Question 1

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Accepted Answer

A) True 
 B)False

Question 2

Goods in transit are included in inventory

Accepted Answer

A)  At any time in transit 
B)  When the purchaser is responsible for paying freight charges 
C)  When the supplier pays the freight charges 
D)  When ownership has passed to the purchaser 
E)  When the purchaser is responsible for paying freight charges and when ownership has passed to the purchaser 
A)  At any time in transit 
B)  When the purchaser is responsible for paying freight charges 
C)  When the supplier pays the freight charges 
D)  When ownership has passed to the purchaser 
E)  When the purchaser is responsible for paying freight charges and when ownership has passed to the purchaser

Question 3

Explain how to calculate the gross profit ratio and interpret its meaning.

Accepted Answer

The gross profit ratio measure

Question 4

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

Accepted Answer

A) True 
 B)False

Question 5

What types of costs are assigned to merchandise inventory?

Accepted Answer

Costs of merchandise inventory

Question 6

Harlingen Store uses the retail method and has the following information available concerning their most recent accounting period:
 $$\begin{array} { | l | r | r | } 
\hline & \text { At Cast } & \text { At Retail } \
\hline \text { Beginning-of-period inventory } & \$ 148,600 & \$ 245,200 \
\hline \text { Net purchases } & 677,400 & 1,229,800 \
\hline \text { Sales } & 1,200,000 & \
\hline
\end{array}$$ (1) What is the cost ratio using the retail method? (2) What is the estimated cost of the ending inventory?

Accepted Answer

The answer of Harlingen Store uses the retail method and...

Question 7

The materiality principle requires that the inventory valuation method follow the flow of goods.

Accepted Answer

A) True 
 B)False

Question 8

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500 million, and average inventory of $2,000 million. The merchandise turnover is

Accepted Answer

A)  2.40 
B)  3.00 
C)  0.33 
D)  0.4 
E)  12.00 
A)  2.40 
B)  3.00 
C)  0.33 
D)  0.4 
E)  12.00

Question 9

Explain how inventory management is evaluated using the merchandise turnover and days' sales in inventory ratios.

Accepted Answer

The goal in inventory management is to h

Question 10

Martock Company uses the periodic inventory system. The following information is available for the period ending December 31:(1) Sales: $30,000 (2) Beginning inventory: $17,500 (3) Ending inventory: $8,000 (4) Purchases: $10,000The cost of goods sold for the period is

Accepted Answer

A)  $19,500 
B)  $21,500 
C)  $24,500 
D)  $25,100 
E)  $26,000 
A)  $19,500 
B)  $21,500 
C)  $24,500 
D)  $25,100 
E)  $26,000

Question 11

The principle of faithful representation

Accepted Answer

A)  Requires that information be complete, neutral and free from error, so assets and income are not overstated, and liabilities and expenses are not understated 
B)  Requires that a company use the same accounting methods period after period 
C)  Requires that revenues and costs be reported in the period in which they are earned or incurred 
D)  Requires that all items of a material nature be included in financial statements 
E)  Requires that all inventory items be reported at full cost 
A)  Requires that information be complete, neutral and free from error, so assets and income are not overstated, and liabilities and expenses are not understated 
B)  Requires that a company use the same accounting methods period after period 
C)  Requires that revenues and costs be reported in the period in which they are earned or incurred 
D)  Requires that all items of a material nature be included in financial statements 
E)  Requires that all inventory items be reported at full cost

Question 12

All businesses should take an inventory count once each year to avoid inventory errors or shortages.

Accepted Answer

A) True 
 B)False

Question 13

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

Accepted Answer

A) True 
 B)False

Question 14

The days' sales in inventory ratio is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Question 15

Bethel Co. has collected the following data related to its ending inventory:
 $$\begin{array} { | l | r | r | r | } 
\hline \text { Product } & \text { Units an Hand } & \text { Unit Cast } & \text { Unit NRV } \
\hline 849 & 200 & \$ 12 & \$ 11 \
\hline 842 & 160 & \$ 13 & \$ 14 \
\hline 847 & 85 & \$ 12 & \$ 13 \
\hline 860 & 40 & \$ 21 & \$ 22 \
\hline
\end{array}$$ Calculate the lower of cost and net realizable value (LCNRV) on an item by item basis.

Accepted Answer

The answer of Bethel Co. has collected the following data...

Question 16

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

Accepted Answer

A) True 
 B)False

Question 17

Which inventory cost flow assumption results in the highest tax expense in a period of inflation?

Accepted Answer

A)  Retail method 
B)  FIFO 
C)  Average cost 
D)  Specific identification 
E)  Moving weighted average 
A)  Retail method 
B)  FIFO 
C)  Average cost 
D)  Specific identification 
E)  Moving weighted average

Question 18

When preparing the financial statements, management can choose the inventory cost flow assumption it will use for a particular year in order to impact the reported net income.

Accepted Answer

A) True 
 B)False

Question 19

The inventory cost flow assumption that is used cannot have a material impact on the financial statements.

Accepted Answer

A) True 
 B)False

Question 20

Explain the effect of an error in inventory valuation on financial statements.

Accepted Answer

An error in the amount of ending invento

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Goods in transit are included in inventory

Explain how to calculate the gross profit ratio and interpret its meaning.

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

What types of costs are assigned to merchandise inventory?

The materiality principle requires that the inventory valuation method follow the flow of goods.

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500 million, and average inventory of $2,000 million. The merchandise turnover is

Explain how inventory management is evaluated using the merchandise turnover and days' sales in inventory ratios.

Martock Company uses the periodic inventory system. The following information is available for the period ending December 31:(1) Sales: $30,000 (2) Beginning inventory: $17,500 (3) Ending inventory: $8,000 (4) Purchases: $10,000The cost of goods sold for the period is

The principle of faithful representation

All businesses should take an inventory count once each year to avoid inventory errors or shortages.

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

The days' sales in inventory ratio is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Bethel Co. has collected the following data related to its ending inventory: Product Units an Hand Unit Cast Unit NRV 849 200 \ 12 \ 11 842 160 \ 13 \ 14 847 85 \ 12 \ 13 860 40 \ 21 \ 22 Calculate the lower of cost and net realizable value (LCNRV) on an item by item basis.

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

Which inventory cost flow assumption results in the highest tax expense in a period of inflation?

When preparing the financial statements, management can choose the inventory cost flow assumption it will use for a particular year in order to impact the reported net income.

The inventory cost flow assumption that is used cannot have a material impact on the financial statements.

Explain the effect of an error in inventory valuation on financial statements.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

Exam 6: Inventory Costing and Valuation

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Goods in transit are included in inventory

Explain how to calculate the gross profit ratio and interpret its meaning.

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

What types of costs are assigned to merchandise inventory?

The materiality principle requires that the inventory valuation method follow the flow of goods.

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500 million, and average inventory of $2,000 million. The merchandise turnover is

Explain how inventory management is evaluated using the merchandise turnover and days' sales in inventory ratios.

Martock Company uses the periodic inventory system. The following information is available for the period ending December 31:(1) Sales: $30,000 (2) Beginning inventory: $17,500 (3) Ending inventory: $8,000 (4) Purchases: $10,000The cost of goods sold for the period is

The principle of faithful representation

All businesses should take an inventory count once each year to avoid inventory errors or shortages.

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

The days' sales in inventory ratio is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Bethel Co. has collected the following data related to its ending inventory: Product Units an Hand Unit Cast Unit NRV 849 200 \ 12 \ 11 842 160 \ 13 \ 14 847 85 \ 12 \ 13 860 40 \ 21 \ 22 Calculate the lower of cost and net realizable value (LCNRV) on an item by item basis.

The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

Which inventory cost flow assumption results in the highest tax expense in a period of inflation?

When preparing the financial statements, management can choose the inventory cost flow assumption it will use for a particular year in order to impact the reported net income.

The inventory cost flow assumption that is used cannot have a material impact on the financial statements.

Explain the effect of an error in inventory valuation on financial statements.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters