Question 1

When merchandise is sold and the perpetual system of inventory is used, the journal entry for a sale would include

Accepted Answer

A)  debiting Accounts Receivable and crediting Sales. 
B)  debiting Accounts Receivable and crediting Merchandise Inventory. 
C)  debiting Accounts Receivable and crediting Cost of Goods Sold. 
D)  debiting Cost of Goods Sold and crediting Sales. 
A)  debiting Accounts Receivable and crediting Sales. 
B)  debiting Accounts Receivable and crediting Merchandise Inventory. 
C)  debiting Accounts Receivable and crediting Cost of Goods Sold. 
D)  debiting Cost of Goods Sold and crediting Sales.

Question 2

When each unit of inventory can be specifically identified, the specific identification method can be used.

Accepted Answer

A) True 
 B)False

Question 3

The natural business year is a fiscal year that starts and ends at the time the stock of merchandise is normally at its lowest level.

Accepted Answer

A) True 
 B)False

Question 4

The inventory system that uses the merchandise inventory account as an active account is called

Accepted Answer

A)  perpetual. 
B)  LIFO. 
C)  FIFO. 
D)  periodic. 
A)  perpetual. 
B)  LIFO. 
C)  FIFO. 
D)  periodic.

Question 5

A widely used method of allocating merchandise cost that assumes the first merchandise bought is the first merchandise sold is called the first-in, first-out method.

Accepted Answer

A) True 
 B)False

Question 6

A method of allocating merchandise cost requiring each item sold and each item remaining in inventory to be separately identified with respect to its purchase cost is called the

Accepted Answer

A)  last-in, first-out method. 
B)  first-in, first-out method. 
C)  specific identification method. 
D)  weighted-average method. 
A)  last-in, first-out method. 
B)  first-in, first-out method. 
C)  specific identification method. 
D)  weighted-average method.

Question 7

A method of allocating merchandise cost that assumes the sales in the period were made from the recently purchased merchandise and its earliest merchandise bought remains in the inventory is called the

Accepted Answer

A)  last-in, first-out method. 
B)  first-in, first-out method. 
C)  specific identification method. 
D)  weighted-average method. 
A)  last-in, first-out method. 
B)  first-in, first-out method. 
C)  specific identification method. 
D)  weighted-average method.

Question 8

Refer to the following data: ​
Net sales, first month
$13,000
Normal gross profit as a percentage of sales
45%
Inventory, start of period
$8,000
Net purchases, first month
$7,000
​
Using the gross profit method of inventory estimation, the amount of normal gross profit would be

Accepted Answer

A)  $5,850. 
B)  $3,600. 
C)  $6,750. 
D)  $15,000. 
A)  $5,850. 
B)  $3,600. 
C)  $6,750. 
D)  $15,000.

Question 9

Assume the beginning inventory as of January 1 consisted of 500 units that were purchased for $8.25 each. During the month, three new purchases were made. The first purchase consisted of 700 units costing $8.50 each, the second purchase had 800 units costing $9.00 each, and the third purchase had 600 units costing $9.50 each. At the end of the month, ending inventory shows 700 units. Compute the cost of goods sold and the ending inventory for the company using each of the following methods. Also determine the gross margin if the total sales revenue is $43,000.
a.
Specific identification: Of the units sold, 300 were from the beginning inventory, 600 from the first purchase, 700 from the second purchase, and 300 from the third purchase.
b.
First-in, first-out (FIFO)
c.
Weighted-average (round the unit price)
d.
Last-in, first-out (LIFO)

Accepted Answer

The answer of Assume the beginning inventory as of January...

Question 10

The gross profit method estimates the ending inventory and cost of goods sold by using the firm's normal gross profit as a percentage of net sales.

Accepted Answer

A) True 
 B)False

Question 11

Match the terms with the definitions.
-Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold.

Accepted Answer

A) average cost 
B) conservatism 
C) perpetual inventory system 
D) market value 
E) consignor
F)consistency
G)cost
H)first-in, first-out method
I)gross profit method
J)last-in, first-out method
K)inventory sheet 
A) average cost 
B) conservatism 
C) perpetual inventory system 
D) market value 
E) consignor
F)consistency
G)cost
H)first-in, first-out method
I)gross profit method
J)last-in, first-out method
K)inventory sheet

Question 12

Under the perpetual system of accounting for inventory, the merchandise inventory account is debited for the cost of all merchandise bought.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the following data: $\begin{array}{lr}
\text { Net sales, first month } & \$ 13,000 \
\text { Normal gross profit as a percentage of sales } & 45 \% \
\text { Inventory, start of period } & \$ 8,000 \
\text { Net purchases, first month } & \$ 7,000
\end{array}$ ? Using the gross profit method of inventory estimation, the cost of goods sold would be

Accepted Answer

A)  $5,850. 
B)  $7,150 
C)  $7,850 
D)  $15,000. 
A)  $5,850. 
B)  $7,150 
C)  $7,850 
D)  $15,000.

Question 14

Under the periodic inventory system, no entries are made to the merchandise inventory or cost of goods sold accounts during the year.

Accepted Answer

A) True 
 B)False

Question 15

A method of allocating merchandise cost that is based on the average cost of identical units is known as weighted-average cost or average cost.

Accepted Answer

A) True 
 B)False

Question 16

The gross profit (inventory valuation) method requires keeping records of the selling prices of merchandise purchased.

Accepted Answer

A) True 
 B)False

Question 17

Errors in the ending inventory have a direct effect on net income for the period.

Accepted Answer

A) True 
 B)False

Question 18

Over the past several years, Landmark Supplies has averaged a gross profit of 34%. At the end of 20--, the income statement of the company included the information shown below:   ​
Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31, 20--. Instead, they had merely estimated the inventory.
Required:
Under the gross profit method of inventory estimation, determine the following items to check the accuracy of the employees' estimates.

Accepted Answer

The answer of Over the past several years, Landmark Supplies...

Question 19

Match the terms with the definitions.
-Under this system, the ending inventory and cost of goods sold are determined at the end of the accounting period, when a physical inventory is taken.

Accepted Answer

A) average cost 
B) weighted-average method 
C) consignee 
D) consigned goods 
E) specific identification method
F)retail method
G)cost
H)physical inventory
I)periodic inventory system
J)in transit
K)inventory sheet
L)natural business year
M)lower-of-cost-or-market method 
A) average cost 
B) weighted-average method 
C) consignee 
D) consigned goods 
E) specific identification method
F)retail method
G)cost
H)physical inventory
I)periodic inventory system
J)in transit
K)inventory sheet
L)natural business year
M)lower-of-cost-or-market method

Question 20

Match the terms with the definitions.
-Goods that are in the process of being shipped between the seller and the buyer.

Accepted Answer

A) average cost 
B) weighted-average method 
C) consignee 
D) consigned goods 
E) specific identification method
F)retail method
G)cost
H)physical inventory
I)periodic inventory system
J)in transit
K)inventory sheet
L)natural business year
M)lower-of-cost-or-market method 
A) average cost 
B) weighted-average method 
C) consignee 
D) consigned goods 
E) specific identification method
F)retail method
G)cost
H)physical inventory
I)periodic inventory system
J)in transit
K)inventory sheet
L)natural business year
M)lower-of-cost-or-market method

Exam 13: Accounting for Merchandise Inventory

When merchandise is sold and the perpetual system of inventory is used, the journal entry for a sale would include

When each unit of inventory can be specifically identified, the specific identification method can be used.

The natural business year is a fiscal year that starts and ends at the time the stock of merchandise is normally at its lowest level.

The inventory system that uses the merchandise inventory account as an active account is called

A widely used method of allocating merchandise cost that assumes the first merchandise bought is the first merchandise sold is called the first-in, first-out method.

A method of allocating merchandise cost requiring each item sold and each item remaining in inventory to be separately identified with respect to its purchase cost is called the

A method of allocating merchandise cost that assumes the sales in the period were made from the recently purchased merchandise and its earliest merchandise bought remains in the inventory is called the

Refer to the following data: ​ Net sales, first month $13,000 Normal gross profit as a percentage of sales 45% Inventory, start of period $8,000 Net purchases, first month $7,000 ​ Using the gross profit method of inventory estimation, the amount of normal gross profit would be

The gross profit method estimates the ending inventory and cost of goods sold by using the firm's normal gross profit as a percentage of net sales.

Match the terms with the definitions. -Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold.

Under the perpetual system of accounting for inventory, the merchandise inventory account is debited for the cost of all merchandise bought.

Refer to the following data: Net sales, first month \ 13,000 Normal gross profit as a percentage of sales 45\% Inventory, start of period \ 8,000 Net purchases, first month \ 7,000 ? Using the gross profit method of inventory estimation, the cost of goods sold would be

Under the periodic inventory system, no entries are made to the merchandise inventory or cost of goods sold accounts during the year.

A method of allocating merchandise cost that is based on the average cost of identical units is known as weighted-average cost or average cost.

The gross profit (inventory valuation) method requires keeping records of the selling prices of merchandise purchased.

Errors in the ending inventory have a direct effect on net income for the period.

Match the terms with the definitions. -Under this system, the ending inventory and cost of goods sold are determined at the end of the accounting period, when a physical inventory is taken.

Match the terms with the definitions. -Goods that are in the process of being shipped between the seller and the buyer.

Introduction to Accounting

Analyzing Transactions: the Accounting Equation

The Double-Entry Framework

Journalizing and Posting Transactions

Adjusting Entries and the Work Sheet

Financial Statements and the Closing Process

Accounting for Cash

Payroll Accounting: Employee Earnings and Deductions

Payroll Accounting: Employer Taxes and Reports

Accounting for Sales and Cash Receipts

Accounting for Purchases and Cash Payments

Special Journals

Adjustments and the Work Sheet for a Merchandising Business

Financial Statements and Year-End Accounting for a Merchandising Business

Accounting for Accounts Receivable

Accounting for Notes and Interest

Accounting for Long-Term Assets

Accounting for Partnerships

Corporations: Organization and Capital Stocks

Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

Corporations: Bonds

Statement of Cash Flows

Analysis of Financial Statements

Departmental Accounting

Manufacturing Accounting: The Job Order Cost System

Manufacturing Accounting: The Work Sheet and Financial Statements

Filters

Refer to the following data: Net sales, first month $13,000 Normal gross profit as a percentage of sales 45% Inventory, start of period $8,000 Net purchases, first month $7,000 Using the gross profit method of inventory estimation, the amount of normal gross profit would be