Question 1

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following accounts would not appear as an asset on a manufacturer's balance sheet?

Accepted Answer

A) Finished Goods 
B) Work in Process 
C) Factory Overhead 
D) Raw Materials 
A) Finished Goods 
B) Work in Process 
C) Factory Overhead 
D) Raw Materials C

Question 3

The determination of the balance sheet cost of merchandise inventory is not important to the determination of net income.

Accepted Answer

A) True 
 B)False  False

Question 4

Periodic and perpetual are examples of inventory costing systems.

Accepted Answer

A) True 
 B)False

Question 5

Use this information to answer the following question.   A periodic inventory system is used; ending inventory is 150 units.
What is ending inventory under the average-cost method?

Accepted Answer

A) $900 
B) $1,050 
C) $1,350 
D) $1,200 
A) $900 
B) $1,050 
C) $1,350 
D) $1,200

Question 6

Assume that during the physical count of the inventory of a large corporation last year,$650,000 of merchandise was not counted.The error was not detected,and the financial statements for the current fiscal year were prepared.Identify the individual statements that would be affected and explain the effect the error would have on each of these statements.

Accepted Answer

By understating last year's ending inven

Question 7

When the cost of inventory is written down due to a market decline,a loss must be recorded.

Accepted Answer

A) True 
 B)False

Question 8

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.(Show your work.)
Assuming that a periodic inventory system is used

Accepted Answer

a.Average-cost: $2,240 ($5,600

Question 9

Which of the following is a reason for not using the specific identification method?

Accepted Answer

A) It is impractical to keep track of the purchase and sale of individual items. 
B) Deciding which of many identical items sold would be arbitrary. 
C) Deciding whether lower or higher-priced identical items sold could be a means of manipulating income. 
D) All of these are reasons for not using the specific identification method. 
A) It is impractical to keep track of the purchase and sale of individual items. 
B) Deciding which of many identical items sold would be arbitrary. 
C) Deciding whether lower or higher-priced identical items sold could be a means of manipulating income. 
D) All of these are reasons for not using the specific identification method.

Question 10

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

Accepted Answer

A) True 
 B)False

Question 11

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Accepted Answer

A) Materiality 
B) Full disclosure 
C) Matching 
D) Conservatism 
A) Materiality 
B) Full disclosure 
C) Matching 
D) Conservatism

Question 12

The lower-of-cost-or-market rule implies that it is a violation of the conservatism concept to carry inventory at a cost that is in excess of its market value.

Accepted Answer

A) True 
 B)False

Question 13

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

Accepted Answer

Under the perpetual system,cost of goods

Question 14

A cost-to-retail percentage must be calculated when applying the gross profit method.

Accepted Answer

A) True 
 B)False

Question 15

A retail store had goods available for sale during the period of $250,000 at retail and $100,000 at cost.It has ending inventory of $28,500 at retail.What is the estimated cost of goods sold?

Accepted Answer

A) $71,500 
B) $94,300 
C) $88,600 
D) $82,900 
A) $71,500 
B) $94,300 
C) $88,600 
D) $82,900

Question 16

Specific identification is a very popular inventory method because it is very easy to apply.

Accepted Answer

A) True 
 B)False

Question 17

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Accepted Answer

A) True 
 B)False

Question 18

Cost of goods sold equals $250,000,and average inventory equals $100,000.Days' inventory on hand equals

Accepted Answer

A) 91.3 days. 
B) 146.0 days. 
C) 821.9 days. 
D) 912.5 days. 
A) 91.3 days. 
B) 146.0 days. 
C) 821.9 days. 
D) 912.5 days.

Question 19

Inventory methods such as LIFO and FIFO deal more with cost flow than with goods flow.

Accepted Answer

A) True 
 B)False

Question 20

An overstatement of beginning inventory in a period will result in an overstatement of gross margin in the next period.

Accepted Answer

A) True 
 B)False

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Which of the following accounts would not appear as an asset on a manufacturer's balance sheet?

The determination of the balance sheet cost of merchandise inventory is not important to the determination of net income.

Periodic and perpetual are examples of inventory costing systems.

Use this information to answer the following question. A periodic inventory system is used; ending inventory is 150 units. What is ending inventory under the average-cost method?

When the cost of inventory is written down due to a market decline,a loss must be recorded.

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.(Show your work.) Assuming that a periodic inventory system is used

Which of the following is a reason for not using the specific identification method?

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

The lower-of-cost-or-market rule implies that it is a violation of the conservatism concept to carry inventory at a cost that is in excess of its market value.

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

A cost-to-retail percentage must be calculated when applying the gross profit method.

A retail store had goods available for sale during the period of $250,000 at retail and $100,000 at cost.It has ending inventory of $28,500 at retail.What is the estimated cost of goods sold?

Specific identification is a very popular inventory method because it is very easy to apply.

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Cost of goods sold equals $250,000,and average inventory equals $100,000.Days' inventory on hand equals

Inventory methods such as LIFO and FIFO deal more with cost flow than with goods flow.

An overstatement of beginning inventory in a period will result in an overstatement of gross margin in the next period.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters

Exam 7: Inventories

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Which of the following accounts would not appear as an asset on a manufacturer's balance sheet?

The determination of the balance sheet cost of merchandise inventory is not important to the determination of net income.

Periodic and perpetual are examples of inventory costing systems.

Use this information to answer the following question. A periodic inventory system is used; ending inventory is 150 units. What is ending inventory under the average-cost method?

When the cost of inventory is written down due to a market decline,a loss must be recorded.

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.(Show your work.) Assuming that a periodic inventory system is used

Which of the following is a reason for not using the specific identification method?

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

The lower-of-cost-or-market rule implies that it is a violation of the conservatism concept to carry inventory at a cost that is in excess of its market value.

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

A cost-to-retail percentage must be calculated when applying the gross profit method.

A retail store had goods available for sale during the period of $250,000 at retail and $100,000 at cost.It has ending inventory of $28,500 at retail.What is the estimated cost of goods sold?

Specific identification is a very popular inventory method because it is very easy to apply.

The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

Cost of goods sold equals $250,000,and average inventory equals $100,000.Days' inventory on hand equals

Inventory methods such as LIFO and FIFO deal more with cost flow than with goods flow.

An overstatement of beginning inventory in a period will result in an overstatement of gross margin in the next period.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters