Question 1

Which statement is correct about absorption costing?

Accepted Answer

A) Under this method,fixed overhead is considered a product cost because production cannot take place without these costs. 
B) Under this method,fixed overhead is considered a period cost because such costs do not vary according to production level. 
C) Under this method,variable overhead is considered a period cost because such costs do not vary according to production level. 
D) Under this method,selling costs are considered a product cost because such costs do not vary according to production level. 
A) Under this method,fixed overhead is considered a product cost because production cannot take place without these costs. 
B) Under this method,fixed overhead is considered a period cost because such costs do not vary according to production level. 
C) Under this method,variable overhead is considered a period cost because such costs do not vary according to production level. 
D) Under this method,selling costs are considered a product cost because such costs do not vary according to production level.

Question 2

Which statement is not correct about overhead?

Accepted Answer

A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is expensed under variable costing. 
C) Variable overhead is expensed under both absorption and variable costing. 
D) Both fixed and variable overhead are capitalized under absorption costing. 
A) Fixed overhead is capitalized under absorption costing. 
B) Fixed overhead is expensed under variable costing. 
C) Variable overhead is expensed under both absorption and variable costing. 
D) Both fixed and variable overhead are capitalized under absorption costing.

Question 3

Which statement is correct about the specific identification method?

Accepted Answer

A) It is prone to earnings management if used for distinguishable items. 
B) This method is most appropriate for low-value inventory items. 
C) It is inexpensive to maintain inventory records under this method. 
D) This method is most appropriate for high-value inventory items. 
A) It is prone to earnings management if used for distinguishable items. 
B) This method is most appropriate for low-value inventory items. 
C) It is inexpensive to maintain inventory records under this method. 
D) This method is most appropriate for high-value inventory items.

Question 4

Which statement is correct about overhead?

Accepted Answer

A) Fixed overhead is expensed under absorption costing. 
B) Fixed overhead is never capitalized. 
C) Variable overhead is always capitalized. 
D) Fixed overhead is capitalized under absorption costing. 
A) Fixed overhead is expensed under absorption costing. 
B) Fixed overhead is never capitalized. 
C) Variable overhead is always capitalized. 
D) Fixed overhead is capitalized under absorption costing.

Question 5

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 understated by $1,000. 
C) Cost of sales is overstated 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 overstated by $1,000. 
D) Inventory is overstated on the balance sheet.

Question 6

Explain how a merchandising company can manipulate earnings through its year-end inventories.What can an auditor do to detect this type of manipulation?

Accepted Answer

Inventories need to be assessed for impa

Question 7

Explain how items of inventory should be grouped for purposes of testing for impairment.

Accepted Answer

•Inventories are usually written down to

Question 8

If the gross margin percentage used in the gross margin method were overstated (e.g. ,36% instead of 32%),what would happen?

Accepted Answer

A) Cost of goods sold would be overstated. 
B) Ending inventory would be understated. 
C) Ending inventory would be overstated. 
D) Ending inventory would be correctly stated,but beginning inventory would be incorrect. 
A) Cost of goods sold would be overstated. 
B) Ending inventory would be understated. 
C) Ending inventory would be overstated. 
D) Ending inventory would be correctly stated,but beginning inventory would be incorrect.

Question 9

If the gross margin percentage used in the gross margin method were overstated (for example,36% instead of 32%),what would happen?

Accepted Answer

A) Cost of goods sold would be overstated. 
B) Ending inventory would be understated. 
C) Ending inventory would be overstated. 
D) Ending inventory would be correctly stated,but beginning inventory would be incorrect. 
A) Cost of goods sold would be overstated. 
B) Ending inventory would be understated. 
C) Ending inventory would be overstated. 
D) Ending inventory would be correctly stated,but beginning inventory would be incorrect.

Question 10

Given the following information,what would the ending inventory value per unit be on April 30 under the weighted-average method in a perpetual inventory system?

Accepted Answer

A) $5.05 
B) $5.06 
C) $5.075 
D) $5.15 
A) $5.05 
B) $5.06 
C) $5.075 
D) $5.15

Question 11

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 and processing costs of $35.The following provides information on inventories at year-end:
   
Required:
a.Evaluate these inventories to determine the amount of write-down,if any.
b.Would your answer change if the replacement cost of raw material A were $11 per unit?

Accepted Answer

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

Question 12

Which statement best depicts the inventory cost flow equation?

Accepted Answer

A) Cost of goods available for sale = Beginning inventory + Ending inventory. 
B) Beginning inventory + Purchases = Cost of sales + Ending inventory. 
C) Sales - Cost of goods sold = Gross margin. 
D) Gross margin - Operating expenses = Operating income. 
A) Cost of goods available for sale = Beginning inventory + Ending inventory. 
B) Beginning inventory + Purchases = Cost of sales + Ending inventory. 
C) Sales - Cost of goods sold = Gross margin. 
D) Gross margin - Operating expenses = Operating income.

Question 13

Identify whether the following are benefits of using a perpetual inventory system (in comparison to a periodic system).

Accepted Answer

The answer of Identify whether the following are benefits of...

Question 14

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

Accepted Answer

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

Question 15

What journal entry is required after the inventory count under the perpetual inventory system when shrinkage has been detected?

Accepted Answer

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

Question 16

The following information was taken from the inventory records of Hari Ltd.:
 
What would be the cost of goods sold,assuming that the LIFO method is used in a perpetual inventory system?

Accepted Answer

A) $920 
B) $930 
C) $940 
D) $950 
A) $920 
B) $930 
C) $940 
D) $950

Question 17

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 sales is overstated by $1,000. 
C) Ending inventory is not affected by the prior year inventory counting error. 
D) Beginning inventory is overstated by $1,000. 
A) Gross margin is understated by $1,000. 
B) Cost of sales is overstated by $1,000. 
C) Ending inventory is not affected by the prior year inventory counting error. 
D) Beginning inventory is overstated by $1,000.

Question 18

Assume that a $100 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 2016 financial reporting?

Accepted Answer

A) Cost of sales is understated by $100. 
B) Gross margin is understated. 
C) Sales are understated by $100. 
D) Operating profit is understated by $100. 
A) Cost of sales is understated by $100. 
B) Gross margin is understated. 
C) Sales are understated by $100. 
D) Operating profit is understated by $100.

Question 19

JP Corporation had net income of $1,000,000 for 2016.After issuing its financial statements,the corporation realized that it had failed to include inventory from one of its small warehouses for two years.Specifically,it forgot to include $20,000 on December 31,2015 and $30,000 on December 31,2016.Which of the following is TRUE regarding JP's 2015 net income?

Accepted Answer

A) Net income was understated by $10,000. 
B) Net income was overstated by $10,000. 
C) Net income was understated by $30,000. 
D) Net income was overstated by $30,000. 
A) Net income was understated by $10,000. 
B) Net income was overstated by $10,000. 
C) Net income was understated by $30,000. 
D) Net income was overstated by $30,000.

Question 20

Given the following information,what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

Accepted Answer

A) $1,510 
B) $1,575 
C) $2,075 
D) $3,120 
A) $1,510 
B) $1,575 
C) $2,075 
D) $3,120

Which statement is correct about absorption costing?

Which statement is not correct about overhead?

Which statement is correct about the specific identification method?

Which statement is correct about overhead?

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?

Explain how a merchandising company can manipulate earnings through its year-end inventories.What can an auditor do to detect this type of manipulation?

Explain how items of inventory should be grouped for purposes of testing for impairment.

If the gross margin percentage used in the gross margin method were overstated (e.g. ,36% instead of 32%),what would happen?

If the gross margin percentage used in the gross margin method were overstated (for example,36% instead of 32%),what would happen?

Given the following information,what would the ending inventory value per unit be on April 30 under the weighted-average method in a perpetual inventory system?

Which statement best depicts the inventory cost flow equation?

Identify whether the following are benefits of using a perpetual inventory system (in comparison to a periodic system).

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

What journal entry is required after the inventory count under the perpetual inventory system when shrinkage has been detected?

The following information was taken from the inventory records of Hari Ltd.: What would be the cost of goods sold,assuming that the LIFO method is used 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 $100 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 2016 financial reporting?

Given the following information,what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

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 absorption costing?

Which statement is not correct about overhead?

Which statement is correct about the specific identification method?

Which statement is correct about overhead?

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?

Explain how a merchandising company can manipulate earnings through its year-end inventories.What can an auditor do to detect this type of manipulation?

Explain how items of inventory should be grouped for purposes of testing for impairment.

If the gross margin percentage used in the gross margin method were overstated (e.g. ,36% instead of 32%),what would happen?

If the gross margin percentage used in the gross margin method were overstated (for example,36% instead of 32%),what would happen?

Given the following information,what would the ending inventory value per unit be on April 30 under the weighted-average method in a perpetual inventory system?

Which statement best depicts the inventory cost flow equation?

Identify whether the following are benefits of using a perpetual inventory system (in comparison to a periodic system).

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

What journal entry is required after the inventory count under the perpetual inventory system when shrinkage has been detected?

The following information was taken from the inventory records of Hari Ltd.: What would be the cost of goods sold,assuming that the LIFO method is used 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 $100 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 2016 financial reporting?

Given the following information,what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system?

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