Question 1

Inventory is classified:

Accepted Answer

A) as a property, plant, and equipment asset on the balance sheet. 
B) as a current asset on the balance sheet. 
C) as a current liability on the balance sheet. 
D) as either an investment or a current asset on the balance sheet. 
A) as a property, plant, and equipment asset on the balance sheet. 
B) as a current asset on the balance sheet. 
C) as a current liability on the balance sheet. 
D) as either an investment or a current asset on the balance sheet.

Question 2

Measuring the cost of inventory is difficult when prices are constant.

Accepted Answer

A) True 
 B)False

Question 3

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } 
\hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \
\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \
\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \
\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \
\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \
\hline
\end{array}$$
-Refer to Table 6-6. What is the gross margin for the two months assuming that Sam's uses the perpetual inventory weighted-average-cost method?

Accepted Answer

A) $13,504 
B) $21,728 
C) $10,800 
D) $17,977 
A) $13,504 
B) $21,728 
C) $10,800 
D) $17,977

Question 4

Table 6-5
Assume the following data for Kruger Sales for November 2019: $\begin{array}{ll}
\text { Beginning inventory Nov. } 1 & 5 \text { units at } \$ 90 \text { each } \
\text { Sale Nov. } 3 & 3 \text { units at } \$ 120 \text { each } \
\text { Nov. } 6 \text { purchase } & 11 \text { units at } \$ 95 \text { each } \
\text { Sale Nov. } 8 & 4 \text { units at } \$ 120 \text { each } \
\text { Sale Nov. } 9 & 3 \text { units at } \$ 120 \text { each }
\end{array}$
 On November 30, a physical count reveals 6 units on hand.
-Refer to Table 6-5. Calculate ending inventory for Kruger Sales assuming the periodic FIFO cost method is being used.

Accepted Answer

@#IMG-DLM& Ending In

Question 5

FIFO will report the lowest cost of goods sold on the income statement when prices are falling.

Accepted Answer

A) True 
 B)False

Question 6

When inventory costs are rising, FIFO results in the highest cost of goods sold and the lowest gross margin.

Accepted Answer

A) True 
 B)False

Question 7

Given the following data, what is the value of ending inventory if the FIFO periodic method is used? $\begin{array} { | l | l | } 
\hline \text { Sales revenue } & 200 \text { units at } \$ 20 \text { per unit } \
\hline \text { Beginning inventory } & 60 \text { units at } \$ 12 \text { per unit } \
\hline \text { Purchases } & 210 \text { units at } \$ 13 \text { per unit } \
\hline
\end{array}$

Accepted Answer

A) $1,400 
B) $840 
C) $910 
D) $1,600 
A) $1,400 
B) $840 
C) $910 
D) $1,600

Question 8

Gross margin is the excess of net sales revenue over cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 9

FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average.

Accepted Answer

A) True 
 B)False

Question 10

The two main types of inventory systems are the perpetual system and the periodic system.

Accepted Answer

A) True 
 B)False

Question 11

Understating ending inventory in 2018 will overstate net income for 2019.

Accepted Answer

A) True 
 B)False

Question 12

Table 6-2 $\begin{array} { | l | l | } 
\hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \
\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \
\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \
\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \
\hline
\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.
-Referring to Table 6-2, assuming all goods are sold throughout the year for $19 per unit, gross margin calculated under the periodic FIFO method would be:

Accepted Answer

A) $1,620. 
B) $1,510. 
C) $1,260. 
D) $1,570. 
A) $1,620. 
B) $1,510. 
C) $1,260. 
D) $1,570.

Question 13

Sam's Corner Store has the following purchase and sales information for one of their inventory items: $\begin{array} { | l | l | c | c | c | } 
\hline { \text { Date } } && \text { Units } & \$ \text { Unit } & \text { Total } \
\hline \text { Feb 1 } & \text { Opening inventory } & 10 & \$ 8 & \$ 80 \
\hline \text { Feb 9 } & \text { Purchase } & 25 & \$ 9 & \$ 225 \
\hline \text { Feb 15 } & \text { Sale } & 15 & \$ 15 & \$ 225 \
\hline \text { Feb 17 } & \text { Purchase } & 20 & \$ 11 & \$ 220 \
\hline \text { Feb 25 } & \text { Sale } & 10 & \$ 16 & \$ 160 \
\hline
\end{array}$ Required:
For (a)and (b)assume the company uses the periodic inventory system.
(a)Calculate the gross profit if the company uses first-in, first-out (FIFO)
(b)Calculate the value of the ending inventory if the company uses weighted average.
For (c)and (d)assume the company uses the perpetual inventory system.
(c)What is the cost of goods sold for the Feb 25 sale if the company uses weighted average to cost the inventory?
(d)What is the value of the ending inventory if the company uses FIFO?

Accepted Answer

For (a)and (b)assume the company uses th

Question 14

Overstating ending inventory in 2018 will understate net income for 2019.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true about a company making an accounting change in its financial statements?

Accepted Answer

A) It must disclose the effect of the change on net income. 
B) It is generally entitled to make one accounting change per year. 
C) Companies can never make accounting changes because of the consistency characteristic. 
D) Management must ask permission from the federal government. 
A) It must disclose the effect of the change on net income. 
B) It is generally entitled to make one accounting change per year. 
C) Companies can never make accounting changes because of the consistency characteristic. 
D) Management must ask permission from the federal government.

Question 16

Two separate errors affected Rollings Company in 2019. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2019 will be:

Accepted Answer

A) overstated by $30,000. 
B) overstated by $12,000. 
C) overstated by $6,000. 
D) understated by $6,000. 
A) overstated by $30,000. 
B) overstated by $12,000. 
C) overstated by $6,000. 
D) understated by $6,000.

Question 17

Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows the accountant to attain:

Accepted Answer

A) consistency. 
B) conservatism. 
C) matching. 
D) full disclosure. 
A) consistency. 
B) conservatism. 
C) matching. 
D) full disclosure.

Question 18

Table 6-5
Assume the following data for Kruger Sales for November 2019: $\begin{array}{ll}
\text { Beginning inventory Nov. } 1 & 5 \text { units at } \$ 90 \text { each } \
\text { Sale Nov. } 3 & 3 \text { units at } \$ 120 \text { each } \
\text { Nov. } 6 \text { purchase } & 11 \text { units at } \$ 95 \text { each } \
\text { Sale Nov. } 8 & 4 \text { units at } \$ 120 \text { each } \
\text { Sale Nov. } 9 & 3 \text { units at } \$ 120 \text { each }
\end{array}$
 On November 30, a physical count reveals 6 units on hand.
-Refer to Table 6-5. Calculate ending inventory for Kruger Sales assuming the weighted-average-cost method is being used and a periodic inventory system.

Accepted Answer

The answer of Table 6-5
Assume the following data for Kruger...

Question 19

Given the following data, what is the cost of goods sold rounded to the nearest whole dollar using periodic FIFO? $\begin{array} { | l | l | } 
\hline \text { Sales revenue } & 100 \text { units at } \$ 10 \text { per unit } \
\hline \text { Beginning inventory } & 50 \text { units at } \$ 8 \text { per unit } \
\hline \text { Purchases } & 90 \text { units at } \$ 9 \text { per unit } \
\hline
\end{array}$

Accepted Answer

A) $400 
B) $360 
C) $890 
D) $850 
A) $400 
B) $360 
C) $890 
D) $850

Question 20

Table 6-4
Assume the following data for Burnette Sales for 2019: $$\begin{array} { | c | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \
\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \
\hline \text { Sale } & 20 \text { units at } \$ 15 \text { each } \
\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \
\hline \text { Sale } & 12 \text { units at } \$ 15 \text { each } \
\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \
\hline \text { Sale } & 10 \text { units at } \$ 16 \text { each } \
\hline
\end{array}$$ On December 31, a physical count reveals 15 units on hand.
-Refer to Table 6-4. Assume a perpetual inventory system. Under FIFO method, the cost of goods sold for the second sale (12 units)would be calculated as:

Accepted Answer

A) $165. 
B) $105. 
C) $115. 
D) $135. 
A) $165. 
B) $105. 
C) $115. 
D) $135.

Inventory is classified:

Measuring the cost of inventory is difficult when prices are constant.

FIFO will report the lowest cost of goods sold on the income statement when prices are falling.

When inventory costs are rising, FIFO results in the highest cost of goods sold and the lowest gross margin.

Given the following data, what is the value of ending inventory if the FIFO periodic method is used? Sales revenue 200 units at \ 20 per unit Beginning inventory 60 units at \ 12 per unit Purchases 210 units at \ 13 per unit

Gross margin is the excess of net sales revenue over cost of goods sold.

FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average.

The two main types of inventory systems are the perpetual system and the periodic system.

Understating ending inventory in 2018 will overstate net income for 2019.

Overstating ending inventory in 2018 will understate net income for 2019.

Which of the following statements is true about a company making an accounting change in its financial statements?

Two separate errors affected Rollings Company in 2019. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2019 will be:

Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows the accountant to attain:

Given the following data, what is the cost of goods sold rounded to the nearest whole dollar using periodic FIFO? Sales revenue 100 units at \ 10 per unit Beginning inventory 50 units at \ 8 per unit Purchases 90 units at \ 9 per unit

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters

Exam 6: Accounting for Merchandise Inventory

Inventory is classified:

Measuring the cost of inventory is difficult when prices are constant.

FIFO will report the lowest cost of goods sold on the income statement when prices are falling.

When inventory costs are rising, FIFO results in the highest cost of goods sold and the lowest gross margin.

Given the following data, what is the value of ending inventory if the FIFO periodic method is used? Sales revenue 200 units at \ 20 per unit Beginning inventory 60 units at \ 12 per unit Purchases 210 units at \ 13 per unit

Gross margin is the excess of net sales revenue over cost of goods sold.

FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average.

The two main types of inventory systems are the perpetual system and the periodic system.

Understating ending inventory in 2018 will overstate net income for 2019.

Overstating ending inventory in 2018 will understate net income for 2019.

Which of the following statements is true about a company making an accounting change in its financial statements?

Two separate errors affected Rollings Company in 2019. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2019 will be:

Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows the accountant to attain:

Given the following data, what is the cost of goods sold rounded to the nearest whole dollar using periodic FIFO? Sales revenue 100 units at \ 10 per unit Beginning inventory 50 units at \ 8 per unit Purchases 90 units at \ 9 per unit

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters