Question 1

The method of estimating inventory that uses records of the selling prices of the merchandise is called

Accepted Answer

A)  retail method 
B)  gross profit method 
C)  inventory turnover method 
D)  average cost method

Question 2

What is the amount of cost of goods sold for the year according to the average cost method?

Accepted Answer

A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250

Question 3

For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

Accepted Answer

A)  8.7 
B)  7.8 
C)  8.3 
D)  44.0

Question 4

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory?

Accepted Answer

A)  Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31. 
B)  Kristin has in its warehouse merchandise on consignment from Abby Co. 
C)  Kristin has sent merchandise to various retailers on a consignment basis. 
D)  Kristin has merchandise on hand which has been returned by customers because of wrong size.

Question 5

Based on the following information, compute a) inventory turnover; b) average daily cost of merchandise sold
using a 365 day year; and c) number of days' sales in inventory.

Accepted Answer

The answer of Based on the following information, compute a)...

Question 6

Match each description to the appropriate inventory system a or b).
-When using this system, a physical inventory is necessary to determine cost of merchandise sold.

Accepted Answer

A) Perpetual 
B) Periodic

Question 7

Match each situation to its impact a-c) on the current year's net income.
-Merchandise that was sold and shipped FOB destination on the last day of the year was not included in the seller's ending inventory.

Accepted Answer

A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income.

Question 8

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

Accepted Answer

A)  consignee 
B)  retailer 
C)  manufacturer 
D)  shipper

Question 9

The units of an item available for sale during the year were as follows: $\begin{array}{lrll}
\text { Jan. } & 1 & \text { Inventory } & 10 \text { units at } \$ 25 \
\text { Apr. } & 4 & \text { Purchase } & 15 \text { units at } \$ 24 \
\text { May. } &20 & \text { Purchase } & 20 \text { units at } \$ 28 \
\text { Oct. } & 30 & \text { Purchase } & 18 \text { units at } \$ 30
\end{array}$ There are 19 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using LIFO.

Accepted Answer

The answer of The units of an item available for...

Question 10

The three inventory costing methods will normally each yield different amounts of net income.

Accepted Answer

A) True 
 B)False

Question 11

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Accepted Answer

A) True 
 B)False

Question 12

Match each situation to its impact a-c) on the current year's net income.
-Merchandise held on consignment was included in the count of ending inventory.

Accepted Answer

A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income.

Question 13

Three identical units of merchandise were purchased during May, as follows:
Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending inventory on May 31 using a) FIFO, b) LIFO, and c) average cost methods.

Accepted Answer

The answer of Three identical units of merchandise were purchased...

Question 14

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

Accepted Answer

The answer of During August, the first month of the...

Question 15

The value of ending inventory rounded to nearest dollar using average cost is:

Accepted Answer

A)  $1,353 
B)  $1,263 
C)  $1,375 
D)  $1,150

Question 16

If ending inventory for the year is understated, net income for the year is overstated.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following will be the same amount regardless of the cost flow assumption adopted?

Accepted Answer

A)  number of items ordered 
B)  gross profit 
C)  cost of goods sold 
D)  ending merchandise inventory

Question 18

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?

Accepted Answer

A)  $655 
B)  $620 
C)  $690 
D)  $659

Question 19

The beginning inventory and purchases of an item for the period were as follows: $\begin{array}{lr}
\text { Beginning inventory } & 6 \text { units at } \$ 70 \text { each } \
\text { First purchase } & 10 \text { units at } \$ 75 \text { each } \
\text { Second purchase } & 18 \text { units at } \$ 80 \text { each } \
\text { Third purchase } & 10 \text { units at } \$ 90 \text { each }
\end{array}$ The company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine the cost of the 15 units in the inventory by each of the following methods, presenting details of your computations: a) first-in, first-out; b) last-in, first-out; c) average cost. Do not round your intermediate calculations. Round your final answer to two decimal places.

Accepted Answer

The answer of The beginning inventory and purchases of an...

Question 20

The following data were taken from Castle, Inc.  Determine the inventory turnover ratio and the number of days' sales in inventory for Castle Inc. Round to two
decimal places.

Accepted Answer

The answer of The following data were taken from Castle,...

Exam 6: Inventories

The method of estimating inventory that uses records of the selling prices of the merchandise is called

What is the amount of cost of goods sold for the year according to the average cost method?

For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory?

Based on the following information, compute a) inventory turnover; b) average daily cost of merchandise sold using a 365 day year; and c) number of days' sales in inventory.

Match each description to the appropriate inventory system a or b) . -When using this system, a physical inventory is necessary to determine cost of merchandise sold.

Match each situation to its impact a-c) on the current year's net income. -Merchandise that was sold and shipped FOB destination on the last day of the year was not included in the seller's ending inventory.

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

The three inventory costing methods will normally each yield different amounts of net income.

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Match each situation to its impact a-c) on the current year's net income. -Merchandise held on consignment was included in the count of ending inventory.

Three identical units of merchandise were purchased during May, as follows: Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending inventory on May 31 using a) FIFO, b) LIFO, and c) average cost methods.

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

The value of ending inventory rounded to nearest dollar using average cost is:

If ending inventory for the year is understated, net income for the year is overstated.

Which of the following will be the same amount regardless of the cost flow assumption adopted?

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?

The following data were taken from Castle, Inc. Determine the inventory turnover ratio and the number of days' sales in inventory for Castle Inc. Round to two decimal places.