Question 1

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000,beginning inventory $8,000,purchases $16,000 and gross profit $20,000.How much was Cassie's ending inventory?

Accepted Answer

A) $4,000. 
B) $8,000. 
C) $6,000. 
D) $12,000.

Question 2

On December 15,2019,Transport Company accepted delivery of merchandise that it purchased on credit.As of December 31,2019,the company had neither recorded the transaction nor included the merchandise in its ending inventory amount because the seller's invoice had not been received.The effect of this omission on its balance sheet at December 31,2019, (end of the accounting period)was that

Accepted Answer

A) inventory and net income were overstated but liabilities were correct. 
B) net income was the only item affected by the omission. 
C) inventory and accounts payable were understated but net income was correct. 
D) assets and stockholders' equity were understated but liabilities were correct.

Question 3

Maxim Corp.has provided the following information about one of its products:  During the year,Maxim sold 400 units.
-
What is cost of goods sold using the average cost method?

Accepted Answer

A) $48,000. 
B) $64,000. 
C) $50,000. 
D) $62,000.

Question 4

Lauer Corporation has provided the following information about one of its laptop computers:  During the year,Lauer sold 750 laptop computers.
-
What was cost of goods sold using the LIFO cost flow assumption?

Accepted Answer

A) $725,000. 
B) $740,000. 
C) $735,000. 
D) $720,000.

Question 5

Which of the following statements is incorrect for a manufacturing entity?

Accepted Answer

A) Inventory is transferred from work in process to finished goods. 
B) Raw materials used are transferred to work in process. 
C) Finished goods inventory eventually becomes cost of goods sold. 
D) Cost of goods sold is recognized when the manufacturing process is complete.

Question 6

Compute the missing amounts that are numbered in parentheses for the income statement of each independent case.(Hint: Each case need not be calculated in the numerical order of the missing numbers. )

Accepted Answer

The answer of Compute the missing amounts that are numbered...

Question 7

How much was ending inventory when sales revenue was $500,000,purchases were $310,000,beginning inventory was $22,000,and gross profit was $200,000.

Accepted Answer

The answer of How much was ending inventory when sales...

Question 8

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

Accepted Answer

The answer of How much were inventory purchases when cost...

Question 9

Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31,2018 using the lower of cost or net realizable value valuation method?

Accepted Answer

A) The 2018 gross profit decreases. 
B) The 2019 cost of goods sold is effectively decreased if the inventory is sold during 2019. 
C) The 2018 ending inventory is decreased. 
D) The 2019 gross profit is not affected if the inventory is sold during 2019.

Question 10

On March 15,2019,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount. Which of the following journal entries is correct when Ryan Company pays for these goods on March 30,2019?

Accepted Answer

A)   
B)   
C)   
D)

Question 11

Which of the following costs does not become a part of inventory of a manufacturer?

Accepted Answer

A) The cost of raw materials used. 
B) The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) Rent on corporate headquarters.

Question 12

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

Accepted Answer

A) An automobile dealer. 
B) A custom jewelry store. 
C) A grocery store. 
D) An art dealer.

Question 13

Maxim Corp.has provided the following information about one of its products:  During the year,Maxim sold 400 units.
-
What is ending inventory using the average cost method?

Accepted Answer

A) $48,000. 
B) $64,000. 
C) $50,000. 
D) $62,000.

Question 14

During periods of decreasing unit costs,use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Accepted Answer

A) True 
 B)False

Question 15

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 17

When there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable,cash flow from operating activities increases by $1,000,000.

Accepted Answer

A) True 
 B)False

Question 18

If two companies each use different inventory accounting methods,the companies can be made comparable from information reported in the financial statements by

Accepted Answer

A) converting the FIFO Reserve to a LIFO inventory. 
B) converting inventory at cost to inventory at lower of cost or market (net realizable value). 
C) converting cost of goods sold to lower of cost or market (net realizable value). 
D) converting inventory on a LIFO basis to a FIFO basis using the LIFO Reserve.

Question 19

Tinker's cost of goods sold in the year of sale (2019)was $750,000 and 2018 cost of goods sold was $770,000.The inventory at the end of 2019 was $188,000 and at the end of 2018 the inventory was $208,000. Tinker's average number of days to sell its inventory during 2019 is closest to: (Use 365 days a year. )

Accepted Answer

A) 96 
B) 92 
C) 95 
D) 94

Question 20

Which of the following is correct when,in the same year,beginning inventory is understated by $1,300 and ending inventory is understated by $700?

Accepted Answer

A) Net income is understated by $600. 
B) Net income is understated by $2,000. 
C) Net income is overstated by $600. 
D) Net income is overstated by $2,000.

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000,beginning inventory $8,000,purchases $16,000 and gross profit $20,000.How much was Cassie's ending inventory?

Maxim Corp.has provided the following information about one of its products: During the year,Maxim sold 400 units. - What is cost of goods sold using the average cost method?

Lauer Corporation has provided the following information about one of its laptop computers: During the year,Lauer sold 750 laptop computers. - What was cost of goods sold using the LIFO cost flow assumption?

Which of the following statements is incorrect for a manufacturing entity?

Compute the missing amounts that are numbered in parentheses for the income statement of each independent case.(Hint: Each case need not be calculated in the numerical order of the missing numbers. )

How much was ending inventory when sales revenue was $500,000,purchases were $310,000,beginning inventory was $22,000,and gross profit was $200,000.

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31,2018 using the lower of cost or net realizable value valuation method?

On March 15,2019,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount. Which of the following journal entries is correct when Ryan Company pays for these goods on March 30,2019?

Which of the following costs does not become a part of inventory of a manufacturer?

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

Maxim Corp.has provided the following information about one of its products: During the year,Maxim sold 400 units. - What is ending inventory using the average cost method?

During periods of decreasing unit costs,use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

When there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable,cash flow from operating activities increases by $1,000,000.

If two companies each use different inventory accounting methods,the companies can be made comparable from information reported in the financial statements by

Which of the following is correct when,in the same year,beginning inventory is understated by $1,300 and ending inventory is understated by $700?