Question 1

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

Accepted Answer

A) True 
 B)False

Question 2

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales:  What is the amount of the cost of goods sold for this sale? (Round average cost per unit to 2 decimal places.)

Accepted Answer

A) $148.00 
B) $150.50 
C) $158.40 
D) $210.00 
E) $330.00

Question 3

Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.

Accepted Answer

A) True 
 B)False

Question 4

Costs included in the Merchandise Inventory account can include all of the following except:

Accepted Answer

A) Invoice price minus any discount. 
B) Transportation-in. 
C) Storage. 
D) Insurance. 
E) Damaged inventory that cannot be sold.

Question 5

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1.On October 2,it purchased 20 units at $205 each.11 units are sold on October 4.Using the perpetual FIFO inventory method,what amount will be reported as cost of goods sold for the 11 units that were sold?

Accepted Answer

A) $2,239. 
B) $2,255. 
C) $2,200. 
D) $2,228. 
E) $2,215.

Question 6

A company reported the following data related to its ending inventory:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Product } & \text { Units Available } & \text { Cost } & \text { Market } \
\hline 849 & 100 & \$ 10 & \$ 11 \
\hline 842 & 75 & 16 & 14 \
\hline 847 & 60 & 14 & 13 \
\hline 860 & 40 & 16 & 20 \
\hline
\end{array}$$

Accepted Answer

The answer of A company reported the following data related...

Question 7

The inventory valuation method that results in the lowest taxable income in a period of inflation is the:

Accepted Answer

A) LIFO method. 
B) FIFO method. 
C) Weighted-average cost method. 
D) Specific identification method. 
E) Gross profit method.

Question 8

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000.If the gross profit ratio is typically 30%,the estimated cost of the ending inventory under the gross profit method would be:

Accepted Answer

A) $60,000 
B) $180,000 
C) $30,000 
D) $90,000 
E) $120,000

Question 9

An overstated beginning inventory will ________ cost of goods sold and ________ net income.

Accepted Answer

The answer of An overstated beginning inventory will ________ cost...

Question 10

Calculate the ending inventory using LIFO for a company that uses a perpetual inventory system,using the information given below.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Units } & \text { Unit Cost } \
\hline \text { Beginning inventory } & 100 & \$ 10 \
\hline \text { Aug. 5 purchased } & 40 & 12 \
\hline \text { Aug. 10 sold } & 60 & - \
\hline \text { Aug. 15 purchased } & 70 & 13 \
\hline \text { Aug. 25 sold } & 50 & \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate the ending inventory using LIFO for...

Question 11

A company reports the following information regarding its inventory. Beginning inventory: cost is $80,000; retail is $130,000
Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory shows $135,000 worth of merchandise available at retail prices.What is the cost of the ending inventory calculated using the retail inventory method?

Accepted Answer

A) $135,000. 
B) $73,125. 
C) $78,300. 
D) $72,900. 
E) $105,000.

Question 12

On December 31 of the current year,Plunkett Company reported an ending inventory balance of $215,000.The following additional information is also available: 
-Plunkett sold and shipped goods costing $38,000 to Savannah Enterprises on December 28 with shipping terms of FOB shipping point.The goods were not included in the ending inventory amount of $215,000.
-Plunkett purchased goods costing $44,000 on December 29.The goods were shipped FOB destination and were received by Plunkett on January 2 of the following year.The shipment was a rush order that was supposed to arrive by December 31.These goods were included in the ending inventory balance of $215,000.
-Plunkett's ending inventory balance of $215,000 included $15,000 of goods being held on consignment from Carole Company.(Plunkett Company is the consignee.)
-Plunkett's ending inventory balance of $215,000 did not include goods costing $95,000 that were shipped to Plunkett on December 27 with shipping terms of FOB destination and were still in transit at year-end.
Based on the above information,the amount that Plunkett should report in ending inventory on December 31 is:

Accepted Answer

A) $194,000 
B) $209,000 
C) $200,000 
D) $171,000 
E) $156,000

Question 13

On September 1 of the current year,Scots Company experienced a flood that destroyed the company's entire inventory.Because the company had not completed its month end reporting for August,it must estimate the amount of inventory lost using the gross profit method.At the beginning of August,the company reported beginning inventory of $215,450.Inventory purchased during August was $192,530.Sales for the month of August 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

Question 14

The inventory valuation method that results in the highest taxable income in a period of inflation is the:

Accepted Answer

A) LIFO method. 
B) FIFO method. 
C) Weighted-average cost method. 
D) Specific identification method. 
E) Gross profit method.

Question 15

A company had the following purchases and sales during its first year of operations:  On December 31,there were 26 units remaining in ending inventory.Using the Periodic FIFO inventory valuation method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A) $8,670. 
B) $3,540. 
C) $5,400. 
D) $5,130. 
E) $3,270.

Question 16

The inventory turnover ratio is calculated as:

Accepted Answer

A) Cost of goods sold divided by average merchandise inventory. 
B) Sales divided by cost of goods sold. 
C) Ending inventory divided by cost of goods sold. 
D) Cost of goods sold divided by ending inventory. 
E) Cost of goods sold divided by ending inventory times 365.

Exam 5: Reporting and Analyzing Inventories