were as follows:
   On January 14,Beech Soda,Inc.sold 25 units of this product.The other 28 units remained in inventory at January 31.
-Assuming that Beech Soda uses the FIFO cost flow assumption,the cost of goods sold to be recorded at January 14 is:

Accepted Answer

A) $278. 
B) $268. 
C) $393. 
D) $673. 
A) $278. 
B) $268. 
C) $393. 
D) $673.

Question 17

The specific identification method is more appropriate than a cost flow assumption method:

Accepted Answer

A) For a large inventory of identical low-priced items. 
B) If each item in the inventory is unique. 
C) If purchase costs are rising. 
D) If purchase costs are falling. 
A) For a large inventory of identical low-priced items. 
B) If each item in the inventory is unique. 
C) If purchase costs are rising. 
D) If purchase costs are falling.

Question 18

[The following information applies to the questions displayed below.]
Castle TV,Inc.purchased 1,000 monitors on January 5 at a per-unit cost of $185,and another 1,000 units on January 31 at a per-unit cost of $230.In the period from February 1 through year-end,the company sold 1,800 units of this product.At year-end,200 units remained in inventory.
-Assume that Castle TV,Inc.uses the LIFO flow assumption.The cost of the 200 units in the year-end inventory is:

Accepted Answer

A) $37,000. 
B) $46,000. 
C) $41,500. 
D) $83,000. 
A) $37,000. 
B) $46,000. 
C) $41,500. 
D) $83,000.

Question 19

When prices are increasing,which inventory method will produce the highest cost of goods sold?

Accepted Answer

A) FIFO 
B) LIFO 
C) Average cost 
D) Cost of goods sold will be the same under these methods. 
A) FIFO 
B) LIFO 
C) Average cost 
D) Cost of goods sold will be the same under these methods.

Question 20

The primary reason a physical inventory is taken is to:

Accepted Answer

A) Adjust the perpetual inventory record for unrecorded shrinkage losses. 
B) Ensure the periodic inventory record is valued correctly. 
C) Both ensure the periodic inventory record is being stored securely and that it is valued correctly. 
D) Ensure the perpetual inventory record is being stored in a secure manner. 
A) Adjust the perpetual inventory record for unrecorded shrinkage losses. 
B) Ensure the periodic inventory record is valued correctly. 
C) Both ensure the periodic inventory record is being stored securely and that it is valued correctly. 
D) Ensure the perpetual inventory record is being stored in a secure manner.

The inventory method used by a company will affect profitability by affecting the amount of income tax a company owes.

Busch,Inc.is a successful company,but has a lower inventory turnover rate than the industry average.Of the following,the most likely explanation is that Busch:

In a periodic inventory system,understating the amount of ending inventory will cause an understatement of gross profit in the current year.

Assume ending inventory is overstated at the end of Year 1 and correctly stated at the end of Year 2.Owners' equity will be correctly stated at the end of Year 2.

Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?

A physical inventory is usually taken during a period of high activity.

Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

In a perpetual inventory system,the flow of inventory cost is:

A clothing store would logically have a higher inventory turnover rate than would a doughnut shop.

The specific identification method is more appropriate than a cost flow assumption method:

When prices are increasing,which inventory method will produce the highest cost of goods sold?

The primary reason a physical inventory is taken is to:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters

Exam 8: Inventories and the Cost of Goods Sold

The inventory method used by a company will affect profitability by affecting the amount of income tax a company owes.

Busch,Inc.is a successful company,but has a lower inventory turnover rate than the industry average.Of the following,the most likely explanation is that Busch:

In a periodic inventory system,understating the amount of ending inventory will cause an understatement of gross profit in the current year.

Assume ending inventory is overstated at the end of Year 1 and correctly stated at the end of Year 2.Owners' equity will be correctly stated at the end of Year 2.

Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?

A physical inventory is usually taken during a period of high activity.

Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

In a perpetual inventory system,the flow of inventory cost is:

A clothing store would logically have a higher inventory turnover rate than would a doughnut shop.

The specific identification method is more appropriate than a cost flow assumption method:

When prices are increasing,which inventory method will produce the highest cost of goods sold?

The primary reason a physical inventory is taken is to:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters