Question 1

The materiality concept requires that a company should report enough information for outsiders to make wise decisions about the company.

Accepted Answer

A) True 
 B)False

Question 2

Santa Fe Tile Company had the following inventory purchases and sales during the month of May.The company uses the periodic inventory method. $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline & \text { Purchases } & & & \text { Sales } & & \
\hline \text { Date } & \text { Units } & \text { Unit Cost } & \text { Total } & \text { Units } & \text { Unit Price } & \text { Total } \
\hline \text { May 1 } & 100 & \$ 4 & \$ 400 & & & \
\hline 5 & 200 & 5 & 1,000 & & & \
\hline 10 & & & & 100 & \$ 10 & \$ 1,000 \
\hline 15 & 100 & 6 & 600 & & & \
\hline 20 & 150 & 7 & 1,050 & & & \
\hline 25 & & & & 200 & 11 & \$ 2,200 \
\hline 30 & 160 & 8 & 1,280 & & & \
\hline & 710 & & \$ 4,330 & 300 & & \$ 3,200 \
\hline
\end{array}$$
- If Santa Fe uses FIFO costing,how much was the Cost of goods sold for the month?

Accepted Answer

A)  $1,400 
B)  $1,520 
C)  $1,380 
D)  $1,850 
A)  $1,400 
B)  $1,520 
C)  $1,380 
D)  $1,850

Question 3

When a company uses FIFO,the Cost of goods sold correlates to the most recently purchased goods,and the ending inventory correlates to the oldest goods in stock.

Accepted Answer

A) True 
 B)False

Question 4

Gross profit is Sales revenue divided by Cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 5

Berring Sales uses LIFO.The partially completed inventory record for January appears below.   On January 14,the company sold 10 units.On January 29,the company sold 50 units.
-Complete the inventory record and calculate the Inventory balance at the end of January.(Please round to the nearest whole dollar.)

Accepted Answer

A)  $135 
B)  $249 
C)  $143 
D)  $228 
A)  $135 
B)  $249 
C)  $143 
D)  $228

Question 6

Using the LIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.

Accepted Answer

A) True 
 B)False

Question 7

A company discovers that its Cost of goods sold is understated by an insignificant amount.They do NOT need to correct the error because of the conservatism principle.

Accepted Answer

A) True 
 B)False

Question 8

A company decides to ignore a very small error in their inventory balance.This is an example of which of the following principles?

Accepted Answer

A)  Accounting conservatism 
B)  Materiality concept 
C)  Disclosure principle 
D)  Consistency principle 
A)  Accounting conservatism 
B)  Materiality concept 
C)  Disclosure principle 
D)  Consistency principle

Question 9

A company purchased 100 units for $20 each on January 31.It purchased 100 units for $30 on February 28.It sold 150 units for $45 each from March 1 through December 31.If the company uses the First-In,First-Out inventory costing method,what is the amount of Cost of goods sold on the December 31 income statement?

Accepted Answer

A)  $6,750 
B)  $4,000 
C)  $3,500 
D)  $3,750 
A)  $6,750 
B)  $4,000 
C)  $3,500 
D)  $3,750

Question 10

If the historical cost of inventory falls below replacement cost,the business must write down the inventory cost.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following inventory costing methods yields the lowest gross profit when costs are rising during the accounting period?

Accepted Answer

A)  Specific-unit-cost 
B)  Average-cost 
C)  Last-In, First-Out 
D)  First-In, First-Out 
A)  Specific-unit-cost 
B)  Average-cost 
C)  Last-In, First-Out 
D)  First-In, First-Out

Question 12

Williams Company had the following balances and transactions during 2013. $$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 70 \
\hline \text { June } 10 & \text { Purchased } 20 \text { units at } \$ 80 \
\hline \text { December } 30 & \text { Sold } 15 \text { units } \
\hline \text { December } 31 & \text { Replacement cost } \$ 60 \
\hline
\end{array}$$ What would the company's inventory amount be on the December 31,2013 balance sheet if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

Accepted Answer

A)  $1,200 
B)  $1,150 
C)  $1,050 
D)  $900 
A)  $1,200 
B)  $1,150 
C)  $1,050 
D)  $900

Question 13

The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following inventory costing methods yields the highest cost of goods sold when costs are rising during the accounting period?

Accepted Answer

A)  Specific-unit-cost 
B)  Average-cost 
C)  Last-In, First-Out 
D)  First-In, First-Out 
A)  Specific-unit-cost 
B)  Average-cost 
C)  Last-In, First-Out 
D)  First-In, First-Out

Question 15

A company purchased 100 units for $20 each on January 31.It purchased 100 units for $30 on February 28.It sold 150 units for $45 each from March 1 through December 31.If the company uses the Last-In,First-Out inventory costing method,what is the amount of ending inventory on December 31?

Accepted Answer

A)  $1,500 
B)  $1,250 
C)  $1,000 
D)  $2,250 
A)  $1,500 
B)  $1,250 
C)  $1,000 
D)  $2,250

Question 16

Berring Sales uses the average-cost method.The partially completed inventory record for January appears below.   On January 14,the company sold 10 units.On January 29,the company sold 50 units.
-Complete the inventory record and calculate the Inventory balance at the end of January.(Please round to the nearest whole dollar.)

Accepted Answer

A)  $135 
B)  $249 
C)  $141 
D)  $228 
A)  $135 
B)  $249 
C)  $141 
D)  $228

Question 17

A company that uses the perpetual inventory system sold $1,000 of goods to a customer on account.The inventory had been purchased by the company for $400.Which of the following journal entries correctly records the Cost of goods sold?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 400 & \
\hline \text { Sales revenue } & & 400 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Inventory } & 400 & \
\hline \text { Cost of goods sold } & & 400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 400 & \
\hline \text { Inventory } & & 400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 400 & \
\hline \text { Sales revenue } & & 400 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 400 & \
\hline \text { Sales revenue } & & 400 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Inventory } & 400 & \
\hline \text { Cost of goods sold } & & 400 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Cost of goods sold } & 400 & \
\hline \text { Inventory } & & 400 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 400 & \
\hline \text { Sales revenue } & & 400 \
\hline
\end{array}$$

Question 18

Samson Company had the following balances and transactions during 2013. $$\begin{array} { | l | l | } 
\hline \text { Beginning inventory } & 10 \text { units at } \$ 70 \
\hline \text { March } 10 & \text { Sold } 8 \text { units } \
\hline \text { June } 10 & \text { Purchased } 20 \text { units at } \$ 80 \
\hline \text { October 30 } & \text { Sold } 15 \text { units } \
\hline
\end{array}$$ 
- What would the company's Inventory amount be on the December 31,2013 balance sheet if the perpetual Last-In,First-Out costing method is used? (Answers are rounded to the nearest dollar.)

Accepted Answer

A)  $490 
B)  $554 
C)  $560 
D)  $540 
A)  $490 
B)  $554 
C)  $560 
D)  $540

Question 19

A company changes its inventory costing method each period in order to maximize net income.This is a violation of the consistency principle.

Accepted Answer

A) True 
 B)False

Question 20

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of goods sold and Net income?

Accepted Answer

A)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Overstated } & \text { Overstated } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Understated } & \text { Overstated } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Overstated } & \text { Understated } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Understated } & \text { Understated } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Overstated } & \text { Overstated } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Understated } & \text { Overstated } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Overstated } & \text { Understated } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Cost of goods sold } & \text { Net income } \
\hline \text { Understated } & \text { Understated } \
\hline
\end{array}$$

The materiality concept requires that a company should report enough information for outsiders to make wise decisions about the company.

When a company uses FIFO,the Cost of goods sold correlates to the most recently purchased goods,and the ending inventory correlates to the oldest goods in stock.

Gross profit is Sales revenue divided by Cost of goods sold.

Using the LIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.

A company discovers that its Cost of goods sold is understated by an insignificant amount.They do NOT need to correct the error because of the conservatism principle.

A company decides to ignore a very small error in their inventory balance.This is an example of which of the following principles?

If the historical cost of inventory falls below replacement cost,the business must write down the inventory cost.

Which of the following inventory costing methods yields the lowest gross profit when costs are rising during the accounting period?

The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.

Which of the following inventory costing methods yields the highest cost of goods sold when costs are rising during the accounting period?

A company purchased 100 units for $20 each on January 31.It purchased 100 units for $30 on February 28.It sold 150 units for $45 each from March 1 through December 31.If the company uses the Last-In,First-Out inventory costing method,what is the amount of ending inventory on December 31?

A company that uses the perpetual inventory system sold $1,000 of goods to a customer on account.The inventory had been purchased by the company for $400.Which of the following journal entries correctly records the Cost of goods sold?

A company changes its inventory costing method each period in order to maximize net income.This is a violation of the consistency principle.

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of goods sold and Net income?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, bonds Payable, and Classification of Liabilities on the Balance Sheet

Filters

Exam 6: Merchandising Inventory

The materiality concept requires that a company should report enough information for outsiders to make wise decisions about the company.

When a company uses FIFO,the Cost of goods sold correlates to the most recently purchased goods,and the ending inventory correlates to the oldest goods in stock.

Gross profit is Sales revenue divided by Cost of goods sold.

Using the LIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.

A company discovers that its Cost of goods sold is understated by an insignificant amount.They do NOT need to correct the error because of the conservatism principle.

A company decides to ignore a very small error in their inventory balance.This is an example of which of the following principles?

If the historical cost of inventory falls below replacement cost,the business must write down the inventory cost.

Which of the following inventory costing methods yields the lowest gross profit when costs are rising during the accounting period?

The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.

Which of the following inventory costing methods yields the highest cost of goods sold when costs are rising during the accounting period?

A company purchased 100 units for $20 each on January 31.It purchased 100 units for $30 on February 28.It sold 150 units for $45 each from March 1 through December 31.If the company uses the Last-In,First-Out inventory costing method,what is the amount of ending inventory on December 31?

A company that uses the perpetual inventory system sold $1,000 of goods to a customer on account.The inventory had been purchased by the company for $400.Which of the following journal entries correctly records the Cost of goods sold?

A company changes its inventory costing method each period in order to maximize net income.This is a violation of the consistency principle.

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of goods sold and Net income?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, bonds Payable, and Classification of Liabilities on the Balance Sheet

Filters