Question 1

Which statement is correct about the retail inventory method?

Accepted Answer

A) It represents a cost flow assumption. 
B) It estimates cost of goods sold by applying an average gross margin to the amount of sales recorded in the period. 
C) It can misstate inventory values if unreliable information is used about profit margins. 
D) It provides direct information about actual cost of goods sold or ending inventory. 
A) It represents a cost flow assumption. 
B) It estimates cost of goods sold by applying an average gross margin to the amount of sales recorded in the period. 
C) It can misstate inventory values if unreliable information is used about profit margins. 
D) It provides direct information about actual cost of goods sold or ending inventory.

Question 2

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Accepted Answer

A) Retained earnings is overstated by $1,000. 
B) Retained earnings is understated by $1,000. 
C) The retained earnings will be correctly stated. 
D) Inventory is understated on the balance sheet. 
A) Retained earnings is overstated by $1,000. 
B) Retained earnings is understated by $1,000. 
C) The retained earnings will be correctly stated. 
D) Inventory is understated on the balance sheet.

Question 3

Explain the meaning of the following inventory costing methods: FIFO,specific identification,LIFO,and weighted average.

Accepted Answer

•First-in,first-out (FIFO): A cost flow

Question 4

Which statement best depicts the inventory cost flow equation?

Accepted Answer

A) Beginning inventory + Sales = Cost of sales + Ending inventory. 
B) Beginning inventory + Goods manufactured = Cost of sales + Ending inventory. 
C) Beginning inventory - Purchase returns = Cost of sales + Ending inventory. 
D) Ending inventory + Purchases = Cost of sales + Beginning inventory. 
A) Beginning inventory + Sales = Cost of sales + Ending inventory. 
B) Beginning inventory + Goods manufactured = Cost of sales + Ending inventory. 
C) Beginning inventory - Purchase returns = Cost of sales + Ending inventory. 
D) Ending inventory + Purchases = Cost of sales + Beginning inventory.

Question 5

Which statement best explains the weighted average 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 6

Consider the following inventory information for last year:
   
The company uses a periodic inventory system.The year-end inventory count indicated 3,700 units in inventory.
Required:
a.Calculate the weighted-average cost per unit for the year.
b.Calculate the ending inventory value and the cost of goods sold for the year.

Accepted Answer

a.Cost of goods available for sale / uni

Question 7

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business:
 
What is the correct cost of goods sold for 2017?

Accepted Answer

A) $400,000 
B) $405,000 
C) $450,000 
D) $460,000 
A) $400,000 
B) $405,000 
C) $450,000 
D) $460,000

Question 8

West Retail uses the retail method of inventory valued at average cost,lower of cost and market.The following information relates to 2016:
 
What is the retail value of the 2016 ending inventory?

Accepted Answer

A) $560 
B) $700 
C) $800 
D) $1,000 
A) $560 
B) $700 
C) $800 
D) $1,000

Question 9

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

Question 10

Which statement is correct about using a cost flow assumption?

Accepted Answer

A) An organization must use the same cost flow assumption as other organizations in its industry. 
B) There is only one acceptable cost flow assumption under GAAP in Canada. 
C) In Canada,organizations can use the FIFO or weighted average cost flow assumptions. 
D) In Canada,organizations can use the FIFO,LIFO or weighted average cost flow assumptions. 
A) An organization must use the same cost flow assumption as other organizations in its industry. 
B) There is only one acceptable cost flow assumption under GAAP in Canada. 
C) In Canada,organizations can use the FIFO or weighted average cost flow assumptions. 
D) In Canada,organizations can use the FIFO,LIFO or weighted average cost flow assumptions.

Question 11

Which statement is correct about inventory errors?

Accepted Answer

A) Misstatements in inventory usually affect two reporting periods. 
B) Misstatements in inventory usually affect only the current accounting period. 
C) Misstatements in inventory usually affect only beginning inventory amounts. 
D) Misstatements in inventory usually affect only ending inventory amounts. 
A) Misstatements in inventory usually affect two reporting periods. 
B) Misstatements in inventory usually affect only the current accounting period. 
C) Misstatements in inventory usually affect only beginning inventory amounts. 
D) Misstatements in inventory usually affect only ending inventory amounts.

Question 12

Explain 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 13

What is the meaning of the terms "F.O.B.shipping point"?

Accepted Answer

A) The buyer takes ownership of the goods once they arrive at their receiving location. 
B) The point at which the buyer takes legal possession of the goods. 
C) The buyer takes ownership of the goods as soon as they are shipped to the buyer. 
D) The seller remains liable for any loss or damage incurred during shipment. 
A) The buyer takes ownership of the goods once they arrive at their receiving location. 
B) The point at which the buyer takes legal possession of the goods. 
C) The buyer takes ownership of the goods as soon as they are shipped to the buyer. 
D) The seller remains liable for any loss or damage incurred during shipment.

Question 14

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Accepted Answer

A) Retained earnings is overstated by $1,000. 
B) Retained earnings is understated by $1,000. 
C) No effect on retained earnings. 
D) The retained earnings will be correctly stated. 
A) Retained earnings is overstated by $1,000. 
B) Retained earnings is understated by $1,000. 
C) No effect on retained earnings. 
D) The retained earnings will be correctly stated.

Question 15

Use the chart provided below to determine the impact of a company processing a $3,500 purchase invoice in fiscal 2018 for a purchase made near its fiscal 2017 year end.The goods were appropriately included in the year end inventory count.

Accepted Answer

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

Question 16

Which transaction would not be included in year end inventory?

Accepted Answer

A) Goods received on consignment at year end. 
B) Goods shipped out on consignment at year end. 
C) Goods shipped FOB shipping point after year end. 
D) Goods received at year end. 
A) Goods received on consignment at year end. 
B) Goods shipped out on consignment at year end. 
C) Goods shipped FOB shipping point after year end. 
D) Goods received at year end.

Which statement is correct about the retail inventory method?

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Explain the meaning of the following inventory costing methods: FIFO,specific identification,LIFO,and weighted average.

Which statement best depicts the inventory cost flow equation?

Which statement best explains the weighted average cost flow assumption?

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business: What is the correct cost of goods sold for 2017?

West Retail uses the retail method of inventory valued at average cost,lower of cost and market.The following information relates to 2016: What is the retail value of the 2016 ending inventory?

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

Which statement is correct about using a cost flow assumption?

Which statement is correct about inventory errors?

Explain 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?

What is the meaning of the terms "F.O.B.shipping point"?

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Use the chart provided below to determine the impact of a company processing a $3,500 purchase invoice in fiscal 2018 for a purchase made near its fiscal 2017 year end.The goods were appropriately included in the year end inventory count.

Which transaction would not be included in year end inventory?

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

Exam 6: Inventories

Which statement is correct about the retail inventory method?

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Explain the meaning of the following inventory costing methods: FIFO,specific identification,LIFO,and weighted average.

Which statement best depicts the inventory cost flow equation?

Which statement best explains the weighted average cost flow assumption?

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business: What is the correct cost of goods sold for 2017?

West Retail uses the retail method of inventory valued at average cost,lower of cost and market.The following information relates to 2016: What is the retail value of the 2016 ending inventory?

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

Which statement is correct about using a cost flow assumption?

Which statement is correct about inventory errors?

Explain 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?

What is the meaning of the terms "F.O.B.shipping point"?

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Use the chart provided below to determine the impact of a company processing a $3,500 purchase invoice in fiscal 2018 for a purchase made near its fiscal 2017 year end.The goods were appropriately included in the year end inventory count.

Which transaction would not be included in year end inventory?

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