Question 1

Which of the following statements is true?

Accepted Answer

A)  A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting. 
B)  A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement. 
C)  Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO. 
D)  LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes. 
A)  A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting. 
B)  A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement. 
C)  Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO. 
D)  LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes. D

Question 2

On June 19, 2011, a fire destroyed the entire uninsured merchandise inventory of the Allen Merchandising Company. The following data are available:
 
What is the approximate inventory loss as a result of the fire?

Accepted Answer

A)  $19,200 
B)  $27,200 
C)  $34,000 
D)  $58,000 
A)  $19,200 
B)  $27,200 
C)  $34,000 
D)  $58,000 A

Question 3

The data below relate to Raw Material F, which is stocked by Dixon Inc. in its warehousing operation:
   
From these data, provide answers for the following [show computations for (1)]:

Accepted Answer

The answer of The data below relate to Raw Material...

Question 4

Which of the inventory cost flow assumptions provides the best measure of earnings, where "best" means most appropriate for predicting future earnings, when prices have been declining?

Accepted Answer

A)  FIFO 
B)  Specific identification 
C)  LIFO 
D)  Average cost 
A)  FIFO 
B)  Specific identification 
C)  LIFO 
D)  Average cost

Question 5

Which of the following describes the flow of product costs through the inventory accounts of a manufacturer?

Accepted Answer

A)  Raw materials, goods in process, factory overhead, finished goods 
B)  Raw materials, goods in process, finished goods 
C)  Raw materials, direct labor, factory overhead, finished goods 
D)  Raw materials, direct labor, factory overhead 
A)  Raw materials, goods in process, factory overhead, finished goods 
B)  Raw materials, goods in process, finished goods 
C)  Raw materials, direct labor, factory overhead, finished goods 
D)  Raw materials, direct labor, factory overhead

Question 6

Goods on consignment are

Accepted Answer

A)  included in the consignee's inventory. 
B)  recorded in a consignment out account which is an inventory account. 
C)  recorded in a consignment in account which is an inventory account. 
D)  all of these. 
A)  included in the consignee's inventory. 
B)  recorded in a consignment out account which is an inventory account. 
C)  recorded in a consignment in account which is an inventory account. 
D)  all of these.

Question 7

With LIFO, cost of goods sold is $195,000, and ending inventory is $45,000. If FIFO ending inventory is $65,000, how much is FIFO cost of goods sold?

Accepted Answer

A)  $215,000 
B)  $195,000 
C)  $175,000 
D)  $65,000 
A)  $215,000 
B)  $195,000 
C)  $175,000 
D)  $65,000

Question 8

In a period of rising prices, the inventory cost allocation method that tends to result in the lowest reported net income is

Accepted Answer

A)  LIFO. 
B)  FIFO. 
C)  moving average. 
D)  weighted average. 
A)  LIFO. 
B)  FIFO. 
C)  moving average. 
D)  weighted average.

Question 9

The following information is available for the Becca Company for the three months ended June 30 of this year:
 
The gross margin was 25 percent of sales. What is the estimated inventory balance at June 30?

Accepted Answer

A)  $880,000 
B)  $933,000 
C)  $1,200,000 
D)  $1,500,000 
A)  $880,000 
B)  $933,000 
C)  $1,200,000 
D)  $1,500,000

Question 10

In a period of falling prices, the use of which of the following inventory cost flow methods would typically result in the highest cost of goods sold?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Weighted average cost 
D)  Specific identification 
A)  FIFO 
B)  LIFO 
C)  Weighted average cost 
D)  Specific identification

Question 11

The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below.
 
See information regarding the Garrett Corporation above. The inventory valuation for highlighters using the lower-of-cost-or-market method is

Accepted Answer

A)  $25,600. 
B)  $29,200. 
C)  $31,800. 
D)  $30,000. 
A)  $25,600. 
B)  $29,200. 
C)  $31,800. 
D)  $30,000.

Question 12

The following information appears in Olsen Company's records for the year ended December 31:
 
On December 31, a physical inventory revealed that the ending inventory was only $210,000. Olsen's gross profit on net sales has remained constant at 30 percent in recent years. Olsen suspects that some inventory may have been pilfered by one of the company's employees. At December 31, what is the estimated cost of missing inventory?

Accepted Answer

A)  $75,000 
B)  $82,500 
C)  $210,000 
D)  $292,500 
A)  $75,000 
B)  $82,500 
C)  $210,000 
D)  $292,500

Question 13

The following information was obtained from the accounts of McKay Company:
 
Given this information, the cost of goods sold during the year is

Accepted Answer

A)  $46,000. 
B)  $41,000. 
C)  $51,000. 
D)  $61,000. 
A)  $46,000. 
B)  $41,000. 
C)  $51,000. 
D)  $61,000.

Question 14

Net realizable value can be defined as

Accepted Answer

A)  selling price. 
B)  selling price less costs to complete and sell. 
C)  selling price plus costs to complete and sell. 
D)  acquisition cost plus costs to complete and sell. 
A)  selling price. 
B)  selling price less costs to complete and sell. 
C)  selling price plus costs to complete and sell. 
D)  acquisition cost plus costs to complete and sell.

Question 15

Stephens Inc. is a wholesaler of photography equipment. The activity for the VTC cameras during July is shown below:
 
See information for Stephens Inc. above. If Stephens Inc. uses a moving average perpetual inventory system, the ending inventory of the VTC cameras at July 31 is reported as

Accepted Answer

A)  $153,400. 
B)  $156,912. 
C)  $158,736. 
D)  $159,464. 
A)  $153,400. 
B)  $156,912. 
C)  $158,736. 
D)  $159,464.

Question 16

The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below.
 
The value for cost to be used in the lower-of-cost-or-market comparison for the markers is

Accepted Answer

A)  $20,800. 
B)  $23,400. 
C)  $24,000. 
D)  $31,200. 
A)  $20,800. 
B)  $23,400. 
C)  $24,000. 
D)  $31,200.

Question 17

The use of a discounts lost account implies that the recorded cost of a purchased inventory item is its

Accepted Answer

A)  invoice price. 
B)  invoice price plus the purchase discount lost. 
C)  invoice price less the purchase discount taken. 
D)  invoice price less the purchase discount allowable whether taken or not. 
A)  invoice price. 
B)  invoice price plus the purchase discount lost. 
C)  invoice price less the purchase discount taken. 
D)  invoice price less the purchase discount allowable whether taken or not.

Question 18

Gordon Company's inventory at June 30, 2011, was $75,000 based on a physical count of goods priced at cost, and before any necessary year-end adjustment relating to the following:
 
What amount should Gordon report as inventory on its June 30, 2011, balance sheet?

Accepted Answer

A)  $73,500 
B)  $74,000 
C)  $75,000 
D)  $76,500 
A)  $73,500 
B)  $74,000 
C)  $75,000 
D)  $76,500

Question 19

The following information is available for Torino Corp. for its most recent year:
 
The gross margin is 40 percent of net sales. What is the cost of goods available for sale?

Accepted Answer

A)  $1,680,000 
B)  $1,920,000 
C)  $2,400,000 
D)  $2,440,000 
A)  $1,680,000 
B)  $1,920,000 
C)  $2,400,000 
D)  $2,440,000

Question 20

Which of the following will occur when inventory costs are decreasing?

Accepted Answer

A)  LIFO will result in lower net income and lower ending inventory than will FIFO. 
B)  FIFO will result in lower net income and lower ending inventory than will LIFO. 
C)  LIFO will result in a lower net income, but a higher ending inventory, than will FIFO. 
D)  FIFO will result in a lower net income, but a higher ending inventory, than will LIFO. 
A)  LIFO will result in lower net income and lower ending inventory than will FIFO. 
B)  FIFO will result in lower net income and lower ending inventory than will LIFO. 
C)  LIFO will result in a lower net income, but a higher ending inventory, than will FIFO. 
D)  FIFO will result in a lower net income, but a higher ending inventory, than will LIFO.

Exam 9: Inventory and Cost of Goods Sold

Which of the following statements is true?

On June 19, 2011, a fire destroyed the entire uninsured merchandise inventory of the Allen Merchandising Company. The following data are available: What is the approximate inventory loss as a result of the fire?

The data below relate to Raw Material F, which is stocked by Dixon Inc. in its warehousing operation: From these data, provide answers for the following [show computations for (1)]:

Which of the inventory cost flow assumptions provides the best measure of earnings, where "best" means most appropriate for predicting future earnings, when prices have been declining?

Which of the following describes the flow of product costs through the inventory accounts of a manufacturer?

Goods on consignment are

With LIFO, cost of goods sold is $195,000, and ending inventory is $45,000. If FIFO ending inventory is $65,000, how much is FIFO cost of goods sold?

In a period of rising prices, the inventory cost allocation method that tends to result in the lowest reported net income is

The following information is available for the Becca Company for the three months ended June 30 of this year: The gross margin was 25 percent of sales. What is the estimated inventory balance at June 30?

In a period of falling prices, the use of which of the following inventory cost flow methods would typically result in the highest cost of goods sold?

The following information was obtained from the accounts of McKay Company: Given this information, the cost of goods sold during the year is

Net realizable value can be defined as

Stephens Inc. is a wholesaler of photography equipment. The activity for the VTC cameras during July is shown below: See information for Stephens Inc. above. If Stephens Inc. uses a moving average perpetual inventory system, the ending inventory of the VTC cameras at July 31 is reported as

The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below. The value for cost to be used in the lower-of-cost-or-market comparison for the markers is

The use of a discounts lost account implies that the recorded cost of a purchased inventory item is its

Gordon Company's inventory at June 30, 2011, was $75,000 based on a physical count of goods priced at cost, and before any necessary year-end adjustment relating to the following: What amount should Gordon report as inventory on its June 30, 2011, balance sheet?

The following information is available for Torino Corp. for its most recent year: The gross margin is 40 percent of net sales. What is the cost of goods available for sale?

Which of the following will occur when inventory costs are decreasing?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

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