Question 1

In periods of falling prices

Accepted Answer

A) FIFO will result in a higher ending inventory valuation than the average cost formula. 
B) FIFO will result in a higher cost of goods sold than the average cost formula. 
C) the average cost formula will result in a higher cost of goods sold than the FIFO cost formula. 
D) the average cost formula will result in a lower ending inventory valuation than the FIFO cost formula.

Question 2

An increase in inventory turnover means days in inventory

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) cannot be determined.

Question 3

An error

Accepted Answer

A) in the ending inventory of the current period will have no effect on net income of the next accounting period. 
B) that understates the ending inventory will cause net income for the period to be overstated. 
C) that understates the ending inventory will cause assets to be understated. 
D) that understates the ending inventory will cause the cost of goods sold for the period to be understated.

Question 4

Goods held on consignment are

Accepted Answer

A) never owned by the consignee. 
B) included in the consignee's ending inventory. 
C) kept for sale on the premises of the consignor. 
D) not included in anyone's ending inventory.

Question 5

To accurately determine inventory quantities, a company must

Accepted Answer

A) use the perpetual inventory system. 
B) employ an independent company to conduct inventory counts. 
C) rely on the warehouse records. 
D) take a physical inventory.

Question 6

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the statement of income will be reduced.

Accepted Answer

A) True 
 B)False

Question 7

All three methods of inventory cost formula will produce the same cumulative cost of goods sold over the life cycle of the business.

Accepted Answer

A) True 
 B)False

Question 8

A problem with the specific identification formula is that

Accepted Answer

A) inventories can be reported at actual costs. 
B) management can manipulate net income. 
C) matching is not achieved. 
D) lower of cost and net realizable value cannot be applied.

Question 9

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

Accepted Answer

A) True 
 B)False

Question 10

For 2022, Superplus Inc.reported $48,000 beginning inventory and $52,000 ending inventory.Net sales were $320,000 and gross profit was $110,000 for the same period.Based on these figures, inventory turnover for 2022 was

Accepted Answer

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

Question 11

The consistent application of an inventory cost formula is essential for

Accepted Answer

A) neutrality. 
B) accuracy. 
C) comparability. 
D) relevance.

Question 12

An inventory writedown from cost to net realizable value should not be made in the period in which the price decline occurs.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost formula in a perpetual inventory system.
 
-If ABC Inc.used the average cost formula instead of FIFO, gross profit from the July 8 sale would be

Accepted Answer

A) higher. 
B) lower. 
C) the same. 
D) cannot be determined.

Question 14

Consigned goods are held for sale by one party, although ownership of the goods is retained by another party.

Accepted Answer

A) True 
 B)False

Question 15

Use the following information for the month of June for questions 
XYZ Inc.uses the average cost formula in a perpetual inventory system.
(Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
 
-The cost of goods sold for the June 10 sale is

Accepted Answer

A) $545.60. 
B) $549.96. 
C) $550.00. 
D) $557.75.

Question 16

The inventory cost formula that best matches cost and revenues is FIFO.

Accepted Answer

A) True 
 B)False

Question 17

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost formula in a perpetual inventory system.
 
-The cost of goods sold for the July 8 sale was

Accepted Answer

A) $950. 
B) $980. 
C) $989. 
D) $1,000.

Question 18

Mandy Corp.purchased inventory as follows:  On March 5, Mandy sold 600 units for $18 each.The average unit cost to be used for the cost of goods sold on March 5, in a perpetual inventory system, is

Accepted Answer

A) $18.80. 
B) $19.40. 
C) $25.00. 
D) $16.67.

Question 19

Inventory cost methods make assumptions about the flow of

Accepted Answer

A) costs. 
B) goods. 
C) resale prices. 
D) fair values.

Question 20

A company just starting a business purchased three inventory items at the following prices: March 2, $150; March 7, $160; and March 15, $180.If the company sold one unit for $230 on March 10 and one unit for $250 on March 20 and uses the average cost formula in a perpetual inventory system, what is the cost of ending inventory?

Accepted Answer

A) $163.34 
B) $167.50 
C) $180.00 
D) $250.00

Exam 6: Reporting and Analyzing Inventory

In periods of falling prices

An increase in inventory turnover means days in inventory

An error

Goods held on consignment are

To accurately determine inventory quantities, a company must

If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the statement of income will be reduced.

All three methods of inventory cost formula will produce the same cumulative cost of goods sold over the life cycle of the business.

A problem with the specific identification formula is that

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

For 2022, Superplus Inc.reported $48,000 beginning inventory and $52,000 ending inventory.Net sales were $320,000 and gross profit was $110,000 for the same period.Based on these figures, inventory turnover for 2022 was

The consistent application of an inventory cost formula is essential for

An inventory writedown from cost to net realizable value should not be made in the period in which the price decline occurs.

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost formula in a perpetual inventory system. -If ABC Inc.used the average cost formula instead of FIFO, gross profit from the July 8 sale would be

Consigned goods are held for sale by one party, although ownership of the goods is retained by another party.

The inventory cost formula that best matches cost and revenues is FIFO.

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost formula in a perpetual inventory system. -The cost of goods sold for the July 8 sale was

Mandy Corp.purchased inventory as follows: On March 5, Mandy sold 600 units for $18 each.The average unit cost to be used for the cost of goods sold on March 5, in a perpetual inventory system, is

Inventory cost methods make assumptions about the flow of