Question 1

Jaywall Corporation, which uses a perpetual inventory system, recorded the following inventory transactions during 2013.
  (a) Using the FIFO cost formula, calculate the amount of the cost of goods sold for the quarter ended June 30. (Show calculations)
(b) Using the average cost formula, calculate the amount of ending inventory at June 30. (Show calculations)

Accepted Answer

The answer of Jaywall Corporation, which uses a perpetual inventory...

Question 2

An overstatement of ending inventory in one period results in

Accepted Answer

A)  an overstatement of the ending inventory of the next period. 
B)  an understatement of profit of the next period. 
C)  an overstatement of profit of the next period. 
D)  no effect on profit of the next period.

Question 3

A company reports its 20B cost of goods sold at $20.0 billion. Its ending inventory for 20B is $1.8 billion and for 20A, ending inventory was $1.5 billion. How much inventory did the company purchase during 20B?

Accepted Answer

A)  $20.3 billion 
B)  $19.7 billion 
C)  $21.8 billion 
D)  $18.5 billion

Question 4

Darkhorse Ltd. has a days in inventory ratio of 40 and average inventory of $254,000. What is its cost of goods sold?

Accepted Answer

A)  $1,854,200. 
B)  $12,700,000. 
C)  $2,317,750. 
D)  Cannot be determined.

Question 5

If beginning inventory is understated by $1,300 and ending inventory is understated by $700, pretax profit for the period will be which of the following?

Accepted Answer

A)  Overstated by $600. 
B)  Overstated by $2,000. 
C)  Understated by $2,000. 
D)  Understated by $600.

Question 6

Under the periodic inventory system, the balance in the inventory account changes each time a purchase or sale is recorded.

Accepted Answer

A) True 
 B)False

Question 7

When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Accepted Answer

A) True 
 B)False

Question 8

Inventory is a tangible asset purchased for use in the company's operations.

Accepted Answer

A) True 
 B)False

Question 9

Wilder Company reported pretax profit amounts of: 20B, $11,000; and 20C, $15,000. Later it was discovered that the ending inventory for 20B was understated by $2,000 (and not corrected in 20C). The correct pretax profit for each year was which of the following?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

Question 10

Match the appropriate letter regarding inventory systems with each of the following statements.
A. The perpetual inventory system.
B. The periodic inventory system.
C. Both the perpetual and periodic inventory systems.
D. Neither the perpetual nor the periodic inventory systems.
1. Uses a separate account for recording purchases.
____ 2. Requires that purchases be recorded at their cash equivalent cost.
____ 3. Requires that two concurrent journal entries be made to record a purchase
____ 4. Cost of goods sold cannot be determined until a physical count is taken.
5. Inventory account is increased for each purchase and decreased for each sale.
____ 6. Used to reveal any inventory shortages and shrinkage that occur during the period.

Accepted Answer

The answer of Match the appropriate letter regarding inventory systems...

Question 11

In 20B, Landings, Inc. provided the following items in their footnotes. Their cost of goods available for sale was $4.5 billion under FIFO costing and their ending inventory value under FIFO costing was $2.1 billion. Their purchases were $4.1 billion. What was their opening inventory?

Accepted Answer

A)  $0.4 billion 
B)  $2.4 billion 
C)  $2.0 billion 
D)  $6.2 billion

Question 12

Which of the following statements regarding inventories is correct?

Accepted Answer

A)  FIFO assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  FIFO seldom coincides with the actual physical flow of inventory. 
C)  Under FIFO, the ending inventory is based on the latest units purchased. 
D)  It is generally good business management to sell the most recently acquired goods first.

Question 13

In a periodic inventory system, the cost of goods sold is determined

Accepted Answer

A)  after each sale. 
B)  at the end of the accounting period. 
C)  at the beginning of the accounting period. 
D)  after each purchase.

Question 14

Divergent Technologies reported the following information in their 2012 annual report:
  1. Determine the inventory turnover ratio
2. Determine the average days to sell inventory ________
3. Explain the meaning of each number.

Accepted Answer

The answer of Divergent Technologies reported the following information in...

Question 15

In conformity with the matching process, the total cost of sales during the period must be related to the sales revenue earned during the period.

Accepted Answer

A) True 
 B)False

Question 16

The following information was taken from the 20B income statement of Milburn Company: Pretax profit, $12,000; Total operating expenses, $20,000; Sales revenue, $120,000. Compute the cost of goods sold.

Accepted Answer

A)  $108,000 
B)  $88,000 
C)  $100,000 
D)  $112,000

Question 17

Inventory turnover measures the liquidity (nearness to cash) of inventory.

Accepted Answer

A) True 
 B)False

Question 18

A manufacturing company uses three different inventory accounts to track their product costs.

Accepted Answer

A) True 
 B)False

Question 19

Match the descriptions with inventory costing methods by entering the proper lett in the space to the left.
A. Specific identification
B. Weighted average
C. FIFO
D. None of the above is correct.

Accepted Answer

The answer of Match the descriptions with inventory costing methods...

Question 20

For 2013, Wilver Inc. reported $24,000 beginning inventory and $26,000 ending inventory. Net sales were $160,000 and gross profit was $55,000 for the same period. Based on these figures, inventory turnover for 2013 was:

Accepted Answer

A)  9.2 times. 
B)  6.4 times. 
C)  3.4 times. 
D)  4.2 times.

Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

An overstatement of ending inventory in one period results in

A company reports its 20B cost of goods sold at $20.0 billion. Its ending inventory for 20B is $1.8 billion and for 20A, ending inventory was $1.5 billion. How much inventory did the company purchase during 20B?

Darkhorse Ltd. has a days in inventory ratio of 40 and average inventory of $254,000. What is its cost of goods sold?

If beginning inventory is understated by $1,300 and ending inventory is understated by $700, pretax profit for the period will be which of the following?

Under the periodic inventory system, the balance in the inventory account changes each time a purchase or sale is recorded.

When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Inventory is a tangible asset purchased for use in the company's operations.

Wilder Company reported pretax profit amounts of: 20B, $11,000; and 20C, $15,000. Later it was discovered that the ending inventory for 20B was understated by $2,000 (and not corrected in 20C) . The correct pretax profit for each year was which of the following?

In 20B, Landings, Inc. provided the following items in their footnotes. Their cost of goods available for sale was $4.5 billion under FIFO costing and their ending inventory value under FIFO costing was $2.1 billion. Their purchases were $4.1 billion. What was their opening inventory?

Which of the following statements regarding inventories is correct?

In a periodic inventory system, the cost of goods sold is determined

Divergent Technologies reported the following information in their 2012 annual report: 1. Determine the inventory turnover ratio 2. Determine the average days to sell inventory ________ 3. Explain the meaning of each number.

In conformity with the matching process, the total cost of sales during the period must be related to the sales revenue earned during the period.

The following information was taken from the 20B income statement of Milburn Company: Pretax profit, $12,000; Total operating expenses, $20,000; Sales revenue, $120,000. Compute the cost of goods sold.

Inventory turnover measures the liquidity (nearness to cash) of inventory.

A manufacturing company uses three different inventory accounts to track their product costs.

Match the descriptions with inventory costing methods by entering the proper lett in the space to the left. A. Specific identification B. Weighted average C. FIFO D. None of the above is correct.

For 2013, Wilver Inc. reported $24,000 beginning inventory and $26,000 ending inventory. Net sales were $160,000 and gross profit was $55,000 for the same period. Based on these figures, inventory turnover for 2013 was: