Question 1

When ending inventory is overstated in period 1, net income in period 2 will be

Accepted Answer

A)  Understated 
B)  Overstated 
C)  Stated correctly 
D)  None of these are correct 
A)  Understated 
B)  Overstated 
C)  Stated correctly 
D)  None of these are correct

Question 2

Hughes Medical Supply, a retail business, had net sales of $92,400 during January. Purchases of merchandise during the month amounted to $42,700, of which $27,400 had been paid for by the end of January. The merchandise purchased had a retail sales value of $59,000. On January 1, inventory on hand cost $26,180 and had a retail sales value of $39,400. Traditionally, Hughes' gross margin percentage has been 30 percent.
Use the gross margin estimation method to determine the cost of Hughes' inventory at the end of January.

Accepted Answer

The answer of Hughes Medical Supply, a retail business, had...

Question 3

The use of the gross profit method assumes

Accepted Answer

A)  The amount of gross profit is the same as in prior years 
B)  Sales and cost of goods sold have not changed from previous years 
C)  Inventory values have not increased from previous years 
D)  The relationship between selling price and cost of goods sold is similar to prior years 
A)  The amount of gross profit is the same as in prior years 
B)  Sales and cost of goods sold have not changed from previous years 
C)  Inventory values have not increased from previous years 
D)  The relationship between selling price and cost of goods sold is similar to prior years

Question 4

The December 31, 2012, balance sheet and income statement for Santana Company are presented below:     Given this information, Santana's inventory turnover during 2012 was

Accepted Answer

A)  4 
B)  5 
C)  7 
D)  8 
A)  4 
B)  5 
C)  7 
D)  8

Question 5

Following are the account balances from Samuel Company's income statement:   Given this information, the cost of merchandise available for sale during 2012 is

Accepted Answer

A)  $65,000 
B)  $59,000 
C)  $69,000 
D)  $61,000 
A)  $65,000 
B)  $59,000 
C)  $69,000 
D)  $61,000

Question 6

Which inventory account consists of goods in a relatively undeveloped state that will eventually be a major part of the finished product?

Accepted Answer

A)  Raw Materials 
B)  Work In Process 
C)  Finished Goods 
D)  Merchandise 
A)  Raw Materials 
B)  Work In Process 
C)  Finished Goods 
D)  Merchandise

Question 7

If goods shipped FOB destination are in transit at the end of the year, they should be included in the inventory balance of the

Accepted Answer

A)  Seller 
B)  Common carrier 
C)  Buyer 
D)  Bank 
A)  Seller 
B)  Common carrier 
C)  Buyer 
D)  Bank

Question 8

An entry is made to close Purchases and Purchase Discounts as: Account A$\quad$ 35,000
Account B$\quad$ 1,600
Account C$\quad$$\quad$36,600 Based on this entry, total (gross) purchases for the year were

Accepted Answer

A)  $35,000 
B)  $1,600 
C)  $36,600 
D)  Undeterminable, given the preceding information 
A)  $35,000 
B)  $1,600 
C)  $36,600 
D)  Undeterminable, given the preceding information

Question 9

ACE Manufacturing pays a freight bill of $54 to United Trucking Company for merchandise purchased from Jackson Sales, terms FOB shipping point. When recording the payment with the periodic inventory method, ACE would debit the $54 cost of the freight to

Accepted Answer

A)  Purchases 
B)  Freight-In 
C)  Prepaid Freight 
D)  Freight-Out 
A)  Purchases 
B)  Freight-In 
C)  Prepaid Freight 
D)  Freight-Out

Question 10

A firm had a beginning inventory balance of $1,000, net purchases of $35,000, and sales of $40,000. Its gross margin percentage was 25 percent. Using the gross margin method, the ending inventory balance is

Accepted Answer

A)  $1,000 
B)  $7,000 
C)  $6,000 
D)  $10,000 
A)  $1,000 
B)  $7,000 
C)  $6,000 
D)  $10,000

Question 11

Tena Company has the following information related to its two products:
 
- Refer to Exhibit 7-8. The net realizable value of product B is

Accepted Answer

A)  $15 
B)  $16 
C)  $18 
D)  $14 
A)  $15 
B)  $16 
C)  $18 
D)  $14

Question 12

Which of the following accounts would be debited when making closing entries?

Accepted Answer

A)  Cost of Goods Sold 
B)  Purchases 
C)  Sales Discounts 
D)  Purchase Returns 
A)  Cost of Goods Sold 
B)  Purchases 
C)  Sales Discounts 
D)  Purchase Returns

Question 13

The following information is provided:
 
- Refer to Exhibit 7-3. Given the information above, determine the amount of freight-in.

Accepted Answer

A)  $9,600 
B)  $12,800 
C)  $6,400 
D)  $3,200 
A)  $9,600 
B)  $12,800 
C)  $6,400 
D)  $3,200

Question 14

Golva Company sold $15,000 of inventory on December 31. This sale was recorded in the books and was also included in the ending inventory count. How will this information affect the financial statements?

Accepted Answer

A)  Cost of goods sold will be overstated by $15,000 
B)  Gross margin will be understated by $15,000 
C)  Gross margin will be overstated by $15,000 
D)  The financial statements will not be affected 
A)  Cost of goods sold will be overstated by $15,000 
B)  Gross margin will be understated by $15,000 
C)  Gross margin will be overstated by $15,000 
D)  The financial statements will not be affected

Question 15

If the shipping terms indicate that the buyer owns the goods upon shipment from the seller, this arrangement is known as

Accepted Answer

A)  Goods in transit 
B)  FOB shipping point 
C)  FOB destination 
D)  FOB carrier 
A)  Goods in transit 
B)  FOB shipping point 
C)  FOB destination 
D)  FOB carrier

Question 16

With LIFO, cost of goods sold is $780,000, and ending inventory is $180,000. If FIFO ending inventory is $260,000, how much is FIFO cost of goods sold?

Accepted Answer

A)  $860,000 
B)  $780,000 
C)  $700,000 
D)  $260,000 
A)  $860,000 
B)  $780,000 
C)  $700,000 
D)  $260,000

Question 17

The following information appears in Gordon Company's records for the year ended December 31:   On December 31, a physical inventory revealed that the ending inventory was only $210,000. Gordon's gross profit on net sales has remained constant at 30 percent in recent years. Gordon suspects that some inventory may have been pilfered by one of the company's employees. At December 31, what is the estimated cost of missing inventory?

Accepted Answer

A)  $75,000 
B)  $82,500 
C)  $210,000 
D)  $292,500 
A)  $75,000 
B)  $82,500 
C)  $210,000 
D)  $292,500

Question 18

Which of the following factors are used in calculating a company's number of days' sales in inventory?

Accepted Answer

A)  Average inventory and 365 
B)  Inventory turnover and 365 
C)  Cost of goods sold and 365 
D)  Average accounts payable and 365 
A)  Average inventory and 365 
B)  Inventory turnover and 365 
C)  Cost of goods sold and 365 
D)  Average accounts payable and 365

Question 19

Warren Clothing Store sells jeans. During January, its inventory records of one brand of designer jeans were as follows:
 
- Refer to Exhibit 7-5. Using the information above, periodic LIFO cost of goods sold is

Accepted Answer

A)  $430 
B)  $360 
C)  $330 
D)  $300 
A)  $430 
B)  $360 
C)  $330 
D)  $300

Question 20

Items that are either manufactured or purchased for resale in the normal course of business are called

Accepted Answer

A)  Supplies 
B)  Inventory 
C)  Purchases 
D)  Materials 
A)  Supplies 
B)  Inventory 
C)  Purchases 
D)  Materials

Exam 7: Inventory and the Cost of Sales

When ending inventory is overstated in period 1, net income in period 2 will be

The use of the gross profit method assumes

The December 31, 2012, balance sheet and income statement for Santana Company are presented below: Given this information, Santana's inventory turnover during 2012 was

Following are the account balances from Samuel Company's income statement: Given this information, the cost of merchandise available for sale during 2012 is

Which inventory account consists of goods in a relatively undeveloped state that will eventually be a major part of the finished product?

If goods shipped FOB destination are in transit at the end of the year, they should be included in the inventory balance of the

An entry is made to close Purchases and Purchase Discounts as: Account A \quad 35,000 Account B \quad 1,600 Account C \quad\quad 36,600 Based on this entry, total (gross) purchases for the year were

ACE Manufacturing pays a freight bill of $54 to United Trucking Company for merchandise purchased from Jackson Sales, terms FOB shipping point. When recording the payment with the periodic inventory method, ACE would debit the $54 cost of the freight to

A firm had a beginning inventory balance of $1,000, net purchases of $35,000, and sales of $40,000. Its gross margin percentage was 25 percent. Using the gross margin method, the ending inventory balance is

Tena Company has the following information related to its two products: - Refer to Exhibit 7-8. The net realizable value of product B is

Which of the following accounts would be debited when making closing entries?

The following information is provided: - Refer to Exhibit 7-3. Given the information above, determine the amount of freight-in.

Golva Company sold $15,000 of inventory on December 31. This sale was recorded in the books and was also included in the ending inventory count. How will this information affect the financial statements?

If the shipping terms indicate that the buyer owns the goods upon shipment from the seller, this arrangement is known as

With LIFO, cost of goods sold is $780,000, and ending inventory is $180,000. If FIFO ending inventory is $260,000, how much is FIFO cost of goods sold?

Which of the following factors are used in calculating a company's number of days' sales in inventory?

Warren Clothing Store sells jeans. During January, its inventory records of one brand of designer jeans were as follows: - Refer to Exhibit 7-5. Using the information above, periodic LIFO cost of goods sold is

Items that are either manufactured or purchased for resale in the normal course of business are called

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

Filters

An entry is made to close Purchases and Purchase Discounts as: Account A $\quad$ 35,000 Account B $\quad$ 1,600 Account C $\quad$ $\quad$ 36,600 Based on this entry, total (gross) purchases for the year were