Question 1

The average cost method of inventory valuation will always result in the lowest reported net income.

Accepted Answer

A) True 
 B)False

Question 2

A matching of the most recent costs to revenue results from the use of

Accepted Answer

A)  the LIFO method. 
B)  the FIFO method. 
C)  the average cost method. 
D)  the lower of cost or market method. 
A)  the LIFO method. 
B)  the FIFO method. 
C)  the average cost method. 
D)  the lower of cost or market method.

Question 3

Under the retail inventory method,if the gross profit ratio is 40% and ending inventory at retail is $55,000,then estimated ending inventory is $33,000.

Accepted Answer

A) True 
 B)False

Question 4

A business is required to apply the lower of cost or market rule by comparing and reporting inventory values on an item-by-item basis.

Accepted Answer

A) True 
 B)False

Question 5

When inventory is valued at the lower of cost or market,the accountant is applying the principle or convention called ___________________.

Accepted Answer

The answer of When inventory is valued at the lower...

Question 6

Inventory costing methods are influenced by industry practice and the types of merchandise available for sale.

Accepted Answer

A) True 
 B)False

Question 7

The firm had a beginning inventory of 50 units with a unit cost of $10.Purchases during the year were as follows: March-50 units with a unit cost of $12;July-60 units with a unit cost of $15.If the average cost method is used,the value of the ending inventory of 45 units is

Accepted Answer

A)  $675. 
B)  $563. 
C)  $450. 
D)  $555. 
A)  $675. 
B)  $563. 
C)  $450. 
D)  $555.

Question 8

If a business builds and sells yachts,the logical method for computing the cost of goods sold is

Accepted Answer

A)  LIFO. 
B)  average cost method. 
C)  specific identification method. 
D)  FIFO. 
A)  LIFO. 
B)  average cost method. 
C)  specific identification method. 
D)  FIFO.

Question 9

Under the gross profit method of estimating inventory,the ending inventory is determined by subtracting the estimated cost of goods sold from the cost of goods available for sale.

Accepted Answer

A) True 
 B)False

Question 10

The steps and proper order for estimating EI cost using the gross profit method are as follows:

Accepted Answer

A)  determine COGA,estimate COGS,subtract COGS from COGA. 
B)  determine COGA,estimate COGS,subtract COGA from COGS. 
C)  estimate COGS,determine COGA,subtract COGA from COGS. 
D)  estimate COGS,determine COGA,subtract COGS from COGA. 
A)  determine COGA,estimate COGS,subtract COGS from COGA. 
B)  determine COGA,estimate COGS,subtract COGA from COGS. 
C)  estimate COGS,determine COGA,subtract COGA from COGS. 
D)  estimate COGS,determine COGA,subtract COGS from COGA.

Question 11

Under the retail inventory method,if the gross profit ratio is 40% and ending inventory at retail is $45,000,then estimated ending inventory is $18,000.

Accepted Answer

A) True 
 B)False

Question 12

Under the gross profit method,the cost of the ending inventory is determined by applying the gross profit ratio to net sales and then subtracting the gross profit calculated from the cost of goods available for sale.

Accepted Answer

A) True 
 B)False

Question 13

The gross profit method of estimating inventory enables managers to prepare budgets and proforma (forecast or anticipated)financial statements.

Accepted Answer

A) True 
 B)False

Question 14

The retail method is a means of estimating

Accepted Answer

A)  selling price. 
B)  beginning inventory cost. 
C)  retail price of inventory. 
D)  ending inventory cost. 
A)  selling price. 
B)  beginning inventory cost. 
C)  retail price of inventory. 
D)  ending inventory cost.

Question 15

Gross profit ratio is determined by dividing Net Sales by Gross Profit.

Accepted Answer

A) True 
 B)False

Question 16

Average costing is advantageous to use when a company's inventory is composed of many similar items that are not subject to significant price and style changes.

Accepted Answer

A) True 
 B)False

Question 17

The difference between the cost and the initial retail price of merchandise is

Accepted Answer

A)  markup. 
B)  markon. 
C)  markdown. 
D)  market price. 
A)  markup. 
B)  markon. 
C)  markdown. 
D)  market price.

Question 18

The gross profit method of determining ending inventory cost

Accepted Answer

A)  can be used without taking a physical count of merchandise. 
B)  provides accurate information about the number of units in inventory. 
C)  requires that a firm keep inventory and purchases data at retail value as well as at cost. 
D)  requires that the inventory be classified into groups of items of about the same rate of markon. 
A)  can be used without taking a physical count of merchandise. 
B)  provides accurate information about the number of units in inventory. 
C)  requires that a firm keep inventory and purchases data at retail value as well as at cost. 
D)  requires that the inventory be classified into groups of items of about the same rate of markon.

Question 19

A merchant who deals in one-of-a-kind items with large unit costs may account for inventory by the _________________________ method.

Accepted Answer

specific i

Question 20

The weighted average cost of an inventory item is calculated by

Accepted Answer

A)  dividing the sum of the unit cost on the purchase invoices by the number of units purchased. 
B)  dividing the cost of goods available for sale by the number of units on the ending inventory. 
C)  dividing the cost of goods available for sale by the number of units available during the period. 
D)  dividing the cost of goods sold by the number of units available during the period. 
A)  dividing the sum of the unit cost on the purchase invoices by the number of units purchased. 
B)  dividing the cost of goods available for sale by the number of units on the ending inventory. 
C)  dividing the cost of goods available for sale by the number of units available during the period. 
D)  dividing the cost of goods sold by the number of units available during the period.

Exam 17: Merchandise Inventory

The average cost method of inventory valuation will always result in the lowest reported net income.

A matching of the most recent costs to revenue results from the use of

Under the retail inventory method,if the gross profit ratio is 40% and ending inventory at retail is $55,000,then estimated ending inventory is $33,000.

A business is required to apply the lower of cost or market rule by comparing and reporting inventory values on an item-by-item basis.

When inventory is valued at the lower of cost or market,the accountant is applying the principle or convention called ___________________.

Inventory costing methods are influenced by industry practice and the types of merchandise available for sale.

The firm had a beginning inventory of 50 units with a unit cost of $10.Purchases during the year were as follows: March-50 units with a unit cost of $12;July-60 units with a unit cost of $15.If the average cost method is used,the value of the ending inventory of 45 units is

If a business builds and sells yachts,the logical method for computing the cost of goods sold is

Under the gross profit method of estimating inventory,the ending inventory is determined by subtracting the estimated cost of goods sold from the cost of goods available for sale.

The steps and proper order for estimating EI cost using the gross profit method are as follows:

Under the retail inventory method,if the gross profit ratio is 40% and ending inventory at retail is $45,000,then estimated ending inventory is $18,000.

Under the gross profit method,the cost of the ending inventory is determined by applying the gross profit ratio to net sales and then subtracting the gross profit calculated from the cost of goods available for sale.

The gross profit method of estimating inventory enables managers to prepare budgets and proforma (forecast or anticipated)financial statements.

The retail method is a means of estimating

Gross profit ratio is determined by dividing Net Sales by Gross Profit.

Average costing is advantageous to use when a company's inventory is composed of many similar items that are not subject to significant price and style changes.

The difference between the cost and the initial retail price of merchandise is

The gross profit method of determining ending inventory cost

A merchant who deals in one-of-a-kind items with large unit costs may account for inventory by the _________________________ method.

The weighted average cost of an inventory item is calculated by

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Property, Plant, and Equipment

Accounting for Partnerships

Corporations: Formation and Capital Stock Transactions

Corporate Earnings and Capital Transactions

Long-Term Bonds

Financial Statement Analyses

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

Cost-Revenue Analysis for Decision Making

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