Question 1

From a theoretical viewpoint,which of the following costs would be considered inventoriable? $$\begin{array} { | l | l | l | } 
\hline & \text { Freight-in } & \text { Warehousing } \
\hline 1 & \text { Yes } & \text { Yes } \
\hline 2 & \text { No } & \text { Yes } \
\hline 3 & \text { Yes } & \text { No } \
\hline 4 & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A) Choice 1 
B) Choice 2 
C) Choice 3 
D) Choice 4

Question 2

The records of Dollars 2 Donuts Ltd.showed the following for June: $$\begin{array} {| l |l| } 
\hline\text { Sales } \ldots \ldots \ldots \ldots \ldots \ldots & 4,200 \text { units at } \$ 200 \text { each } \
\hline\text { Purchase } \ldots \ldots \ldots \ldots \ldots & 4,000 \text { units at } \$ 150 \text { each } \
\hline \text { Beginning Inventory } \ldots \ldots \ldots & 6,000 \text { units at } \$ 100 \text { each }\\hline
\end{array}$$ Assuming the periodic inventory system is used complete the following tabulation. $$\begin{array} { | l | l| l| } 
\hline & \text { FIFO } & \text { Weighted Average } \
\hline \text { (1) Sales ....... } & \$ \_\_\_ & \$\_\_\_ \
\text { (2) Cost of goods sold. . } &\$ \_\_\_ & \$\_\_\_ \
\text { (3) Gross margin. .... } &  \$ \_\_\_ & \$\_\_\_ \
\text { (4) Ending inventory... } &\$ \_\_\_ & \$\_\_\_ \\hline
\end{array}$$ Computations:
FIFO:
Weighted Average:

Accepted Answer

The answer of The records of Dollars 2 Donuts Ltd.showed...

Question 3

A corporation compiled the information given below for their auditor.The corporation uses a periodic inventory system. $\begin{array}{|l|l|l|}
\hline &2001&2002\
\hline \text { Purchases................. } & \$ 240 & \$ 160 \
\hline \text { Goods out on consignment .... } & 0 & 80 \
\hline \text { Beginning inventory } & 900 & ? \
\hline \text { Ending inventory } & ? & ? \
\hline \text { Physical inventory count .................... } & \text { Unavailable } & 240 \
\hline \text { Cost of goods sold. ............. } & 360 & ?\\hline 
\end{array}$ What was the amount of cost of goods sold for 2002?

Accepted Answer

A) $620 
B) $700 
C) $780 
D) $900

Question 4

In inventorying goods at December 31,a company incorrectly included some items received on consignment.The error causes an:

Accepted Answer

A) understatement of inventory, purchases, and accounts payable. 
B) overstatement of net income and assets by the same amount. 
C) understatement of income and assets by the same amount. 
D) overstatement of inventory, purchases, and accounts payable.

Question 5

Which one of the following should be excluded from inventories?

Accepted Answer

A) Goods in transit to which title is held 
B) Shop worn goods saleable at a price lower than the regular sale price 
C) Goods out on consignment 
D) Goods held on consignment

Question 6

Answer the questions below based on the following data (in 000's): $\begin{array} { l  }
 \text { Purchases}&\$160\
 \text { Beginning inventory}&32\
 \text {Ending inventory }&48\
\end{array}$
 (a) What amount of sales would produce a gross margin of 35 percent based on cost of goods sold? $______________________________.
(b) What amount of sales would produce a gross margin of 40 percent based on sales? $______________________________.

Accepted Answer

The answer of Answer the questions below based on the...

Question 7

Application of the FIFO inventory costing method means that:

Accepted Answer

A) A periodic inventory system is used. 
B) Cost of goods sold should reflect the most recent prices. 
C) The cost of the last item purchased should be included in ending inventory. 
D) The cost of the first item purchased should be included in ending inventory.

Question 8

A corporation's records reflected the following with respect to one of the items that it regularly sells: $\begin{array} { l  }&\text { Units } & \text { Total } \
&\text { Cost } &\
\text { July } 1\text {Beginning inventory}& 400&\$12,000\
\text { July } 10 \text { Purchases.}&800&26,400 \
\text { July } 15 \text {Sales (at $ \$ 50 $ each). }& 600\
\text { July } 20 \text {Purchases. }&400&14,000 \
\text { July } 31 \text {Sales (at \$60 each). }& 400\
\end{array}$
 Complete the following schedule,assuming a periodic inventory system is used: $\begin{array} { l  }
& \text {FIFO }& \text {Weighted Average } \
 \text { Balance Sheet As of July 31}\
 \text { End. Inv.}\
 \text { Income Statement}\
 \text {Sales }\
 \text { Cost of Goods}\
 \text { Sold}\
 \text {Gross Margin }\
\end{array}$
 *Costed at the end of the period.

Accepted Answer

The answer of A corporation's records reflected the following with...

Question 9

What types of inventory does GAAP allow to be measured at selling price in excess of cost?

Accepted Answer

The answer of What types of inventory does GAAP allow...

Question 10

Inventories are assets consisting of goods owned by the business and held for future sale or for use in the manufacture of goods for sale.

Accepted Answer

A) True 
 B)False

Question 11

The records of a company showed the following data for the month of May (in order of date): $\begin{array} { l  }
 \text { \text { Units }}&\text { Unit }\
&\text { Cost }\
 \text {Beginning inventory }&200\
 \text {Purchase $ \# 1 $. }&400\
 \text { Sale \#1.}&300\
 \text { Purchase \#2.}&400\
 \text {Sale \#2.. }&600\
 \text {Purchase $ \# 3 $ }&200\
\end{array}$
 Required: Complete the following schedule: (round to the nearest cent): $\begin{array} { |l|l|l|  }
\hline&\text { Ending }\
\hline &\text { Inventory }&\text { Cost of }\
\hline&\text { Valuation }&\text { Goods Sold }\
\hline \text {(a) FIFO }&\$&\$\
\hline \text {(d) Weighted average. }&\$&\$\
\hline
\end{array}$

Accepted Answer

The answer of The records of a company showed the...

Question 12

ABC Inc.had net sales of $120,000 during 2013.Its finished goods inventories were valued at $20,000 on January 1st,2013.During the year,$60,000 of goods was purchased for resale.The company has a gross profit percentage of 40%.What was the company's cost of goods sold for 2013?

Accepted Answer

A) $8,000. 
B) $72,000. 
C) $48,000. 
D) $60,000.

Question 13

The primary difference between the inventory system of a manufacturing company and a retail company is that a retail company uses a periodic system and a manufacturing firm uses a perpetual system.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not relevant to the gross margin method of inventory valuation?

Accepted Answer

A) Gross margin percentage 
B) Mark-up on cost 
C) Cost percentage 
D) Profit margin

Question 15

Which of the following note disclosure are NOT required under ASPE with respect to inventories?

Accepted Answer

A) Accounting policies and cost flows. 
B) Inventory write-downs. 
C) Amount of inventory expensed through cost of sales. 
D) Carrying values of inventory by category.

Question 16

ABC Inc.had net sales of $120,000 during 2013.Its finished goods inventories were valued at $20,000 on January 1st,2013.During the year,$60,000 of goods was purchased for resale.The company has a gross profit percentage of 40%.What was the company's estimated inventory at December 31st,2013 under the Gross Profit method?

Accepted Answer

A) $8,000. 
B) $72,000. 
C) $48,000. 
D) $60,000.

Question 17

Country Guides Inc.uses the gross margin method to estimate its ending inventory for each quarter.The following information for the second quarter was provided from the records: $\begin{array} { l  } 
 \text {Sales revenue. }&\$200,000\
 \text {Purchases. }&47,500\
 \text { Freight-in.}&1,400\
 \text {Beginning inventory. }&14,250\
 \text {Purchase returns. }&900\
 \text {Estimated gross margin rate }&72 percent\
\end{array}$
 The estimated ending inventory for the second quarter is:

Accepted Answer

A) $30,250 
B) $32,250 
C) $33,250 
D) $35,050

Question 18

An increase in ending inventories from one period to the next will result in a decrease in cash flows from operating activities when the indirect method is applied to compute these cash flows.

Accepted Answer

A) True 
 B)False

Question 19

All of the following correctly describe the average cost inventory cost flow method except:

Accepted Answer

A) A moving average cost is used with a perpetual inventory system only. 
B) The average cost methods are based on the view that the cost of inventory on hand and the cost of goods sold during a period should be representative of all purchase costs available for the period. 
C) A weighted-average unit cost is used with a periodic inventory system only. 
D) A moving average cost is used with either a periodic or a perpetual inventory system.

Question 20

ASPE provides separate guidance for Biological Assets.

Accepted Answer

A) True 
 B)False

Exam 8: Cost-Based Inventories and Cost of Sales

In inventorying goods at December 31,a company incorrectly included some items received on consignment.The error causes an:

Which one of the following should be excluded from inventories?

Application of the FIFO inventory costing method means that:

What types of inventory does GAAP allow to be measured at selling price in excess of cost?

Inventories are assets consisting of goods owned by the business and held for future sale or for use in the manufacture of goods for sale.

ABC Inc.had net sales of $120,000 during 2013.Its finished goods inventories were valued at $20,000 on January 1^st,2013.During the year,$60,000 of goods was purchased for resale.The company has a gross profit percentage of 40%.What was the company's cost of goods sold for 2013?

The primary difference between the inventory system of a manufacturing company and a retail company is that a retail company uses a periodic system and a manufacturing firm uses a perpetual system.

Which of the following is not relevant to the gross margin method of inventory valuation?

Which of the following note disclosure are NOT required under ASPE with respect to inventories?

An increase in ending inventories from one period to the next will result in a decrease in cash flows from operating activities when the indirect method is applied to compute these cash flows.

All of the following correctly describe the average cost inventory cost flow method except:

ASPE provides separate guidance for Biological Assets.