Question 1

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2016 financial reporting?

Accepted Answer

A) Retained earnings is overstated by $1,000. 
B) No effect on inventory value on the balance sheet. 
C) No effect on retained earnings. 
D) Inventory is understated on the balance sheet. 
A) Retained earnings is overstated by $1,000. 
B) No effect on inventory value on the balance sheet. 
C) No effect on retained earnings. 
D) Inventory is understated on the balance sheet.

Question 2

A particular production process requires two types of raw materials to produce the end product.Each unit of finished product requires three units of raw material A and 2 units of raw material B,plus processing costs of $35.The following provides information on inventories at fiscal 2015 year-end:
   
Required:
a.Evaluate these inventories to determine the amount of write-down,if any.
b.If the entry required in part (a)is not made in fiscal 2015,what is the effect on
i)2015 and 2016 inventory on the balance sheet
ii)2015 and 2016 cost of goods sold
iii)2015 and 2016 net income
iv)2015 and 2016 retained earnings

Accepted Answer

a.The finished product's NRV < cost.Ther

Question 3

SimBis Enterprises incurred the following costs to produce and sell its inventory in 2016:
   
SimBis also noted that the following errors were made in recording transactions in 2016 (note that these errors only affect part (d)of this question):
   
Required:
a)Determine the cost of inventory under the absorption costing method.
b)Determine the cost of inventory under the variable costing method.
c)Explain how management could potentially manipulate net income by using absorption costing.What can an analyst or investor do to check if income has been manipulated through the use of absorption costing?
d)Assume that,before any corrections,gross margin was $500,000 and ending retained earnings was $750,000.Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2016.

Accepted Answer

a)and b)
 @#IMG-DLM& 
c)Under absorption costing a

Question 4

What issues arise on the initial recognition and measurement of inventory?

Accepted Answer

A) Determining which expenditures to capitalize into the "inventory" account. 
B) Determining which expenditures to expense into the "cost of goods sold" account. 
C) Determining how much of the costs recognized in inventory should be expensed in the year. 
D) Determining the appropriate valuation of inventories that remain on hand. 
A) Determining which expenditures to capitalize into the "inventory" account. 
B) Determining which expenditures to expense into the "cost of goods sold" account. 
C) Determining how much of the costs recognized in inventory should be expensed in the year. 
D) Determining the appropriate valuation of inventories that remain on hand.

Question 5

Which of the following is a potential journal entry required after the inventory count under the periodic inventory system?

Accepted Answer

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

Question 6

Use the chart provided below to determine the impact if a company forgets to include $3,500 of inventory that was shipped FOB shipping point on December 25,2017 but was still in transit at year end.The purchase invoice was processed in fiscal 2018.

Accepted Answer

The answer of Use the chart provided below to determine...

Question 7

A retailer has a standard mark-up of 50% on invoiced cost.At the year end,200 out of 5,000 products had been discounted by 20% of retail price.
Required:
Calculate the estimated costs as a percentage of retail price,separately for regular and discounted products.

Accepted Answer

The answer of A retailer has a standard mark-up of...

Question 8

What issues arise on the subsequent measurement of inventory?

Accepted Answer

A) Determining which expenditures to capitalize into the "inventory" account. 
B) Determining which expenditures to expense into the "cost of goods sold" account. 
C) Determining how much of the costs recognized in inventory should be expensed in the year. 
D) Determining the appropriate valuation of inventories that remain on hand. 
A) Determining which expenditures to capitalize into the "inventory" account. 
B) Determining which expenditures to expense into the "cost of goods sold" account. 
C) Determining how much of the costs recognized in inventory should be expensed in the year. 
D) Determining the appropriate valuation of inventories that remain on hand.

Question 9

Give some examples of how manufacturing companies can manipulate earnings through its production process.What should an auditor or financial statement user do to detect this type of manipulation?

Accepted Answer

For manufacturing companies,producing mo

Question 10

Explain the meaning of product costs and period costs.Discuss which costs should be included in the cost of inventories.

Accepted Answer

•Product costs are those that should be

Question 11

Garrit Limited's income statement reported the following for the year ended Dec 31,2016:
 
Which is the correct statement about the income statement?

Accepted Answer

A) Mark-up on selling price is $573,000. 
B) Mark-up on cost is 53.75%. 
C) Gross margin percentage is 20.32%. 
D) Mark-up on the selling price is $308,000. 
A) Mark-up on selling price is $573,000. 
B) Mark-up on cost is 53.75%. 
C) Gross margin percentage is 20.32%. 
D) Mark-up on the selling price is $308,000.

Question 12

Which goods in transit would be recorded in inventory at year end?

Accepted Answer

A) Goods purchased with terms F.O.B.destination point that were received after year end. 
B) Goods purchased with terms F.O.B.shipping point that were received after year end. 
C) Goods sold F.O.B.shipping point that were shipped two weeks before year end. 
D) Goods returned for credit,with terms F.O.B.destination point,received two days after year end. 
A) Goods purchased with terms F.O.B.destination point that were received after year end. 
B) Goods purchased with terms F.O.B.shipping point that were received after year end. 
C) Goods sold F.O.B.shipping point that were shipped two weeks before year end. 
D) Goods returned for credit,with terms F.O.B.destination point,received two days after year end.

Question 13

What costs are not included in the cost of inventories?

Accepted Answer

A) Raw materials. 
B) Labour used to make the finished product. 
C) Costs to deliver raw materials to the company. 
D) Costs to ship goods to customers. 
A) Raw materials. 
B) Labour used to make the finished product. 
C) Costs to deliver raw materials to the company. 
D) Costs to ship goods to customers.

Question 14

Which statement is not correct about the perpetual inventory system for inventory management?

Accepted Answer

A) This system keeps track of additions to and withdrawals from inventory. 
B) It is not necessary to conduct an inventory count if the perpetual system is used. 
C) This method produces timely information for management. 
D) With this method,the company knows the inventory on hand and the related cost of goods sold at any point in time. 
A) This system keeps track of additions to and withdrawals from inventory. 
B) It is not necessary to conduct an inventory count if the perpetual system is used. 
C) This method produces timely information for management. 
D) With this method,the company knows the inventory on hand and the related cost of goods sold at any point in time.

Question 15

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Accepted Answer

A) Gross margin is overstated by $1,000. 
B) Cost of sales is overstated by $1,000. 
C) Ending inventory is understated by $1,000. 
D) No effect on beginning inventory. 
A) Gross margin is overstated by $1,000. 
B) Cost of sales is overstated by $1,000. 
C) Ending inventory is understated by $1,000. 
D) No effect on beginning inventory.

Question 16

Which statement is correct about overhead?

Accepted Answer

A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is capitalized under variable costing. 
C) Variable overhead is always expensed. 
D) Selling costs are part of fixed overhead. 
A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is capitalized under variable costing. 
C) Variable overhead is always expensed. 
D) Selling costs are part of fixed overhead.

Question 17

Sarabjit Inc.produced the following information for December,2016:
   
Required:
NOTE THAT EACH REQUIREMENT IS INDEPENDENT OF THE OTHERS.
a)Determine if any of the transactions near year-end should be included in the December 31,2016 inventory balance.
b)Determine if there is any impairment of inventory at December 31,2016.
c)Determine the cost of goods sold for December 2016.
d)The company has a historical gross margin of 25%.If sales were $400,000,what should ending inventory be at December 31,2016?

Accepted Answer

a)Determine if any of the transactions n

Question 18

The following information was taken from the inventory records of Penelope Ltd.:
 
What would be the gross margin,assuming that the weighted-average method is used in a periodic inventory system?

Accepted Answer

A) $310 
B) $875 
C) $935 
D) $1,810 
A) $310 
B) $875 
C) $935 
D) $1,810

Question 19

Which statement best explains the gross margin method?

Accepted Answer

A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period. 
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products. 
D) This method is least appropriate for inventory items that are not distinguishable from one another. 
A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period. 
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products. 
D) This method is least appropriate for inventory items that are not distinguishable from one another.

Question 20

What definition is used for "market" under IFRS and ASPE?

Accepted Answer

A) The amount it would cost to repurchase an item of inventory. 
B) The lowest amount that can be obtained from the sale of inventory. 
C) The amount required to be paid to replace an item of inventory. 
D) The amount that can be obtained from selling the inventory less selling costs. 
A) The amount it would cost to repurchase an item of inventory. 
B) The lowest amount that can be obtained from the sale of inventory. 
C) The amount required to be paid to replace an item of inventory. 
D) The amount that can be obtained from selling the inventory less selling costs.

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2016 financial reporting?

What issues arise on the initial recognition and measurement of inventory?

Which of the following is a potential journal entry required after the inventory count under the periodic inventory system?

Use the chart provided below to determine the impact if a company forgets to include $3,500 of inventory that was shipped FOB shipping point on December 25,2017 but was still in transit at year end.The purchase invoice was processed in fiscal 2018.

A retailer has a standard mark-up of 50% on invoiced cost.At the year end,200 out of 5,000 products had been discounted by 20% of retail price. Required: Calculate the estimated costs as a percentage of retail price,separately for regular and discounted products.

What issues arise on the subsequent measurement of inventory?

Give some examples of how manufacturing companies can manipulate earnings through its production process.What should an auditor or financial statement user do to detect this type of manipulation?

Explain the meaning of product costs and period costs.Discuss which costs should be included in the cost of inventories.

Garrit Limited's income statement reported the following for the year ended Dec 31,2016: Which is the correct statement about the income statement?

Which goods in transit would be recorded in inventory at year end?

What costs are not included in the cost of inventories?

Which statement is not correct about the perpetual inventory system for inventory management?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Which statement is correct about overhead?

The following information was taken from the inventory records of Penelope Ltd.: What would be the gross margin,assuming that the weighted-average method is used in a periodic inventory system?

Which statement best explains the gross margin method?

What definition is used for "market" under IFRS and ASPE?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

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Exam 6: Inventories

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2016 financial reporting?

What issues arise on the initial recognition and measurement of inventory?

Which of the following is a potential journal entry required after the inventory count under the periodic inventory system?

Use the chart provided below to determine the impact if a company forgets to include $3,500 of inventory that was shipped FOB shipping point on December 25,2017 but was still in transit at year end.The purchase invoice was processed in fiscal 2018.

A retailer has a standard mark-up of 50% on invoiced cost.At the year end,200 out of 5,000 products had been discounted by 20% of retail price. Required: Calculate the estimated costs as a percentage of retail price,separately for regular and discounted products.

What issues arise on the subsequent measurement of inventory?

Give some examples of how manufacturing companies can manipulate earnings through its production process.What should an auditor or financial statement user do to detect this type of manipulation?

Explain the meaning of product costs and period costs.Discuss which costs should be included in the cost of inventories.

Garrit Limited's income statement reported the following for the year ended Dec 31,2016: Which is the correct statement about the income statement?

Which goods in transit would be recorded in inventory at year end?

What costs are not included in the cost of inventories?

Which statement is not correct about the perpetual inventory system for inventory management?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Which statement is correct about overhead?

The following information was taken from the inventory records of Penelope Ltd.: What would be the gross margin,assuming that the weighted-average method is used in a periodic inventory system?

Which statement best explains the gross margin method?

What definition is used for "market" under IFRS and ASPE?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters