Question 1

Eastview Company uses a periodic LIFO inventory system,and has the following purchases and sales:  What is the value of cost of goods sold?

Accepted Answer

A) $2,730. 
B) $2,750. 
C) $2,670. 
D) $440. 
E) $380.

Question 2

Hull Company reported the following income statement information for the current year:  The beginning inventory balance is correct.However,the ending inventory figure was overstated by $20,000.Given this information,the correct gross profit would be:

Accepted Answer

A) $149,000. 
B) $169,000. 
C) $129,000. 
D) $142,000. 
E) $112,000.

Question 3

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:

Accepted Answer

A) The expense recognition principle. 
B) The materiality constraint. 
C) The cost principle. 
D) The conservation constraint principle. 
E) The lower of cost or market principle.

Question 4

A company uses the periodic inventory system,and the following information is available.All purchases and sales are on credit.The selling price for the merchandise is $11 per unit.
 $$\begin{array} { | l | l | l | l | l | } 
\hline & & \text { Units } & \text { Unit Cost } & \text { Total Cost } \
\hline 6 / 01 & \text { Inventory Balance } & 30 & \$ 3 & \$ 90 \
\hline 6 / 06 & \text { Purchase } & 70 & 4 & 280 \
\hline 6 / 11 & \text { Purchase } & 45 & 5 & 225 \
\hline 6 / 16 & \text { Purchase } & 50 & 6 & 300 \
\hline & \text { Goods available } & 195 & & \$ 895 \
\hline 6 / 12 & \text { Sale } & 100 & & \
\hline 6 / 20 & \text { Sale } & 60 & & \
\hline & \text { Goods sold } & 160 & & \
\hline 6 / 31 & \text { Inventory Balance } & 35 & & \
\hline
\end{array}$$ Required:
Determine the cost of the ending inventory and the cost of goods sold for June using the LIFO method.

Accepted Answer

The answer of A company uses the periodic inventory system,and...

Question 5

An understatement of the ending inventory balance will overstate cost of goods sold and understate net income.

Accepted Answer

A) True 
 B)False

Question 6

________ is the estimated sales price of damaged goods minus the cost of making the sale.

Accepted Answer

The answer of ________ is the estimated sales price of...

Question 7

The understatement of the ending inventory balance causes:

Accepted Answer

A) Cost of goods sold to be overstated and net income to be understated. 
B) Cost of goods sold to be overstated and net income to be overstated. 
C) Cost of goods sold to be understated and net income to be understated. 
D) Cost of goods sold to be understated and net income to be overstated. 
E) Cost of goods sold to be overstated and net income to be correct.

Question 8

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements.The following information is available: Beginning inventory,January 1: $4,000
Net sales: $80,000
Net purchases: $78,000
The company's gross margin ratio is 25%.Using the gross profit method,the estimated ending inventory value would be:

Accepted Answer

A) $82,000. 
B) $60,000. 
C) $20,000. 
D) $22,000. 
E) $19,500.

Question 9

Under FIFO,the most recent costs are assigned to ending inventory.

Accepted Answer

A) True 
 B)False

Question 10

Eastview Company uses a perpetual LIFO inventory system,and has the following purchases and sales:  What is the value of cost of goods sold?

Accepted Answer

A) $2,730. 
B) $2,750. 
C) $2,670. 
D) $440. 
E) $380.

Question 11

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 Perpetual LIFO inventory valuation method,what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

Accepted Answer

A) $3,405. 
B) $3,270. 
C) $3,200. 
D) $3,364. 
E) $5,400.

Question 12

Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except:

Accepted Answer

A) LIFO method. 
B) FIFO method. 
C) Specific identification method. 
D) Weighted average method. 
E) Retail method.

Question 13

A company has the following per unit original costs and replacement costs for its inventory.LCM is applied to individual items. Part A: 50 units with a cost of $5,and replacement cost of $4.50
Part B: 75 units with a cost of $6,and replacement cost of $6.50
Part C: 160 units with a cost of $3,and replacement cost of $2.50
Under the lower of cost or market method,the total value of this company's ending inventory is:

Accepted Answer

A) $1,180.00. 
B) $1,075.00. 
C) $1,112.50. 
D) $1,217.50. 
E) $1,137.50.

Question 14

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 Perpetual LIFO 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) $5,400. 
C) $5,470. 
D) $5,130. 
E) $5,305.

Question 15

Most companies do not take a physical count of inventory each year,but rather rely on inventory records to determine the inventory value.

Accepted Answer

A) True 
 B)False

Question 16

A company's current inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

Accepted Answer

A) Debit Merchandise Inventory $25,000; credit Cost of Goods Sold $25,000. 
B) Debit Cost of Goods Sold $30,000; credit Merchandise Inventory $30,000. 
C) Debit Cost of Goods Sold $5,000; credit Merchandise Inventory $5,000. 
D) Debit Loss on Inventory $5,000; credit Cost of Goods Sold $5,000. 
E) Debit Merchandise Inventory $30,000; credit Cost of Goods Sold $25,000.

Question 17

Sandoval needs to determine its year-end inventory.The warehouse contains 20,000 units,of which 3,000 were damaged by flood and are not sellable.Another 2,000 units were purchased from Markor Company,FOB shipping point,and are currently in transit.The company also consigns goods and has 4,000 units at a consignee's location.How many units should Sandoval include in its year-end inventory?

Accepted Answer

A) 29,000 
B) 21,000 
C) 23,000 
D) 19,000 
E) 26,000

Question 18

Sarbanes Oxley (SOX)demands that companies safeguard inventory and properly report it.List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory.

Accepted Answer

The answer of Sarbanes Oxley (SOX)demands that companies safeguard inventory...

Question 19

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Accepted Answer

A) True 
 B)False

Question 20

A company had the following purchases and sales during its first month of operations:  Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places.)

Accepted Answer

A) $84. 
B) $61. 
C) $23. 
D) $27. 
E) $5.

Exam 5: Reporting and Analyzing Inventories

Eastview Company uses a periodic LIFO inventory system,and has the following purchases and sales: What is the value of cost of goods sold?

Hull Company reported the following income statement information for the current year: The beginning inventory balance is correct.However,the ending inventory figure was overstated by $20,000.Given this information,the correct gross profit would be:

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:

An understatement of the ending inventory balance will overstate cost of goods sold and understate net income.

________ is the estimated sales price of damaged goods minus the cost of making the sale.

The understatement of the ending inventory balance causes:

Under FIFO,the most recent costs are assigned to ending inventory.

Eastview Company uses a perpetual LIFO inventory system,and has the following purchases and sales: What is the value of cost of goods sold?

Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except:

Most companies do not take a physical count of inventory each year,but rather rely on inventory records to determine the inventory value.

A company's current inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

Sarbanes Oxley (SOX)demands that companies safeguard inventory and properly report it.List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

A company had the following purchases and sales during its first month of operations: Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places.)