Question 1

A company provided the following data:
Sales,$500,000; beginning inventory,$40,000; ending inventory,$45,000; and gross margin,$150,000.What was the amount of inventory purchased during the year?

Accepted Answer

A) $370,000 
B) $355,000 
C) $348,000 
D) $341,000

Question 2

On March 15,2010,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount.The periodic inventory system is used.Which of the following journal entries is correct when Ryan Company pays for these goods on March 20,2010?

Accepted Answer

A)  Accounts payable $\quad $ 9,800
$\quad $ Cash $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $   9,800 
B)  Accounts payable $\quad $ 10,000
$\quad $ Cash$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ 10,000 
C)  Accounts payable $\quad $ $\quad $ $\quad $ 10,000
$\quad $ Cash$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ 9,800
$\quad $ Purchase discounts$\quad $ $\quad $ $\quad $ 200 
D)  Accounts payable $\quad 9,800$
Purchase discounts $\quad $ 200
$\quad $ Cash$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ 10,000

Question 3

The LIFO inventory method allocates the most recent inventory purchase costs to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

QV-TV,Inc.provided the following items in their footnotes for the year-end 2010:
Cost of goods sold was $22 billion under FIFO costing and their inventory value under FIFO costing was $2.1 billion.The LIFO Reserve for year-end 2009 was a $0.6 billion credit balance and at year-end 2010 it had increased to a credit balance of $0.8 billion.How much is the 2010 LIFO cost of goods sold?

Accepted Answer

A) $22.2 billion 
B) $19.8 billion 
C) $22.8 billion 
D) $19.2 billion

Question 5

Inventory inspection costs incurred at the time of purchase are reported as operating expenses on the income statement.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following costs is not included as inventory on the balance sheet?

Accepted Answer

A) Raw materials currently being used in the manufacturing process. 
B) Work in process. 
C) Finished goods. 
D) Storage costs for finished goods.

Question 7

Which of the following costs does not become a part of cost of goods manufactured?

Accepted Answer

A) The cost of raw materials used. 
B) The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) The salary of the company president.

Question 8

Hollander Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and the 2010 ending inventory was overstated by $5,000.What would be the effect of this error in ending inventory?

Accepted Answer

A) 2010 net income would be overstated. 
B) 2010 net income would be understated. 
C) 2010 ending retained earnings would be understated. 
D) 2010 cost of goods sold would be overstated.

Question 9

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

Accepted Answer

The answer of How much were inventory purchases when cost...

Question 10

Freeman Company uses the periodic inventory system and applied LIFO inventory costing.At the end of the annual accounting period,December 31,2009,the accounting records in inventory showed $$\begin{array} { l c c } 
\underline { \text { Transactions } } & \underline { \text { Units } } & \underline { \text { Unit Cost } } \
\hline \text { Beginning inventory, Jan. 1, 2009 } & 300 & \$ 20 \
\text { Purchase, Feb. 1 } & 500 & 21 \
\text { Sale, March } 15 \text { (sold at \$20 each) } & ( 400 ) & \
\text { Purchase, May 15 } & 400 & 22 \
\text { Sale, July } 31 \text { (sold at \$25 each) } & ( 500 ) &
\end{array}$$ Calculate the following:
 (round to the nearest dollar.)
1.Cost of goods available for sale
2.Ending inventory
3.Cost of goods sold

Accepted Answer

The answer of Freeman Company uses the periodic inventory system...

Question 11

An understatement of the ending inventory in Year 1,if not corrected,will cause which of the following?

Accepted Answer

A) The year 1 net income to be understated and Year 2 net income to be overstated. 
B) The year 1 net income to be overstated and Year 2 net income to be overstated. 
C) The year 1 net income to be overstated and Year 2 net income will be correct. 
D) The year 1 net income to be overstated and Year 2 net income to be understated.

Question 12

Carr Corporation has provided the following information for its most recent month of operation:
Sales $8,000; beginning inventory $1,000; ending inventory $2,000 and gross profit $5,000.How much were Carr's inventory purchases during the period?

Accepted Answer

A) $9,000 
B) $5,000 
C) $6,000 
D) $4,000

Question 13

RJ Corporation has provided the following information about one of their inventory items:

$$\begin{array}{ll}
\begin{array} { ll } 
\text { Date } & \text { Transaction } \
1 / 1 & \text { Beginning Inventory } \
6 /6& \text { Purchase } \
9 / 10 & \text { Purchase } \
11/ 15 & \text { Purchase }
\end{array}
\begin{array} { l l} 
\text { Number of Units } & \text { Cost per Unit } \
400& \$ 3,200 \
800 & \$ 3,600 \
1,200 & \$ 4,000 \
800 & \$ 4,200
\end{array}
\end{array}$$
 During the year,3,000 units were sold. What was ending inventory using the LIFO cost flow assumption?

Accepted Answer

A) $640,000 
B) $840,000 
C) $770,000 
D) $880,000

Question 14

Which of the following journal entries is not consistent with the use of a perpetual inventory system?

Accepted Answer

A)  Inventory
$\quad $ Accounts payable 
B)  Cost of goods sold
$\quad $ Inventory 
C)  Purchases
$\quad $ Accounts payable 
D)  Accounts receivable
$\quad $ Sales revenue

Question 15

Carrie Company sold merchandise with an invoice price of $1,000 to Underwood,Inc.,with terms of 2/10,n/30.Which of the following is the correct entry to record the payment by Underwood Inc.,within the 10 days if the company uses the periodic inventory system and the gross method to record purchases?

Accepted Answer

A)  $\begin{array} { l r r } 
\text { Cash } & 980 & \
\text { Sales Discount } & 20 & \
\quad \text { Accounts receivable } & & 1,000
\end{array}$ 
B)  $\begin{array} { l r r } 
\text { Accounts Payable } & 1,000 & \
\quad \text { Cash } & &980 \
\quad \text { Purchases Discounts } && 20
\end{array}$ 
C)  Accounts Payable $ \quad $$ \quad $1,000
$ \quad $Cash$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $1,000 
D)  Purchases$ \quad $$ \quad $980
$ \quad $Cash$ \quad $$ \quad $$ \quad $$ \quad $980

Question 16

Under the FIFO cost flow assumption during a period of inflation,which of the following is false?

Accepted Answer

A) Income tax expense will be higher than under LIFO. 
B) Gross margin will be higher than under LIFO. 
C) Ending inventory will be lower than under LIFO. 
D) Cost of goods sold will be lower than under LIFO.

Question 17

The following income statement is complete except for a few captions with bold lines on the left,and amounts with dotted lines on the right.You are to fill in the most likely captions and amounts (ignore income taxes):

Accepted Answer

The answer of The following income statement is complete except...

Question 18

Under the LIFO cost flow assumption during a period of inflation,which of the following is false?

Accepted Answer

A) Cost of goods sold will be lower than under FIFO. 
B) Gross margin will be lower than under FIFO. 
C) Income tax expense will be lower than under FIFO. 
D) Ending inventory will be lower than under FIFO.

Question 19

The records of Jimmy Company show 2010 purchases of $90,000.An actual count revealed a 2010 ending inventory of $8,000.The 2010 beginning inventory was $5,000.What was cost of goods sold for 2010?

Accepted Answer

The answer of The records of Jimmy Company show 2010...

Question 20

The LIFO inventory method will result in the highest gross margin when costs are increasing in comparison to the specific identification,FIFO and weighted average inventory methods.

Accepted Answer

A) True 
 B)False

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

A company provided the following data: Sales,$500,000; beginning inventory,$40,000; ending inventory,$45,000; and gross margin,$150,000.What was the amount of inventory purchased during the year?

The LIFO inventory method allocates the most recent inventory purchase costs to cost of goods sold.

Inventory inspection costs incurred at the time of purchase are reported as operating expenses on the income statement.

Which of the following costs is not included as inventory on the balance sheet?

Which of the following costs does not become a part of cost of goods manufactured?

Hollander Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and the 2010 ending inventory was overstated by $5,000.What would be the effect of this error in ending inventory?

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

An understatement of the ending inventory in Year 1,if not corrected,will cause which of the following?

Carr Corporation has provided the following information for its most recent month of operation: Sales $8,000; beginning inventory $1,000; ending inventory $2,000 and gross profit $5,000.How much were Carr's inventory purchases during the period?

Which of the following journal entries is not consistent with the use of a perpetual inventory system?

Under the FIFO cost flow assumption during a period of inflation,which of the following is false?

The following income statement is complete except for a few captions with bold lines on the left,and amounts with dotted lines on the right.You are to fill in the most likely captions and amounts (ignore income taxes):

Under the LIFO cost flow assumption during a period of inflation,which of the following is false?

The records of Jimmy Company show 2010 purchases of $90,000.An actual count revealed a 2010 ending inventory of $8,000.The 2010 beginning inventory was $5,000.What was cost of goods sold for 2010?

The LIFO inventory method will result in the highest gross margin when costs are increasing in comparison to the specific identification,FIFO and weighted average inventory methods.