Question 1

An understatement of purchases results in cost of goods sold being

Accepted Answer

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

Question 2

A perpetual inventory system is most often used when

Accepted Answer

A)  Inventory has a small number of items with relatively high value 
B)  Inventory has a small number of items with relatively low value 
C)  Inventory has a large number of items with relatively low value 
D)  Inventory has a large number of items with relatively high value 
A)  Inventory has a small number of items with relatively high value 
B)  Inventory has a small number of items with relatively low value 
C)  Inventory has a large number of items with relatively low value 
D)  Inventory has a large number of items with relatively high value

Question 3

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, average (periodic) cost of goods sold is

Accepted Answer

A)  $450 
B)  $390 
C)  $375 
D)  $330 
A)  $450 
B)  $390 
C)  $375 
D)  $330

Question 4

A periodic inventory system is most often used when

Accepted Answer

A)  Inventory has a small number of items with relatively high value 
B)  Inventory has a small number of items with relatively low value 
C)  Inventory has a large number of items with relatively low value 
D)  Inventory has a large number of items with relatively high value 
A)  Inventory has a small number of items with relatively high value 
B)  Inventory has a small number of items with relatively low value 
C)  Inventory has a large number of items with relatively low value 
D)  Inventory has a large number of items with relatively high value

Question 5

A physical count would be necessary at the end of the accounting period under which inventory system?

Accepted Answer

A)  Periodic inventory system 
B)  Perpetual inventory system 
C)  Both periodic and perpetual inventory systems 
D)  Neither periodic nor perpetual inventory systems 
A)  Periodic inventory system 
B)  Perpetual inventory system 
C)  Both periodic and perpetual inventory systems 
D)  Neither periodic nor perpetual inventory systems

Question 6

Company D makes the following entry in its accounting records:  This entry would be made when

Accepted Answer

A)  Merchandise is sold and the periodic inventory method is used 
B)  Merchandise is sold and the perpetual inventory method is used 
C)  Merchandise is returned and the perpetual inventory method is used 
D)  Merchandise is returned and the periodic inventory method is used 
A)  Merchandise is sold and the periodic inventory method is used 
B)  Merchandise is sold and the perpetual inventory method is used 
C)  Merchandise is returned and the perpetual inventory method is used 
D)  Merchandise is returned and the periodic inventory method is used

Question 7

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

Accepted Answer

A)  $73,600 
B)  $105,600 
C)  $70,400 
D)  $102,400 
A)  $73,600 
B)  $105,600 
C)  $70,400 
D)  $102,400

Question 8

Under the periodic inventory method, if merchandise is sold for cash on December 31 and is recorded as a sale but is NOT shipped (and thus is included in the ending inventory count), the financial statements will

Accepted Answer

A)  Overstate assets 
B)  Understate net income 
C)  Understate liabilities 
D)  Understate assets 
A)  Overstate assets 
B)  Understate net income 
C)  Understate liabilities 
D)  Understate assets

Question 9

Conner Company's accounts payable balance on December 31, 2012 was $1,400,000 before considering the following transactions:   Given the above information, on December 31, 2012, Conner should report an accounts payable balance of

Accepted Answer

A)  $1,400,000 
B)  $1,150,000 
C)  $1,775,000 
D)  $1,650,000 
A)  $1,400,000 
B)  $1,150,000 
C)  $1,775,000 
D)  $1,650,000

Question 10

Garfunkle Company had the following four transactions during January 2012:
  
-Refer to Exhibit 7-1.Given the information above,with the perpetual inventory method,the entry to record the January 5 transaction would include

Accepted Answer

A) A debit to Cost of Goods Sold of $1,500 
B) A debit to Accounts Receivable of $2,500 
C) A credit to Inventory of $1,500 
D) All of these 
A) A debit to Cost of Goods Sold of $1,500 
B) A debit to Accounts Receivable of $2,500 
C) A credit to Inventory of $1,500 
D) All of these

Question 11

Inventories are carried in the accounting records at cost, EXCEPT when

Accepted Answer

A)  The inventory is damaged 
B)  The market value of the inventory falls below its acquisition cost 
C)  Either the inventory is damaged or the market value of the inventory falls below its acquisition cost 
D)  The market price rises above cost 
A)  The inventory is damaged 
B)  The market value of the inventory falls below its acquisition cost 
C)  Either the inventory is damaged or the market value of the inventory falls below its acquisition cost 
D)  The market price rises above cost

Question 12

A firm using the periodic inventory method purchased $2,000 of inventory on terms 2/10, n/30. The journal entry to record this transaction would include a debit to

Accepted Answer

A)  Purchases 
B)  Purchase Discounts 
C)  Inventory 
D)  Accounts Payable 
A)  Purchases 
B)  Purchase Discounts 
C)  Inventory 
D)  Accounts Payable

Question 13

A firm using the perpetual inventory method returned defective merchandise costing $2,000 to one of its suppliers. The entry to record this transaction will include a credit to

Accepted Answer

A)  Accounts Receivable 
B)  Inventory 
C)  Purchase Returns 
D)  Accounts Payable 
A)  Accounts Receivable 
B)  Inventory 
C)  Purchase Returns 
D)  Accounts Payable

Question 14

Under which inventory system would a company NOT be able to specifically determine the amount of inventory lost or stolen?

Accepted Answer

A)  Periodic inventory system 
B)  Perpetual inventory system 
C)  Both periodic and perpetual inventory systems 
D)  Neither periodic nor perpetual inventory systems 
A)  Periodic inventory system 
B)  Perpetual inventory system 
C)  Both periodic and perpetual inventory systems 
D)  Neither periodic nor perpetual inventory systems

Question 15

The following information was taken from the records of Colfax Company:
  
Given this information, compute the following ratios for Colfax Company.

Accepted Answer

Given this informati

Question 16

When products are sold, their costs are removed from inventory and reported on the income statement as an expense called

Accepted Answer

A)  Operating expenses 
B)  Cost of goods sold 
C)  Cost of goods manufactured 
D)  Inventory expenses 
A)  Operating expenses 
B)  Cost of goods sold 
C)  Cost of goods manufactured 
D)  Inventory expenses

Question 17

Williston Cattle Company uses a perpetual inventory system. Williston purchased sheep from Little H Ranch at a cost of $39,000, payable at time of delivery. The entry to record the delivery would be

Accepted Answer

A)  
  
B) 
  
C)  
  
D) 
  
A)  
  
B) 
  
C)  
  
D)

Question 18

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 perpetual inventory method, ACE would debit the $54 cost of the freight to

Accepted Answer

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

Question 19

Which ratio tells how many times a year a company is replenishing its inventory?

Accepted Answer

A)  Number of days' sales in inventory 
B)  Accounts receivable turnover 
C)  Number of days' purchases in accounts payable 
D)  Inventory turnover 
A)  Number of days' sales in inventory 
B)  Accounts receivable turnover 
C)  Number of days' purchases in accounts payable 
D)  Inventory turnover

Question 20

The following information is available for Lendo Company:  
 
 Lendo's inventory turnover for 2012 is computed by

Accepted Answer

A)  $2,000,000 / $575,000 
B)  $2,350,000 / $600,000 
C)  $2,800,000 / $575,000 
D)  $3,000,000 / $575,000 
A)  $2,000,000 / $575,000 
B)  $2,350,000 / $600,000 
C)  $2,800,000 / $575,000 
D)  $3,000,000 / $575,000

Exam 7: Inventory and the Cost of Sales

An understatement of purchases results in cost of goods sold being

A perpetual inventory system is most often used when

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, average (periodic) cost of goods sold is

A periodic inventory system is most often used when

A physical count would be necessary at the end of the accounting period under which inventory system?

Company D makes the following entry in its accounting records: This entry would be made when

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

Under the periodic inventory method, if merchandise is sold for cash on December 31 and is recorded as a sale but is NOT shipped (and thus is included in the ending inventory count), the financial statements will

Conner Company's accounts payable balance on December 31, 2012 was $1,400,000 before considering the following transactions: Given the above information, on December 31, 2012, Conner should report an accounts payable balance of

Garfunkle Company had the following four transactions during January 2012: -Refer to Exhibit 7-1.Given the information above,with the perpetual inventory method,the entry to record the January 5 transaction would include

Inventories are carried in the accounting records at cost, EXCEPT when

A firm using the periodic inventory method purchased $2,000 of inventory on terms 2/10, n/30. The journal entry to record this transaction would include a debit to

A firm using the perpetual inventory method returned defective merchandise costing $2,000 to one of its suppliers. The entry to record this transaction will include a credit to

Under which inventory system would a company NOT be able to specifically determine the amount of inventory lost or stolen?

The following information was taken from the records of Colfax Company: Given this information, compute the following ratios for Colfax Company.

When products are sold, their costs are removed from inventory and reported on the income statement as an expense called

Williston Cattle Company uses a perpetual inventory system. Williston purchased sheep from Little H Ranch at a cost of $39,000, payable at time of delivery. The entry to record the delivery would be

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 perpetual inventory method, ACE would debit the $54 cost of the freight to

Which ratio tells how many times a year a company is replenishing its inventory?

The following information is available for Lendo Company: Lendo's inventory turnover for 2012 is computed by

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

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