Question 1

The gross profit method is a way to estimate inventory on the basis of the cost of goods sold model.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following states that a company must perform strictly proper accounting only for items that are significant to the business's financial statements?

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 3

Williams Company had the following balances and transactions during 2014.   Williams maintains its records of inventory on a perpetual basis using the last-in, first-out method. Calculate the amount of ending Merchandise Inventory at December 31, 2014 using the lower-of-cost-or-market rule.

Accepted Answer

A) $750 
B) $1,140 
C) $1,200 
D) $1,950 
A) $750 
B) $1,140 
C) $1,200 
D) $1,950

Question 4

Henderson Sales sold 400 units of product to a customer on account. The selling price was $28 per unit, and the cost, according to the company's inventory records, was $14 per unit. Provide the journal entry to record cost of goods sold. (Assume a perpetual inventory system)

Accepted Answer

@#IMG-DLM& Note:
Cost of Goods

Question 5

Which of the following states that the business should use the same accounting methods from period to period?

Accepted Answer

A) materiality concept 
B) consistency principle 
C) conservatism 
D) disclosure principle 
A) materiality concept 
B) consistency principle 
C) conservatism 
D) disclosure principle

Question 6

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 7

Rubal Inc. earned revenue of $400,000 and incurred cost of goods sold of $320,000. Calculate the gross profit percent.

Accepted Answer

A) 75% 
B) 20% 
C) 60% 
D) 80% 
A) 75% 
B) 20% 
C) 60% 
D) 80%

Question 8

Which of the following assets must be reported at the lower-of-cost-or-market value?

Accepted Answer

A) Accounts Receivable 
B) Merchandise Inventory 
C) Prepaid Insurance 
D) Notes Receivable 
A) Accounts Receivable 
B) Merchandise Inventory 
C) Prepaid Insurance 
D) Notes Receivable

Question 9

Samson Company had the following balances and transactions during 2014:   What is the amount of the company's Merchandise Inventory, as disclosed in the December 31, 2014 balance sheet as per the periodic first-in, first-out (FIFO)costing method?

Accepted Answer

A) $475 
B) $500 
C) $665 
D) $700 
A) $475 
B) $500 
C) $665 
D) $700

Question 10

The ending Merchandise Inventory for the current accounting period is understated by $2,700. What effect will this error have on Cost of Goods Sold and Net Income?

Accepted Answer

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

Question 11

A company that uses the perpetual inventory system sold goods to a customer for cash for $3,000. The cost of the goods sold was $1,000. Which of the following journal entries correctly records this transaction?

Accepted Answer

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

Question 12

A high rate of inventory turnover indicates ease in selling inventory.

Accepted Answer

A) True 
 B)False

Question 13

A lower days' sales in inventory for Company X when compared to other companies, indicates that Company X:

Accepted Answer

A) is able to sell its inventory quickly. 
B) is spending more on inventory storage. 
C) is incurring higher insurance costs. 
D) is holding excess obsolete inventory. 
A) is able to sell its inventory quickly. 
B) is spending more on inventory storage. 
C) is incurring higher insurance costs. 
D) is holding excess obsolete inventory.

Question 14

Under GAAP, which of the following amounts would be reported as Merchandise Inventory on the balance sheet of a company if the cost of an item is $85 and the current replacement cost is $70?

Accepted Answer

A) $155 
B) The average of $70 and $85 
C) $85 
D) $70 
A) $155 
B) The average of $70 and $85 
C) $85 
D) $70

Question 15

The beginning inventory of Soft Toys Company was $46,000. The purchases (excluding returns)and sales revenue for the year were $230,000 and $325,000, respectively. The purchase returns amounted to $30,000. The company's normal gross profit percent is 60%. What is the amount of estimated ending inventory?

Accepted Answer

A) $72,000 
B) $246,000 
C) $30,000 
D) $116,000 
A) $72,000 
B) $246,000 
C) $30,000 
D) $116,000

Question 16

Perez Company purchased inventory on account for $6,500. Provide the journal entry to record the purchase of inventory on account. (Assume a perpetual inventory system)

Accepted Answer

The answer of Perez Company purchased inventory on account for...

Question 17

Using the first-in, first-out (FIFO)method of inventory valuation will always produce the same results whether a company uses perpetual or periodic inventory.

Accepted Answer

A) True 
 B)False

Question 18

Under the last-in, first-out method, the amount of cost of goods sold calculated using the perpetual inventory system will differ from the amount calculated using the periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the correct formula to calculate inventory turnover?

Accepted Answer

A) Inventory turnover = Cost of goods sold ÷ Average merchandise inventory 
B) Inventory turnover = Cost of goods sold × Average merchandise inventory 
C) Inventory turnover = Cost of goods sold + Average merchandise inventory 
D) Inventory turnover = Cost of goods sold - Average merchandise inventory 
A) Inventory turnover = Cost of goods sold ÷ Average merchandise inventory 
B) Inventory turnover = Cost of goods sold × Average merchandise inventory 
C) Inventory turnover = Cost of goods sold + Average merchandise inventory 
D) Inventory turnover = Cost of goods sold - Average merchandise inventory

Question 20

A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold a total of 150 units for $45 each from March 1 through December 31. What is the amount of ending inventory on December 31, if the company uses the first-in, first-out (FIFO)inventory costing method? (Assume that the company uses a perpetual inventory system.)

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

Exam 6: Merchandise Inventory

The gross profit method is a way to estimate inventory on the basis of the cost of goods sold model.

Which of the following states that a company must perform strictly proper accounting only for items that are significant to the business's financial statements?

Williams Company had the following balances and transactions during 2014. Williams maintains its records of inventory on a perpetual basis using the last-in, first-out method. Calculate the amount of ending Merchandise Inventory at December 31, 2014 using the lower-of-cost-or-market rule.

Henderson Sales sold 400 units of product to a customer on account. The selling price was $28 per unit, and the cost, according to the company's inventory records, was $14 per unit. Provide the journal entry to record cost of goods sold. (Assume a perpetual inventory system)

Which of the following states that the business should use the same accounting methods from period to period?

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

Rubal Inc. earned revenue of $400,000 and incurred cost of goods sold of $320,000. Calculate the gross profit percent.

Which of the following assets must be reported at the lower-of-cost-or-market value?

Samson Company had the following balances and transactions during 2014: What is the amount of the company's Merchandise Inventory, as disclosed in the December 31, 2014 balance sheet as per the periodic first-in, first-out (FIFO)costing method?

The ending Merchandise Inventory for the current accounting period is understated by $2,700. What effect will this error have on Cost of Goods Sold and Net Income?

A company that uses the perpetual inventory system sold goods to a customer for cash for $3,000. The cost of the goods sold was $1,000. Which of the following journal entries correctly records this transaction?

A high rate of inventory turnover indicates ease in selling inventory.

A lower days' sales in inventory for Company X when compared to other companies, indicates that Company X:

Under GAAP, which of the following amounts would be reported as Merchandise Inventory on the balance sheet of a company if the cost of an item is $85 and the current replacement cost is $70?

Perez Company purchased inventory on account for $6,500. Provide the journal entry to record the purchase of inventory on account. (Assume a perpetual inventory system)

Using the first-in, first-out (FIFO)method of inventory valuation will always produce the same results whether a company uses perpetual or periodic inventory.

Under the last-in, first-out method, the amount of cost of goods sold calculated using the perpetual inventory system will differ from the amount calculated using the periodic inventory system.

Which of the following is the correct formula to calculate inventory turnover?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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