Deck 7: Inventory

Question 1

Inventory costs are all costs necessary to acquire and sell the merchandise.

Answer 1

False

Question 2

Just-in-case inventories create inventory carrying costs, which include insurance, and the cost of the capital invested in the inventory.

Answer 2

True

Question 3

A company that uses LIFO must sell its oldest goods first.

Answer 3

False

Question 4

The average unit cost used in the weighted-average inventory pricing method is calculated by dividing the total units available for sale into the period's net cost of purchases.

Question 5

When inventory quantities are maintained or increased during a period, the LIFO method prevents any part of the beginning inventory amount from becoming part of the period's cost of goods sold.

Question 6

FIFO inventory costing yields more accurate reporting of the inventory balance on the balance sheet than the LIFO method.

Question 7

In general, in a period of rising prices, FIFO produces higher gross profits than LIFO.

Question 8

Under the FIFO method of inventory costing, the ending inventory amount reflects the most recent acquisition costs.

Question 9

An uncorrected error in an ending inventory amount will affect income determination for two accounting periods.

Question 10

When a company uses LIFO and prices are declining, profits will be higher than if the company had used FIFO.

Question 11

A weighted-average approach to costing inventory most naturally fits operations that involve differentiated products of high unit value.

Question 12

The lower-of-cost-or-net realizable value method may be applied to each inventory item or to totals of each inventory category or to the entire inventory.

Question 13

The lower-of-cost-or-net realizable value method provides for the recognition of inventory losses from price declines in the period the inventory is sold.

Question 14

A decline in gross profit percentage can be caused by selling fewer units to customers.

Question 15

A firm's days' sales in inventory is computed by dividing 365 by its inventory turnover.

Question 16

A low inventory turnover indicates that a firm is able to sell its inventory more quickly.

Question 17

Companies using LIFO are required to disclose the amount at which inventory would have been reported had the company used FIFO. The difference between LIFO and FIFO inventories is called the LIFO reserve.

Question 18

Which of the following is not an inventory account for manufacturing companies?

A) Work-in-process
B) Finished goods
C) Cost of goods sold
D) Raw materials

Question 19

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company's inventory balance to be reported on its balance sheet at year end?

A) $18,000
B) $ 2,000
C) $45,000
D) $ 3,000

Question 20

What is Brill Company's Ending Inventory for the year?

A) $ 7,650
B) $ 4,950
C) $10,350
D) $ 2,700

Question 21

Felix Company reported the following year-end amounts:

What is Felix Company's Ending Inventory and Cost of Goods Sold for the year?

A) Ending Inventory = $12,660; Cost of Goods Sold = $30,740
B) Ending Inventory = $11,110; Cost of Goods Sold = $21,640
C) Ending Inventory = $ 8,640; Cost of Goods Sold = $30,740
D) Ending Inventory = $ 9,100; Cost of Goods Sold = $19,750

Question 22

Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?

A) First-in, first-out
B) Last-in, last-out
C) Average cost
D) Lower of cost or market

Question 23

The following hammers were available for sale during the year for Wilkins Tools:

Wilkins has 30 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method?

A) $1,975
B) $2,650
C) $1,575
D) $1,950

Question 24

The following inventory was available for sale during the year for Mega Tools:

Mega has 25 units on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method?

A) $1,650
B) $2,975
C) $1,575
D) $1,950

Question 25

The following hammers were available for sale during the year for Wilkins Tools:

Wilkins has 30 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the last-in, first-out method?

A) $1,975
B) $3,125
C) $1,575
D) $1,950

Question 26

The following amounts and costs of platters were available for sale by San Antonio Ceramics during the year:

San Antonio Ceramics has 35 platters on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the weighted-average cost method?

A) $4,960
B) $3,100
C) $1,732.50
D) $2,170

Question 27

The following amounts and costs of platters were available for sale by Sierra Pottery during the year:

Sierra Pottery has 35 platters on hand at the end of the year. How much is cost of goods sold in dollars at the end of the year according to the weighted-average cost method?

A) $4,960
B) $1,860
C) $2,790
D) $1,732.50

Question 28

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period.


-Assuming Newtown, Inc., uses FIFO inventory procedures, the ending inventory cost is:

A) $684
B) $696
C) $722
D) $740
E) None of the above

Question 29

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period.


-Assuming Newtown, Inc., uses LIFO inventory procedures, the ending inventory cost is:

A) $684
B) $696
C) $722
D) $740
E) None of the above

Question 30

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period.


-Assuming Newtown, Inc., uses weighted-average inventory procedures, the ending inventory cost is:

A) $720.10
B) $721.00
C) $722.00
D) $795.90
E) None of the above

Question 31

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Blunt, Inc., for an operating period.


-Assuming Blunt, Inc., uses FIFO periodic inventory procedures, the ending inventory cost is:

A) $420
B) $440
C) $280
D) $310
E) None of the above

Question 32

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Blunt, Inc., for an operating period.


-Assuming Blunt, Inc., uses LIFO periodic inventory procedures, the ending inventory cost is:

A) $280
B) $420
C) $310
D) $440
E) None of the above

Question 33

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Blunt, Inc., for an operating period.


-Assuming Blunt, Inc., uses weighted-average (periodic) inventory procedures, the ending inventory cost is:

A) $373.33
B) $372.00
C) $550.00
D) $380.00
E) None of the above

Question 34

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Fiskie, Inc., for an operating period.


-Assuming Fiskie, Inc., uses FIFO periodic inventory procedures, the ending inventory cost is:

A) $1,080
B) $1,488
C) $1,056
D) $1,200
E) None of the above

Question 35

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Fiskie, Inc., for an operating period.


-Assuming Fiskie, Inc., uses LIFO periodic inventory procedures, the ending inventory cost is:

A) $1,056
B) $1,080
C) $1,272
D) $1,488
E) None of the above

Question 36

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Fiskie, Inc., for an operating period.


-Assuming Fiskie, Inc., uses weighted-average (periodic) inventory procedures, the ending inventory cost is:

A) $1,092
B) $1,248
C) $1,272
D) $1,080
E) None of the above

Question 37

The following data represent the beginning inventory and, in the order of occurrence, the purchases and sales of McKensie Company for an operating period.


-Assuming McKensie Company uses FIFO periodic inventory procedures, the ending inventory cost is:

A) $3,240
B) $2,800
C) $3,160
D) $2,520
E) None of the above

Question 38

The following data represent the beginning inventory and, in the order of occurrence, the purchases and sales of McKensie Company for an operating period.


-Assuming McKensie Company uses LIFO periodic inventory procedures, the ending inventory cost is:

A) $2,610
B) $3,160
C) $3,130
D) $2,800
E) None of the above

Question 39

The following data represent the beginning inventory and, in the order of occurrence, the purchases and sales of McKensie Company for an operating period.


-Assuming McKensie Company uses weighted-average (periodic) inventory procedures, the ending inventory cost is:

A) $2,970
B) $2,880
C) $3,156
D) $3,630
E) None of the above

Question 40

Mendez Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 1,200 units that cost $15 each. During the month, the company made two purchases: 500 units at $14.50 each and 2,000 units at $14.00 each. Mendez Company also sold 2,150 units during the month.
Using the periodic FIFO method, what is the cost of ending inventory?

A) $21,700
B) $18,950
C) $20,073
D) $18,600

Question 41

Hanifee Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 200 units that cost $65 each. During the month, the company made two purchases: 300 units at $69 each and 150 units at $70 each. The company also sold 500 units during the month.
Using the periodic weighted-average cost method, what is the cost of ending inventory?

A) $33,770
B) $10,200
C) $10,500
D) $33,400

Question 42

Use the following inventory related information for Questions below


-Calculate the company's Cost of Goods Sold using Periodic FIFO for the month of January.

A) $1,930
B) $1,945
C) $1,966
D) $2,080

Question 43

Use the following inventory related information for Questions below


-Calculate the company's Ending Inventory on January 31 using Periodic LIFO.

A) $430
B) $454
C) $544
D) $565

Question 44

Use the following inventory related information for Questions below


-Calculate the company's Cost of Goods Sold using Periodic Weighted-Average for the month of January.

A) $2,053
B) $2,008
C) $1,883
D) $1,940

Question 45

Use the following inventory related information for Questions below


-Assuming a periodic inventory system is used, what is ending inventory under LIFO?

A) $2,400
B) $3,300
C) $1,600
D) $2,100

Question 46

Use the following inventory related information for Questions below


-Assuming a periodic inventory system is used, what is cost of goods sold under FIFO?

A) $2,100
B) $2,400
C) $3,300
D) $3,000

Question 47

Use the following inventory related information for Questions below


-Assuming a periodic inventory system is used, what is ending inventory under the Weighted-Average Cost method?

A) $2,314
B) $3,875
C) $2,025
D) $3,375

Question 48

Use the following inventory related information for Questions below
On September 1, the beginning inventory was 110 units at $50 each. Purchases and sales during September were:


-What is the cost of inventory on September 30 if the periodic LIFO costing alternative is used?

A) $7,160
B) $5,520
C) $6,620
D) $6,500

Question 49

Use the following inventory related information for Questions below
On September 1, the beginning inventory was 110 units at $50 each. Purchases and sales during September were:


-What is the cost of goods sold for September if the periodic FIFO costing alternative is used?

A) $13,920
B) $12,880
C) $13,980
D) $13,900

Question 50

Use the following inventory related information for Questions below
On September 1, the beginning inventory was 110 units at $50 each. Purchases and sales during September were:


-What is the cost of ending inventory for September if the periodic weighted-average costing alternative is used? (Round your answer to the nearest dollar)

A) $ 966
B) $6,338
C) $5,363
D) $6,276

Question 51

Cork Company imports and sells a product produced in Canada. In the summer of 2019, a natural disaster disrupted production, affecting its supply of product. Cork uses the LIFO inventory method. On January 1, 2019, Cork's inventory records were as follows:

Through mid-December of 2019, purchases were limited to 8,000 units, because the cost had increased to $80 per unit. Cork sold 14,200 units during 2019 at a price of $102 per unit, which significantly depleted its inventory.
Assume that Cork makes no further purchases during 2019. Compute Cork's gross profit for 2019.

A) $ 440,600
B) $1,036,600
C) $1,247,000
D) $ 485,400

Question 52

During its first and second years of operations, Forrester Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that understated Year 1 ending inventory by $40,000 and overstated Year 2 ending inventory by $55,000.
The combined effect of these errors on reported income is:

Question 53

During its first and second years of operations, Rogers Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that overstated year 1 ending inventory by $80,000 and overstated year 2 ending inventory by $60,000.
The combined effect of these errors on reported income is:

Question 54

The weighted-average cost method is used by Mendez, Inc. Sales are $80,000, the number of units available for sale is 100, the number of units sold during the period is 75, and the weighted-average cost of the goods available for sale is $200 each.
How much is gross profit for the company?

A) $10,000
B) $15,000
C) $20,000
D) $65,000

Question 55

During its first year of operations, Williams Company, using a periodic inventory system, made undiscovered errors in taking its year-end inventory that overstated Year 1 ending inventory by $50,000.
The effect of these errors on reported income is:

Question 56

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement?

A) FIFO
B) Average Cost
C) LIFO
D) All of these give equal values for cost of goods sold

Question 57

Assuming sales hold steady, which of the following actions would result in lowering income taxes for a company that uses the LIFO inventory method?

A) Increasing sales prices
B) Buying extra inventory near the end of the year in an inflationary environment
C) Allowing the inventory quantity at year end to fall below beginning year levels
D) None of these. All would cause increasing taxes

Question 58

The specific identification inventory costing method:

A) Is more appropriate for a firm selling construction equipment than for a firm selling greeting cards
B) Measures the ending inventory at the actual prices of the specific units sold during the period
C) Uses expected future acquisition costs rather than historical costs to measure the ending inventory
D) Is not a generally accepted method of pricing inventories
E) None of the above

Question 59

Which of the following inventory costing methods most closely matches the cost flow with the goods flow?

A) Periodic FIFO
B) Specific identification
C) Periodic LIFO
D) Weighted average
E) None of the above

Question 60

In its 2019 income statement, Riley Company reported cost of goods sold of $85,000. Later, Riley determined that beginning inventory was understated by $23,000, and the ending inventory was understated by $10,000.
What should be the corrected amount for cost of goods sold for 2019?

A) $98,000
B) $72,000
C) $95,000
D) $85,000

Question 61

A company discovered in 2019 that it had overstated the inventory balance for December 31, 2017 by $10,000. The company had (incorrectly) reported Net Income to be $300,000 for 2017, and $400,000 for 2018.
What are the corrected Net Incomes for 2017 and 2018?

Question 62

The following data refer to Issue Company's ending inventory:
How much is the inventory if the lower of cost or net realizable value rule is applied to each item of inventory?

A) $63,160
B) $60,940
C) $66,360
D) None of the above

Question 63

The following data refer to Billings Company's ending inventory:
How much is ending inventory if the lower of cost or net realizable value rule is applied to the total inventory?

A) $8,935
B) $8,805
C) $8,812
D) $8,814

Question 64

The lower-of-cost-or-net realizable value rule for inventory may be applied to:

A) Each inventory item
B) The totals of major inventory classes or categories
C) The total inventory
D) All of the above
E) None of the above

Question 65

The lower-of-cost-or-net realizable value rule for inventory:

A) States that inventory must be reported on the balance sheet at its current replacement cost
B) Must be applied to inventory on an item by item basis
C) Places losses from price declines in the period the goods are sold rather than in the period of the price decline
D) May cause inventory to be written up to an amount larger than historic cost
E) None of the above

Question 66

At year-end, The Appliance Shop has a freezer on hand that has been used as a demonstration model. The freezer cost $390 and sells for $750 when new. In its present condition, the freezer will be sold for $380. Related selling costs are an estimated $20.
At what amount should the freezer be carried in inventory?

A) $375
B) $380
C) $360
D) $400
E) None of the above

Question 67

Nelson Corporation sells three different products. The following information is available on December 31:
When applying the lower of cost or net realizable value rule to each item, what will Nelson report as its cost of ending inventory on December 31?

A) $2,300
B) $2,200
C) $2,650
D) $2,000

Question 68

Use the following data, determine the value of inventory under the lower of cost or net realizable value rule, applied on an individual item basis.

A) $6,000
B) $5,200
C) $6,800
D) $6,700

Question 69

Data on the physical inventory for a company as of December 31, are given below:

Assuming the company applies the lower-of-cost-or net realizable value rule on the inventory by major category of items, the inventory balance reported on the Balance Sheet as of December 31 will be:

A) $33,000
B) $33,100
C) $33,300
D) $33,400

Question 70

Basic inventory data for Save Mart Company as of June 30 are presented below:

Assume Save Mart Company applies the Lower of Cost or Net Realizable Value rule for the inventory by major category, determine the amount of inventory adjustment at the end of the year.

A) $130
B) $230
C) $360
D) $100

Question 71

Using the information below for a sporting goods store, calculate the amount of inventory adjustment using the Lower of Cost or Net Realizable value method applied to the inventory on a major category basis:

A) $ 450
B) $ 825
C) $1,275
D) $ 800

Question 72

Bono Company reported sales of $900,000, cost of goods sold of $600,000, and a gross profit of $300,000 for the year. Bono's beginning inventory was $120,000; the ending inventory at December 31, was $100,000.
Bono's inventory turnover for the year is:

A) 7.20
B) 4.27
C) 5.45
D) 2.08
E) None of the above

Question 73

A firm's inventory turnover:

A) Is computed by dividing cost of goods sold by the end-of-year inventory
B) Is affected by the inventory costing method used
C) Becomes the days' sales in inventory when multiplied by 365
D) Is generally interpreted as favorable if it is smaller than the industry average
E) None of the above

Question 74

Wang Company's average inventory for 2019 was $75,000 and its inventory turnover for 2019 was 6.0; Wang's 2019 days' sales in inventory (computed to one decimal place) is:

A) 12.7 days
B) 60.8 days
C) 68.5 days
D) 53.8 days
E) None of the above

Question 75

If a firm's inventory turnover increases, its days' sales in inventory will:

A) Increase
B) Decrease
C) Be unaffected
D) Change, but the direction of the effect can't be predicted
E) None of the above

Question 76

Flint Company and White Company reported the following information in their financial statements, prior to their merger:

To the closest hundredth, how much is the 2019 inventory turnover for Flint Company?

A) 2.89
B) 2.41
C) 1.28
D) 3.08

Question 77

Clint Company and Black Company reported the following information in their financial statements, prior to their merger:

To the closest hundredth, how much is the 2019 inventory turnover for Black Company?

A) 2.24
B) 0.90
C) 1.72
D) 1.80

Question 78

Use the following information for Questions below
The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period


-Assuming Newtown, Inc., uses FIFO perpetual inventory procedures, it records sale no. 2 as an entry to Cost of Goods Sold for:

A) $576
B) $596
C) $620
D) $632
E) None of the above

Question 79

Use the following information for Questions below
The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period


-Assuming Newtown, Inc., uses LIFO perpetual inventory procedures, sale no. 2 is recorded as an entry to Cost of Goods Sold for:

A) $576
B) $596
C) $620
D) $632
E) None of the above

Question 80

Use the following information for Questions below
The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Newtown, Inc. for an operating period


-Assuming Newtown, Inc., uses weighted-average (perpetual) inventory procedures, sale no. 2 is recorded as an entry to Cost of Goods sold for:

A) $605.87
B) $608.00
C) $611.84
D) $606.40
E) None of the above