Question 1

The two inventory cost formulas will result in the following comparative effects on profit during a period when prices are rising: 
$\quad $FIFO $\quad $$\quad $Average

Accepted Answer

A)  Higher$\quad $$\quad $ no effect 
B)  Higher$\quad $$\quad $ lower 
C)  Lower$\quad $$\quad $ higher 
D)  No effect $\quad $No effect 
A)  Higher$\quad $$\quad $ no effect 
B)  Higher$\quad $$\quad $ lower 
C)  Lower$\quad $$\quad $ higher 
D)  No effect $\quad $No effect B

Question 2

The Singh Computer Shop begins operations on June 1 and uses a periodic inventory system. During June, the company had the following purchases and sales for its Model 10 Fastback Computer System:   On June 30 an inventory count showed there were 8 units on hand.
-Using the FIFO inventory cost formula, the amount allocated to cost of goods sold for June is

Accepted Answer

A)  $10,000. 
B)  $10,600. 
C)  $16,000. 
D)  $20,800. 
A)  $10,000. 
B)  $10,600. 
C)  $16,000. 
D)  $20,800. B

Question 3

In a period of rising prices, ending inventory using FIFO will be ______________ ending inventory determined using average.

Accepted Answer

A)  higher than 
B)  lower than 
C)  equal to 
D)  Cost formulas have no impact on ending inventory. 
A)  higher than 
B)  lower than 
C)  equal to 
D)  Cost formulas have no impact on ending inventory. A

Question 4

The factor which determines whether or not goods should be included in a physical count of inventory is

Accepted Answer

A)  physical possession. 
B)  legal title. 
C)  management's judgement. 
D)  whether or not the purchase price has been paid. 
A)  physical possession. 
B)  legal title. 
C)  management's judgement. 
D)  whether or not the purchase price has been paid.

Question 5

Labco Company reported the following partial income statement for the previous two years of operations:   Labco uses a perpetual inventory system. The company accountant, while reviewing the financial records of the company noticed that the December 31, 2014 ending inventory was understated by $5,000.
Instructions 
a. Prepare the correct partial income statement data for 2014 and 2015.
b. What is the cumulative effect of the inventory error on total gross profit for the two years?

Accepted Answer

a. 2014 2015
 @#IMG-DLM& b. The cumulati

Question 6

Which one of the following statements is correct?

Accepted Answer

A)  A merchandiser buys inventory and a manufacturer produces its inventory. 
B)  A manufacturer buys inventory and a merchandiser produces its inventory. 
C)  A merchandiser and a manufacturer produces their inventory. 
D)  A merchandiser and a manufacturer buy their inventory. 
A)  A merchandiser buys inventory and a manufacturer produces its inventory. 
B)  A manufacturer buys inventory and a merchandiser produces its inventory. 
C)  A merchandiser and a manufacturer produces their inventory. 
D)  A merchandiser and a manufacturer buy their inventory.

Question 7

The Ontario Canoe Company has $10,000 in inventory in its warehouse. The company has goods in transit of $500 shipped from a supplier FOB shipping point. Included in the items counted in the warehouse is $120 in goods held on consignment from a local manufacturer. Craft's correct inventory balance is $10,500.

Accepted Answer

A) True 
 B)False

Question 8

Per its January 31, 2015 physical inventory count, Pugwash Company has $24,500 in inventory on hand at year end. In addition, at year end the company has $1,200 in merchandise in transit purchased from a supplier shipped FOB destination. Included in its physical inventory is $900 in goods held on consignment from a local manufacturer. How much inventory should be reported on the company's January 31, 2015 balance sheet?

Accepted Answer

A)  $24,500 
B)  $25,700 
C)  $24,800 
D)  $23,600 
A)  $24,500 
B)  $25,700 
C)  $24,800 
D)  $23,600

Question 9

The retail inventory method is useful for estimating the amount of shrinkage due to breakage, loss, or theft.

Accepted Answer

A) True 
 B)False

Question 10

A company is able to change its cost determination method from one year to the next.

Accepted Answer

A) True 
 B)False

Question 11

An error in Cost of Goods sold has _______________ impact on gross profit and profit.

Accepted Answer

A)  no 
B)  the opposite 
C)  the same 
D)  immaterial 
A)  no 
B)  the opposite 
C)  the same 
D)  immaterial

Question 12

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under the FIFO and average cost formulas.

Accepted Answer

A) True 
 B)False

Question 13

The inventory turnover ratio is the average inventory divided by the average cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 14

A change in the inventory cost determination method can only occur if the physical flow of inventory changes and a different method would result in more relevant information in the financial statements.

Accepted Answer

A) True 
 B)False

Question 15

The first in first out (FIFO) method tracks the actual physical flow (movement) of the goods in a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 16

Under the periodic method, the cost of goods available for sale will be the same under the average cost or FIFO.

Accepted Answer

A) True 
 B)False

Question 17

The following information is available from the financial statements of Complete Home Furnishings. The company is a manufacturer of home furnishings, and its sales are mainly on credit.   Instructions
Evaluate the company's liquidity position for 2016. As part of your analysis, you will have to calculate the current ratio, inventory turnover ratio, and days in inventory for the company for 2016 and 2015.

Accepted Answer

@#IMG-DLM& The company's current ratio has improve

Question 18

Inventory affects both the income statement and the balance sheet.

Accepted Answer

A) True 
 B)False

Question 19

When using the perpetual method of accounting and the average cost formula, the average cost per unit will change every time a unit of inventory is sold.

Accepted Answer

A) True 
 B)False

Question 20

A company uses the perpetual 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

$\quad $Assets $\quad $$\quad $Owner's Equity

Accepted Answer

A)  Overstated$\quad $$\quad $Overstated 
B)  Correct$\quad $$\quad $$\quad $Correct 
C)  Understated$\quad $$\quad $Understated 
D)  Overstated$\quad $$\quad $Correct 
A)  Overstated$\quad $$\quad $Overstated 
B)  Correct$\quad $$\quad $$\quad $Correct 
C)  Understated$\quad $$\quad $Understated 
D)  Overstated$\quad $$\quad $Correct

The two inventory cost formulas will result in the following comparative effects on profit during a period when prices are rising: $\quad$ FIFO $\quad$ $\quad$ Average

In a period of rising prices, ending inventory using FIFO will be ______________ ending inventory determined using average.

The factor which determines whether or not goods should be included in a physical count of inventory is

Which one of the following statements is correct?

The retail inventory method is useful for estimating the amount of shrinkage due to breakage, loss, or theft.

A company is able to change its cost determination method from one year to the next.

An error in Cost of Goods sold has _______________ impact on gross profit and profit.

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under the FIFO and average cost formulas.

The inventory turnover ratio is the average inventory divided by the average cost of goods sold.

A change in the inventory cost determination method can only occur if the physical flow of inventory changes and a different method would result in more relevant information in the financial statements.

The first in first out (FIFO) method tracks the actual physical flow (movement) of the goods in a perpetual inventory system.

Under the periodic method, the cost of goods available for sale will be the same under the average cost or FIFO.

Inventory affects both the income statement and the balance sheet.

When using the perpetual method of accounting and the average cost formula, the average cost per unit will change every time a unit of inventory is sold.

A company uses the perpetual 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 $\quad$ Assets $\quad$ $\quad$ Owner's Equity

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 6: Inventory Costing

The two inventory cost formulas will result in the following comparative effects on profit during a period when prices are rising: \quad FIFO \quad \quad Average

In a period of rising prices, ending inventory using FIFO will be ______________ ending inventory determined using average.

The factor which determines whether or not goods should be included in a physical count of inventory is

Which one of the following statements is correct?

The retail inventory method is useful for estimating the amount of shrinkage due to breakage, loss, or theft.

A company is able to change its cost determination method from one year to the next.

An error in Cost of Goods sold has _______________ impact on gross profit and profit.

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under the FIFO and average cost formulas.

The inventory turnover ratio is the average inventory divided by the average cost of goods sold.

A change in the inventory cost determination method can only occur if the physical flow of inventory changes and a different method would result in more relevant information in the financial statements.

The first in first out (FIFO) method tracks the actual physical flow (movement) of the goods in a perpetual inventory system.

Under the periodic method, the cost of goods available for sale will be the same under the average cost or FIFO.

Inventory affects both the income statement and the balance sheet.

When using the perpetual method of accounting and the average cost formula, the average cost per unit will change every time a unit of inventory is sold.

A company uses the perpetual 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 \quad Assets \quad \quad Owner's Equity

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

The two inventory cost formulas will result in the following comparative effects on profit during a period when prices are rising: $\quad$ FIFO $\quad$ $\quad$ Average

A company uses the perpetual 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 $\quad$ Assets $\quad$ $\quad$ Owner's Equity