Deck 6: Merchandising Inventory

Question 1

The consistency principle states that businesses should use the same accounting methods from period to period.

Answer 1

True

Question 2

Changing from the LIFO (Last-In, First-Out)to specific-identification method of valuing inventory ignores the:

A)principle of conservatism.
B)principle of consistency.
C)principle of disclosure.
D)concept of materiality.

Answer 2

B

Question 3

The materiality concept requires that a company should report enough information for outsiders to make wise decisions about the company.

Answer 3

False

Question 4

A company discovers that its Cost of goods sold is understated by an insignificant amount. They do not need to correct the error because of the materiality concept.

Question 5

Which of the following states that a company must perform strictly proper accounting ONLY for items that are significant to the business's financial statements?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 6

A company reports that it uses the FIFO method of inventory costing. This is an example of the disclosure principle.

Question 7

A company discovers that its Cost of goods sold is understated by an insignificant amount. They do NOT need to correct the error because of the conservatism principle.

Question 8

Which of the following states that the business should use the same accounting methods from period to period?

A)Materiality concept
B)Consistency principle
C)Accounting conservatism
D)Disclosure principle

Question 9

A company is uncertain whether a complex transaction should be recorded as an asset or an expense. Under the conservatism principle, they should choose to treat it as an asset.

Question 10

A company is uncertain whether a complex transaction should be recorded as gain or loss. Under the conservatism principle, they should choose to treat it a loss.

Question 11

A company is uncertain whether a complex transaction should result in an asset being recorded at $100,000 or at $150,000. Under the conservatism principle, they should choose to show it at the lower amount.

Question 12

A company decides to ignore a very small error in their inventory balance. This is an example of which of the following principles?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 13

Which of the following states that a business must report enough information for outsiders to make knowledgeable decisions about the company?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 14

The lower-of-cost-or-market rule demonstrates accounting conservatism in action.

Question 15

The consistency principle states that a business should use the same accounting methods from period to period.

Question 16

The accounting principle that states that we should never anticipate gains is which of the following?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 17

A company changes its inventory costing method each period in order to maximize net income. This is a violation of the consistency principle.

Question 18

Which of the following requires that financial statements should report the LEAST favorable figures?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 19

Which of the following principles are reflected in the lower-of-cost-or-market rule?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 20

A company should NOT change the inventory costing method each period in order to maximize net income. This is an example of the disclosure principle.

Question 21

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average-cost inventory costing method, what is the amount of ending inventory on December 31?

A)$1,000
B)$1,250
C)$2,250
D)$1,500

Question 22

When a company uses LIFO, the Cost of goods sold correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.

Question 23

Under which of the following inventory costing methods is the Cost of goods sold based on the cost of the oldest purchases?

A)Specific-unit-cost
B)Average-cost
C)Last-In, First-Out
D)First-In, First-Out

Question 24

Which of the following concepts states that a company must perform strictly proper accounting ONLY for significant items?

A)Accounting conservatism
B)Materiality concept
C)Disclosure principle
D)Consistency principle

Question 25

Under Last-In, First-Out, the Cost of goods sold is based on the oldest purchases.

Question 26

Ending inventory equals the number of units on hand multiplied by the unit cost.

Question 27

The specific-unit-cost method of inventory costing is recommended when a business deals in unique and high-priced inventory items.

Question 28

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?

A)$1,500
B)$1,250
C)$1,000
D)$2,250

Question 29

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the Last-In, First-Out inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?

A)$4,000
B)$3,750
C)$6,750
D)$3,500

Question 30

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the December 31, 2013 balance sheet if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$490
B)$540
C)$560
D)$554

Question 31

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the Last-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?

A)$1,500
B)$1,250
C)$1,000
D)$2,250

Question 32

A new average cost is calculated after each purchase when a business is using which of the following methods?

A)Specific-unit-cost
B)Average-cost
C)Last-In, First-Out
D)First-In, First-Out

Question 33

When a company uses FIFO, the Cost of goods sold correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.

Question 34

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?

A)$6,750
B)$4,000
C)$3,500
D)$3,750

Question 35

Ending inventory equals the cost of goods available for sale less beginning inventory.

Question 36

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average cost inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?

A)$6,750
B)$3,750
C)$4,000
D)$3,500

Question 37

Under which of the following inventory costing methods is ending inventory based on the cost of the oldest purchases?

A)Specific-unit-cost
B)Average-cost
C)Last-In, First-Out
D)First-In, First-Out

Question 38

The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.

Question 39

Under which of the following inventory costing methods is ending inventory based on the cost of the most recent purchases?

A)Specific-unit-cost
B)Average-cost
C)Last-In, First-Out
D)First-In, First-Out

Question 40

Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?

A)Specific-unit-cost
B)Average-cost
C)Last-In, First-Out
D)First-In, First-Out

Question 41

Metro Computer Company had the following balances and transactions during 2014. What would the Inventory amount be as reported on the balance sheet at December 31, 2014 if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$7,000
B)$8,600
C)$8,000
D)$7,750

Question 42

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of goods sold be as reported on the income statement at December 31, 2014 if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$15,750
B)$12,000
C)$3,750
D)$15,000

Question 43

Metro Computer Company had the following balances and transactions during 2014. What would the company's Inventory amount be on the December 31, 2014 balance sheet if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$7,500
B)$8,000
C)$7,750
D)$7,300

Question 44

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the December 31, 2013 balance sheet if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

A)$537
B)$554
C)$490
D)$560

Question 45

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the December 31, 2013 balance sheet if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$490
B)$554
C)$560
D)$540

Question 46

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies LIFO. How much is Cost of goods sold for the month?

A)$180
B)$170
C)$150
D)$110

Question 47

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses FIFO costing, how much was the Cost of goods sold for the month?

A)$1,400
B)$1,520
C)$1,380
D)$1,850

Question 48

Samson Company had the following balances and transactions during 2013. What would the company's Cost of goods sold be on the December 31, 2013 income statement if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$1,760
B)$1,610
C)$1,740
D)$1,840

Question 49

Metro Computer Company had the following balances and transactions during 2014. What would the Inventory amount be as reported on the balance sheet at December 31, 2014 if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

A)$7,900
B)$8,600
C)$8,000
D)$7,750

Question 50

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies the average-costing method. How much is Cost of goods sold for the month? (When calculating average cost, please round to the nearest cent. When calculating Cost of goods sold and Ending inventory, please round to the nearest whole dollar.)

A)$162
B)$170
C)$158
D)$168

Question 51

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies the average-costing method. How much is the Ending inventory balance? (When calculating average cost, please round to the nearest cent. When calculating Cost of goods sold and Ending inventory, please round to the nearest whole dollar.)

A)$122
B)$126
C)$118
D)$109

Question 52

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies FIFO. How much is the Ending inventory balance?

A)$116
B)$130
C)$132
D)$110

Question 53

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies LIFO. How much is the Ending inventory balance?

A)$116
B)$130
C)$132
D)$110

Question 54

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses LIFO costing, how much was the Cost of goods sold for the month?

A)$1,400
B)$1,850
C)$1,380
D)$1,640

Question 55

Samson Company had the following balances and transactions during 2013. What would the company's Cost of goods sold be on the December 31, 2013 income statement if the perpetual Last-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$1,760
B)$1,810
C)$1,690
D)$1,540

Question 56

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of goods sold be as reported on the income statement at December 31, 2014 if the perpetual First-In, First-Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$15,000
B)$12,000
C)$16,000
D)$15,500

Question 57

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of goods sold be as reported on the income statement at December 31, 2014 if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

A)$13,900
B)$14,600
C)$15,600
D)$17,750

Question 58

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses FIFO costing, how much was the Ending inventory balance?

A)$2.980
B)$3,120
C)$2,200
D)$2,930

Question 59

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies FIFO. How much is the Cost of goods sold for the month?

A)$170
B)$150
C)$180
D)$165

Question 60

Samson Company had the following balances and transactions during 2013. What would the company's Cost of goods sold be on the December 31, 2013 income statement if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

A)$1,590
B)$1,840
C)$1,746
D)$1,652

Question 61

A company that uses the perpetual inventory system purchased an order of 500 pallets of industrial soap for $8,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $10,000 on account. Which of the following entries correctly records the Sales revenue?

A)
B)
C)
D)

Question 62

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$135
B)$249
C)$143
D)$228

Question 63

Berring Sales uses the average-cost method. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale, and calculate the Inventory balance after the January 14 sale. (Please round to the nearest whole dollar.)

A)$380
B)$330
C)$230
D)$228

Question 64

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale and calculate the Cost of goods sold for the sale on January 14. (Please round to the nearest whole dollar.)

A)$40
B)$46
C)$38
D)$43

Question 65

A company that uses the perpetual inventory system sold $1,000 of goods to a customer on account. The inventory had been purchased by the company for $400. Which of the following journal entries correctly records the Cost of goods sold?

A)
B)
C)
D)

Question 66

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Cost of goods sold for the month of January. (Please round to the nearest whole dollar.)

A)$240
B)$246
C)$249
D)$388

Question 67

Berring Sales uses the average-cost method. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale, and calculate the Cost of goods sold for the January 14 sale. (Please round to the nearest whole dollar.)

A)$38
B)$33
C)$42
D)$40

Question 68

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Cost of goods sold for the month of January. (Please round to the nearest whole dollar.)

A)$242
B)$249
C)$230
D)$228

Question 69

Berring Sales uses the average-cost method. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Cost of goods sold for the month of January. (Please round to the nearest whole dollar.)

A)$243
B)$249
C)$230
D)$228

Question 70

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale, and calculate the Cost of goods sold for the January 14 sale. (Please round to the nearest whole dollar.)

A)$38
B)$33
C)$43
D)$40

Question 71

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale, and calculate the Inventory balance after the January 14 sale. (Please round to the nearest whole dollar.)

A)$380
B)$330
C)$230
D)$228

Question 72

Berring Sales uses the average-cost method. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$135
B)$249
C)$141
D)$228

Question 73

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses LIFO costing, how much was the Ending inventory balance?

A)$2.980
B)$3,120
C)$2,480
D)$2,930

Question 74

A company that uses the perpetual inventory system sold $1,000 of goods to a customer for cash. Which of the following journal entries correctly records the Sales revenue?

A)
B)
C)
D)

Question 75

A company that uses the perpetual inventory system sold $1,000 of goods to a customer on account. Which of the following journal entries correctly records the Sales revenue?

A)
B)
C)
D)

Question 76

A company that uses the perpetual inventory system purchased an order of 500 pallets of industrial soap for $8,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $10,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the Cost of goods sold?

A)
B)
C)
D)

Question 77

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record through the January 14 sale and calculate the inventory balance after the sale on January 14. (Please round to the nearest whole dollar.)

A)$230
B)$228
C)$330
D)$216

Question 78

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses average-cost, how much was the Cost of goods sold for the month?

A)$1,400
B)$1,850
C)$1,380
D)$1,615

Question 79

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses average-cost, how much was the Ending inventory balance?

A)$2.980
B)$2,480
C)$2,715
D)$2,930

Question 80

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On January 14, the company sold 10 units. On January 29, the company sold 50 units. Complete the inventory record and calculate the Ending inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$128
B)$135
C)$112
D)$388