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

Which ratio measures the portion of net sales that is gross profit?

Accepted Answer

A) Gross profit ratio. 
B) Net sales ratio. 
C) Gross margin ratio. 
D) Gross margin ratio and gross profit ratio 
E) All of these answers are correct 
A) Gross profit ratio. 
B) Net sales ratio. 
C) Gross margin ratio. 
D) Gross margin ratio and gross profit ratio 
E) All of these answers are correct

Question 3

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

Accepted Answer

A) 152.1. 
B) 121.7. 
C) 876. 
D) 30.5. 
E) 1,095. 
A) 152.1. 
B) 121.7. 
C) 876. 
D) 30.5. 
E) 1,095.

Question 4

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Goods in transit are included in inventory:

Accepted Answer

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

Question 7

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

Accepted Answer

A) True 
 B)False

Question 8

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Accepted Answer

A) True 
 B)False

Question 9

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

Accepted Answer

A) True 
 B)False

Question 10

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

Accepted Answer

A) Current replacement cost. 
B) Current sales price. 
C) The inventory as a whole. 
D) Purchase price. 
E) To groups of similar or related items. 
A) Current replacement cost. 
B) Current sales price. 
C) The inventory as a whole. 
D) Purchase price. 
E) To groups of similar or related items.

Question 11

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

Accepted Answer

A) True 
 B)False

Question 12

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows:   Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

Accepted Answer

The answer of During January, a company that uses a...

Question 13

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

Accepted Answer

A) True 
 B)False

Question 14

For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

Accepted Answer

A) $6,000. 
B) $7,000. 
C) $8,000. 
D) $16,000. 
E) $10,200. 
A) $6,000. 
B) $7,000. 
C) $8,000. 
D) $16,000. 
E) $10,200.

Question 15

The full disclosure principle:

Accepted Answer

A) Requires that any change in net income due to changes in the inventory cost assumption be disclosed. 
B) Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the type of change. 
C) Does not require a company to use one cost flow assumption exclusively. 
D) Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the justification for the change. 
E) All of these answers are correct. 
A) Requires that any change in net income due to changes in the inventory cost assumption be disclosed. 
B) Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the type of change. 
C) Does not require a company to use one cost flow assumption exclusively. 
D) Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the justification for the change. 
E) All of these answers are correct.

Question 16

FreshFoods Co. is a small fruit and vegetable grocer. FreshFoods is concerned that sales have been down over the past three quarters. As the companyaccountant, you decide to perform some analysis to uncover the source of theproblem. You gather the following data from the accounting records by quarter:   Required: Use the information above to draw some conclusions and discuss the financial impact of your analysis to FreshFoods Co. management.

Accepted Answer

The company's invent

Question 17

The merchandise turnover ratio:

Accepted Answer

A) Is cost of goods sold divided by ending inventory. 
B) Is cost of goods sold divided by average merchandise inventory. 
C) Is cost of goods sold divided by ending inventory times 365. 
D) Is average merchandise inventory divided by cost of goods sold. 
E) Is ending inventory divided by cost of goods sold. 
A) Is cost of goods sold divided by ending inventory. 
B) Is cost of goods sold divided by average merchandise inventory. 
C) Is cost of goods sold divided by ending inventory times 365. 
D) Is average merchandise inventory divided by cost of goods sold. 
E) Is ending inventory divided by cost of goods sold.

Question 18

An error in valuing inventory will cause an error in the amount of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 19

The merchandise turnover ratio:

Accepted Answer

A) Depends on the type of inventory valuation method. 
B) Measures how quickly a firm sells its merchandise inventory. 
C) Is used to analyze profitability. 
D) Validates the acid-test ratio. 
E) Is used to measure solvency. 
A) Depends on the type of inventory valuation method. 
B) Measures how quickly a firm sells its merchandise inventory. 
C) Is used to analyze profitability. 
D) Validates the acid-test ratio. 
E) Is used to measure solvency.

Question 20

If the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Accepted Answer

A) True 
 B)False

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

Which ratio measures the portion of net sales that is gross profit?

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

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

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.

Goods in transit are included in inventory:

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

The full disclosure principle:

The merchandise turnover ratio:

An error in valuing inventory will cause an error in the amount of cost of goods sold.

The merchandise turnover ratio:

If the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

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

Appendix

Filters

Exam 6: Inventory Costing and Valuation

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

Which ratio measures the portion of net sales that is gross profit?

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

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

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.

Goods in transit are included in inventory:

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

The full disclosure principle:

The merchandise turnover ratio:

An error in valuing inventory will cause an error in the amount of cost of goods sold.

The merchandise turnover ratio:

If the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

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

Appendix

Filters