Question 1

Which statement is correct about the various cost allocation methods available in GAAP?

Accepted Answer

A) FIFO is used in the initial recognition and measurement of inventory. 
B) LIFO is used to measure the ending inventory balance on the balance sheet. 
C) Weighted average is not an acceptable allocation method for the income statement. 
D) Moving weighted average is the perpetual weighted average cost method. 
A) FIFO is used in the initial recognition and measurement of inventory. 
B) LIFO is used to measure the ending inventory balance on the balance sheet. 
C) Weighted average is not an acceptable allocation method for the income statement. 
D) Moving weighted average is the perpetual weighted average cost method.

Question 2

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 2016 financial reporting?

Accepted Answer

A) Beginning inventory is understated by $1,000. 
B) Gross margin is understated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Inventory is overstated on the balance sheet. 
A) Beginning inventory is understated by $1,000. 
B) Gross margin is understated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Inventory is overstated on the balance sheet.

Question 3

Which statement best explains the specific identification method?

Accepted Answer

A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales. 
A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales.

Question 4

Compare the perpetual inventory control system and the periodic inventory control system.Which system provides better information for inventory management?

Accepted Answer

Perpetual inventory system: One that dir

Question 5

Which statement best explains the difference between the retail inventory and gross margin methods?

Accepted Answer

A) The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period. 
B) The retail inventory method estimates ending inventory cost using wholesale prices and an average gross margin. 
C) The gross margin method calculates an estimated ending inventory balance by using the inventory cost flow equation. 
D) The gross margin method calculates an estimate of cost of goods sold using the inventory cost flow equation. 
A) The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period. 
B) The retail inventory method estimates ending inventory cost using wholesale prices and an average gross margin. 
C) The gross margin method calculates an estimated ending inventory balance by using the inventory cost flow equation. 
D) The gross margin method calculates an estimate of cost of goods sold using the inventory cost flow equation.

Question 6

Which statement is correct about the system used to account for inventories?

Accepted Answer

A) Organizations must use the perpetual system to determine the amount of inventory and cost of goods sold. 
B) The perpetual system is used to determine the amount of inventory and the periodic system is used to determine the cost of goods sold. 
C) The perpetual and periodic system are both acceptable methods to use for inventory control. 
D) The balance sheet under the perpetual system is different than that under the periodic system. 
A) Organizations must use the perpetual system to determine the amount of inventory and cost of goods sold. 
B) The perpetual system is used to determine the amount of inventory and the periodic system is used to determine the cost of goods sold. 
C) The perpetual and periodic system are both acceptable methods to use for inventory control. 
D) The balance sheet under the perpetual system is different than that under the periodic system.

Question 7

Which inventory method provides the highest quality information for the balance sheet?

Accepted Answer

A) LIFO. 
B) FIFO. 
C) Weighted average. 
D) Retail inventory. 
A) LIFO. 
B) FIFO. 
C) Weighted average. 
D) Retail inventory.

Question 8

Which statement best explains "net realizable value"?

Accepted Answer

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

Question 9

Top Trimaran manufactures sailboats.Due to recessionary conditions which have significantly depressed sales,the company had to cut back production to levels significantly below the normal level of 900 units a year.In 2017,the company's production resulted in the following figures:
   
Actual amounts of variable and fixed costs were not materially different from standard costs.
Required:
Determine the amount of cost that should be included in inventories and the gross margin for the year.Top Trimaran uses the first-in,first-out cost flow assumption.

Accepted Answer

The answer of Top Trimaran manufactures sailboats.Due to recessionary conditions...

Question 10

Which inventory method provides the highest quality information for the income statement?

Accepted Answer

A) LIFO. 
B) FIFO. 
C) Weighted average. 
D) Retail inventory. 
A) LIFO. 
B) FIFO. 
C) Weighted average. 
D) Retail inventory.

Question 11

Given the following information,what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system?

Accepted Answer

A) $1,813 
B) $1,845 
C) $1,785 
D) $3,055 
A) $1,813 
B) $1,845 
C) $1,785 
D) $3,055

Question 12

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) Beginning inventory is overstated by $1,000. 
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) Beginning inventory is overstated by $1,000.

Question 13

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Accepted Answer

A) Cost of sales is understated by $500. 
B) No effect on gross margin. 
C) Operating expenses are overstated by $500. 
D) Operating profit is overstated by $500. 
A) Cost of sales is understated by $500. 
B) No effect on gross margin. 
C) Operating expenses are overstated by $500. 
D) Operating profit is overstated by $500.

Question 14

Using the following cost information regarding finished goods,what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

Accepted Answer

A) $ 0 
B) $100,000 
C) $150,000 
D) $250,000 
A) $ 0 
B) $100,000 
C) $150,000 
D) $250,000

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 not have on fiscal 2017 financial reporting?

Accepted Answer

A) Beginning inventory is understated by $1,000. 
B) Gross margin is overstated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Inventory is understated on the balance sheet. 
A) Beginning inventory is understated by $1,000. 
B) Gross margin is overstated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Inventory is understated on the balance sheet.

Question 16

A company has fixed production overhead costs totalling $25,000.The normal production level is 2,500 units per year,yielding a standard fixed overhead rate of $10.00 per unit.If the actual production level is 2,000 units,how much would be the amount of fixed overhead per unit and the amount of total fixed overhead included in inventory? Select the letter for the best answer:

Accepted Answer

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

Question 17

Johnson Ltd.began operations on January l,2016.Merchandise purchases and four alternative methods of valuing inventory for the first two years of operations are summarized below:
   
Required:
a.Which of the four methods listed above does not apply the matching principle? Briefly explain.
b.Determine the cost flow assumption or inventory valuation method that would report the highest net income for 2016.
c.Assuming that FIFO had been used for both years,how much would the cost of goods sold be for 2017?

Accepted Answer

a.The lower of cost and market method do

Question 18

The inventory records of ZUP indicate the following regarding its best-selling product for the month of January:
   
Required:
Calculate the dollar amount of ending inventory and cost of goods sold under each of the following cost flow assumptions:
a.Weighted-average cost,periodic inventory.
b.First-in,first-out (FIFO),perpetual inventory.
c.Weighted-average cost,perpetual inventory.

Accepted Answer

a.
COGAS / units available for sale = WA

Question 19

Which statement best explains the FIFO cost flow assumption?

Accepted Answer

A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales. 
A) A method that uses the most recent costs in the calculation of cost of sales. 
B) A method that uses the cost of goods available for sale divided by the number of units available for sale. 
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item. 
D) A method that uses the oldest costs in the calculation of cost of sales.

Question 20

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 understated by $1,000. 
B) Cost of goods available for sale is overstated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Beginning inventory is overstated by $1,000. 
A) Gross margin is understated by $1,000. 
B) Cost of goods available for sale is overstated by $1,000. 
C) Cost of sales is understated by $1,000. 
D) Beginning inventory is overstated by $1,000.

Which statement is correct about the various cost allocation methods available in GAAP?

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 2016 financial reporting?

Which statement best explains the specific identification method?

Compare the perpetual inventory control system and the periodic inventory control system.Which system provides better information for inventory management?

Which statement best explains the difference between the retail inventory and gross margin methods?

Which statement is correct about the system used to account for inventories?

Which inventory method provides the highest quality information for the balance sheet?

Which statement best explains "net realizable value"?

Which inventory method provides the highest quality information for the income statement?

Given the following information,what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system?

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?

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Using the following cost information regarding finished goods,what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

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 not have on fiscal 2017 financial reporting?

Which statement best explains the FIFO cost flow assumption?

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?

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

Which statement is correct about the various cost allocation methods available in GAAP?

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 2016 financial reporting?

Which statement best explains the specific identification method?

Compare the perpetual inventory control system and the periodic inventory control system.Which system provides better information for inventory management?

Which statement best explains the difference between the retail inventory and gross margin methods?

Which statement is correct about the system used to account for inventories?

Which inventory method provides the highest quality information for the balance sheet?

Which statement best explains "net realizable value"?

Which inventory method provides the highest quality information for the income statement?

Given the following information,what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system?

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?

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Using the following cost information regarding finished goods,what would be the ending value of the finished goods inventory if the market value of the goods is $300,000?

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 not have on fiscal 2017 financial reporting?

Which statement best explains the FIFO cost flow assumption?

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?

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