Question 1

The lower-of-cost-or-market basis of accounting for inventories should be applied when the ______________ cost of the goods is lower than its cost.

Accepted Answer

The answer of The lower-of-cost-or-market basis of accounting for inventories...

Question 2

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

Accepted Answer

A) True 
 B)False

Question 3

Julian Junkets has the following inventory information.   Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

Accepted Answer

A)  $2,748 
B)  $2,754 
C)  $2,778 
D)  $5,796 
A)  $2,748 
B)  $2,754 
C)  $2,778 
D)  $5,796

Question 4

A company just starting business made the following four inventory purchases in June:   A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

Accepted Answer

A)  $2,100. 
B)  $1,500. 
C)  $575. 
D)  $600. 
A)  $2,100. 
B)  $1,500. 
C)  $575. 
D)  $600.

Question 5

A problem with the specific identification method is that

Accepted Answer

A)  inventories can be reported at actual costs. 
B)  management can manipulate income. 
C)  matching is not achieved. 
D)  the lower-of-cost-or-market basis cannot be applied. 
A)  inventories can be reported at actual costs. 
B)  management can manipulate income. 
C)  matching is not achieved. 
D)  the lower-of-cost-or-market basis cannot be applied.

Question 6

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

Accepted Answer

A) True 
 B)False

Question 7

Julian Junkets has the following inventory information.   Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?

Accepted Answer

A)  $2,750 
B)  $2,784 
C)  $2,406 
D)  $2,772 
A)  $2,750 
B)  $2,784 
C)  $2,406 
D)  $2,772

Question 8

Under the LCM approach, the market value is defined as

Accepted Answer

A)  FIFO cost. 
B)  LIFO cost. 
C)  current replacement cost. 
D)  selling price. 
A)  FIFO cost. 
B)  LIFO cost. 
C)  current replacement cost. 
D)  selling price.

Question 9

Kirby Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Kirby Company developed the following information:   
The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period.
Instructions
Using the gross profit method, prepare an estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.

Accepted Answer

The answer of Kirby Company suffered a loss of its...

Question 10

The ______________ method tracks the actual physical flow of each unit of inventory available for sale; however, management may be able to manipulate ______________ by using this method.

Accepted Answer

specific i

Question 11

Two widely used methods of estimating inventories are the ______________ method and the _____________ method.

Accepted Answer

gross prof

Question 12

At May 1, 2010, Deitrich Company had beginning inventory consisting of 100 units with a unit cost of $7. During May, the company purchased inventory as follows:
200 units at $7
300 units at $8
The company sold 500 units during the month for $12 per unit. Deitrich uses the average cost method. The value of Deitrich's inventory at May 31, 2010 is

Accepted Answer

A)  $700. 
B)  $750. 
C)  $800. 
D)  $4,500. 
A)  $700. 
B)  $750. 
C)  $800. 
D)  $4,500.

Question 13

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.
Code: O = item is overstated
U = item is understated
NA = item is not affected

Accepted Answer

The answer of For each of the independent events listed...

Question 14

If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.

Accepted Answer

A) True 
 B)False

Question 15

Accounting for inventories is important because inventories affect the ______________ section of the balance sheet and the ______________ section on the income statement.

Accepted Answer

current as

Question 16

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000. The amounts reflected in the current end of the period balance sheet are

Accepted Answer

The answer of A company uses the periodic inventory method...

Question 17

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $825. At the statement date, each computer has a current replacement cost of $350. What value should Paulson, Inc., have for the computers at the end of the year?

Accepted Answer

A)  $1,250. 
B)  $1,750. 
C)  $3,000. 
D)  $4,125. 
A)  $1,250. 
B)  $1,750. 
C)  $3,000. 
D)  $4,125.

Question 18

Holliday Company's inventory records show the following data:   A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $12 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. If the company uses FIFO, what is the gross profit for the period?

Accepted Answer

A)  $2,000 
B)  $10,000 
C)  $21,000 
D)  $38,000 
A)  $2,000 
B)  $10,000 
C)  $21,000 
D)  $38,000

Question 19

Hoyt Company's inventory records show the following data for the month of September:   
A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

Accepted Answer

Ending inventory: (100 units ×

Question 20

Widner Company understated its inventory by $10,000 at December 31, 2010. It did not correct the error in 2010 or 2011. As a result, Widner's owner's equity was:

Accepted Answer

A)  understated at December 31, 2010, and overstated at December 31, 2011. 
B)  understated at December 31, 2010, and properly stated at December 31, 2011. 
C)  overstated at December 31, 2010, and overstated at December 31, 2011. 
D)  understated at December 31, 2010, and understated at December 31, 2011. 
A)  understated at December 31, 2010, and overstated at December 31, 2011. 
B)  understated at December 31, 2010, and properly stated at December 31, 2011. 
C)  overstated at December 31, 2010, and overstated at December 31, 2011. 
D)  understated at December 31, 2010, and understated at December 31, 2011.

Exam 6: Inventories

The lower-of-cost-or-market basis of accounting for inventories should be applied when the ______________ cost of the goods is lower than its cost.

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

A problem with the specific identification method is that

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?

Under the LCM approach, the market value is defined as

The ______________ method tracks the actual physical flow of each unit of inventory available for sale; however, management may be able to manipulate ______________ by using this method.

Two widely used methods of estimating inventories are the ______________ method and the _____________ method.

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item. Code: O = item is overstated U = item is understated NA = item is not affected

If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.

Accounting for inventories is important because inventories affect the ______________ section of the balance sheet and the ______________ section on the income statement.

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000. The amounts reflected in the current end of the period balance sheet are

Hoyt Company's inventory records show the following data for the month of September: A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

Widner Company understated its inventory by $10,000 at December 31, 2010. It did not correct the error in 2010 or 2011. As a result, Widner's owner's equity was:

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

The method tracks the actual physical flow of each unit of inventory available for sale; however, management may be able to manipulate by using this method.

Two widely used methods of estimating inventories are the __ method and the _ method.

Accounting for inventories is important because inventories affect the section of the balance sheet and the section on the income statement.