Question 1

Determine the amount of gross margin assuming the weighted average cost flow method.

Accepted Answer

A) $1,503 
B) $2,160 
C) $1,305 
D) $657

Question 2

Inventory turnover is calculated by dividing:

Accepted Answer

A) cost of goods sold by inventory. 
B) sales by inventory. 
C) beginning inventory by the ending inventory. 
D) inventory by cost of goods sold.

Question 3

In relation to inventory, differentiate between the flow of cost and the physical flow of goods.

Accepted Answer

The answer of In relation to inventory, differentiate between the...

Question 4

Haley Company purchased two identical inventory items. The item purchased first cost $32.00. The item purchased second cost $35.00. Haley sold one of the inventory items for $60.00. Based on this information:

Accepted Answer

A) the amount of ending inventory is $32.00 if Haley uses the LIFO cost flow method. 
B) the amount of gross margin is $26.50 if Haley uses the weighted average cost flow method. 
C) the amount of cost of goods sold is $32.00 if Haley uses the FIFO cost flow method. 
D) All of the above are correct.

Question 5

Explain the meaning of "cost" and "market" as used in the application of the lower-of-cost-or-market rule.

Accepted Answer

The answer of Explain the meaning of "cost" and "market"...

Question 6

If a company overstates its Inventory balance at the end of 2013 due to an error, its Retained Earnings will also be overstated on the 2013 balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

On June 1, Jefferson Co. had one unit in beginning inventory that cost $5.00. During June, Jefferson paid cash to purchase two additional inventory items. Jefferson purchased the first item for cash at a cost $5.00, and the second at a cost of $6.00. Jefferson Co. sold two inventory items for $12.00 each, receiving cash. Based on this information alone, indicate whether each of the following items is true or false.
_____ a) The amount of ending inventory will be $5 assuming the LIFO cost flow was used.
_____ b) Cost of goods sold would be $11 assuming the weighted average cost flow was used.
_____ c) Cash flow from operating activities in June would be $14 assuming a FIFO cost flow was used.
_____ d) Cash flow from operating activities in June would be $13 independent of what cost flow assumption was used.
_____ e) The amount of gross margin would be $14 assuming the FIFO cost flow was used.

Accepted Answer

The answer of On June 1, Jefferson Co. had one...

Question 8

Indicate whether each of the following statements is true or false.
_____ a) To compute cost of goods sold under the weighted average method, it is necessary to first compute the weighted-average cost per unit.
_____ b) The weighted average cost per unit is computed by dividing the total cost of goods purchased by the number of units sold.
_____ c) Under the FIFO method, each time units are sold the unit cost of the most recently acquired inventory is applied to the number of units sold.
_____ d) Under a perpetual inventory system, it is not possible to use the LIFO method of cost flow.
_____ e) A U.S. company can use LIFO for income tax purposes only if it also uses LIFO for financial reporting purposes.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 9

The following information is for Cho Company for 2013:
Beginning inventory 120 units @$50
Units purchased 180 units @ $56
Cho sold 250 units for $95 each.
Required:
a) Calculate gross margin assuming Cho uses FIFO, LIFO, Weighted average.
b) Disregarding the effect of income taxes, what would be the dollar amount of difference in net income between FIFO and LIFO?
c) Calculate the 2013 cash flow from operating activities assuming that Cho uses LIFO, FIFO. Again, disregard the effect of income taxes.

Accepted Answer

The answer of The following information is for Cho Company...

Question 10

Best Supply uses the perpetual inventory method. At the end of the year Best Supply had the following items in inventory.  Required:
a) Determine the amount of inventory Best Supply is showing on its books before any adjustment.
b) Determine the amount of ending inventory using lower of cost or market applied to each individual item.
c) Prepare the journal entry necessary to adjust inventory.
d) Determine the amount of ending inventory using lower of cost or market applied to total inventory in aggregate.
e) Which method (individual items or aggregate) produces the smallest amount of total assets?

Accepted Answer

The answer of Best Supply uses the perpetual inventory method....

Question 11

The Kent Company's inventory records reflects the following for the month of October 2013  Assuming that Kent Company uses the FIFO cost flow method in a perpetual inventory system:
(a) Calculate the cost of goods sold and the ending inventory for the month ending October 31, 2013
(b) Prepare the journal entry for the sale of inventory on October 31, 2013

Accepted Answer

The answer of The Kent Company's inventory records reflects the...

Question 12

Greene's cost of goods sold under FIFO would be:

Accepted Answer

A) $620. 
B) $550. 
C) $770. 
D) $700.

Question 13

Under the perpetual inventory system, the best estimate of the amount of inventory is:

Accepted Answer

A) shown on the previous period's financial statements. 
B) provided by application of the gross margin method. 
C) the book balance in the inventory account. 
D) the beginning inventory balance minus sales for the perioD.In a perpetual inventory system, the balance in the inventory general ledger account should provide the best estimate of inventory on hand. The gross margin method should only be used if a book inventory and a physical inventory are unavailable.

Question 14

In an inflationary period, which cost flow method of accounting for inventory, FIFO, LIFO or weighted average, will produce the smallest amount of net income?

Accepted Answer

The answer of In an inflationary period, which cost flow...

Question 15

How would the sale affect the financial statements if Pufferbellies Bookstore uses the LIFO inventory cost flow method?

Accepted Answer

The answer of How would the sale affect the financial...

Question 16

Given that longer inventory holding periods act to increase expenses, which of the three companies would be expected to have the highest inventory holding cost?

Accepted Answer

A) All three companies have equal holding costs 
B) Company Z 
C) Company Y 
D) Company X

Question 17

Generally accepted accounting principles would not allow a company to use FIFO for part of its inventory and the weighted-average cost flow assumption for the rest of its inventory.

Accepted Answer

A) True 
 B)False

Question 18

Lewiston Company is preparing its financial statements. Gross margin is normally 40% of sales. Information taken from the company's records revealed sales of $50,000; beginning inventory of $5,000 and purchases of $35,000. The estimated amount of ending inventory would be:

Accepted Answer

A) $10,000. 
B) $30,000. 
C) $20,000. 
D) $16,000.

Question 19

Nguyen Corporation is required to record an inventory write-down of $2,342 as a result of using the lower-of-cost-or-market rule. Which of the following answers correctly shows how this entry would affect the financial statements?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 20

The following information is for Little Company for 2013  Required:
Assuming that Little uses the LIFO cost flow method,
a) How much product cost would be allocated to Cost of Goods Sold?
b) How much product cost would be allocated to Merchandise Inventory at the end of the year?
c) Calculate the average number of days to sell inventory for the year.

Accepted Answer

The answer of The following information is for Little Company...

Exam 5: Accounting for Inventories