Question 1

The main objective of the lower-of-cost-or-market rule is to ________.

Accepted Answer

A) not overstate revenues 
B) report a conservative inventory balance 
C) not overstate cost of goods sold 
D) report a conservative gross profit 
A) not overstate revenues 
B) report a conservative inventory balance 
C) not overstate cost of goods sold 
D) report a conservative gross profit

Question 2

Tarheel Company purchases inventory from McGardy Wholesalers.The per unit cost of the items purchased during the current accounting period was $5.50,$5.70,$5.90 and $6.23.Which statement below regarding Tarheel's choice of inventory cost flow methods is TRUE?

Accepted Answer

A) Net income will be the same regardless of the cost flow assumption adopted.The choice of an accounting method can't affect net income. 
B) Net income will be greater than taxable income regardless of the inventory method chosen by Tarheel Company. 
C) If Tarheel Company uses the LIFO method for financial reporting,then it must also use the LIFO method for tax reporting. 
D) If Tarheel Company selects the FIFO method,it will result in a lower net income than the LIFO method would have produced. 
A) Net income will be the same regardless of the cost flow assumption adopted.The choice of an accounting method can't affect net income. 
B) Net income will be greater than taxable income regardless of the inventory method chosen by Tarheel Company. 
C) If Tarheel Company uses the LIFO method for financial reporting,then it must also use the LIFO method for tax reporting. 
D) If Tarheel Company selects the FIFO method,it will result in a lower net income than the LIFO method would have produced.

Question 3

On June 1,beginning inventory consists of ten items that cost $100 each.On June 8,ten more items are purchased at $120 each.On June 12,fifteen items are sold for $200 each.On June 28,ten items are purchased at $130 each.Using perpetual FIFO,cost of goods sold for the month ended June 30 equals ________.

Accepted Answer

A) $1,500 
B) $1,600 
C) $1,800 
D) $3,000 
A) $1,500 
B) $1,600 
C) $1,800 
D) $3,000

Question 4

Inventory information for Cut Above,Inc.is provided below.Sales for the period were 2,000 units at $10 each.The company uses FIFO.   Determine the gross profit ratio at January 31.

Accepted Answer

A) 60% 
B) 65% 
C) 40% 
D) 57.5% 
A) 60% 
B) 65% 
C) 40% 
D) 57.5%

Question 5

An example of an internal control procedure to protect inventory is to limit access to inventory deliveries to the accountants.

Accepted Answer

A) True 
 B)False

Question 6

The purchase of inventory is recorded as an expense called cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 7

Which financial statement(s)do you need to calculate a company's gross profit ratio?

Accepted Answer

A) only the income statement 
B) only the balance sheet 
C) both the income statement and the balance sheet 
D) both the balance sheet and the statement of cash flows 
A) only the income statement 
B) only the balance sheet 
C) both the income statement and the balance sheet 
D) both the balance sheet and the statement of cash flows

Question 8

The accountants for Q-Logic Integrated Systems use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP rules.The accountants have gathered the following information:   At what amount will inventory will be reported on the balance sheet?

Accepted Answer

A) $400,000 
B) $900,000 
C) $410,000 
D) $630,000 
A) $400,000 
B) $900,000 
C) $410,000 
D) $630,000

Question 9

If the terms of purchase are FOB shipping point,title to the goods passes from the vendor to the buyer ________.

Accepted Answer

A) when the merchandise leaves the vendor's warehouse 
B) halfway between the vendor's warehouse and the buyer's warehouse 
C) when the merchandise reaches the buyer's warehouse 
D) when the merchandise is sold to the end user 
A) when the merchandise leaves the vendor's warehouse 
B) halfway between the vendor's warehouse and the buyer's warehouse 
C) when the merchandise reaches the buyer's warehouse 
D) when the merchandise is sold to the end user

Question 10

The accountants for Sandoval Products use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information:
   Required: Determine the amount of inventory that will be reported on the balance sheet.

Accepted Answer

Inventory will be on the balan

Question 11

Which financial statement(s)is/are needed in order to calculate the average days in inventory?

Accepted Answer

A) income statement only 
B) balance sheets only 
C) both the income statement and balance sheets 
D) both the statement of cash flows and income statement 
A) income statement only 
B) balance sheets only 
C) both the income statement and balance sheets 
D) both the statement of cash flows and income statement

Question 12

The following inventory data are from the records of Hobo Widget Company:
   A physical inventory count revealed that the inventory was actually $75,000.If this error were not corrected,what effect would it have on the income statements for this fiscal year and the following fiscal year?

Accepted Answer

If ending inventory is understated by $5

Question 13

Which method requires the unit cost is calculated by dividing the total cost of goods available for sale by the total number of units available for sale?

Accepted Answer

A) FIFO 
B) LIFO 
C) Weighted average method 
D) Specific identification 
A) FIFO 
B) LIFO 
C) Weighted average method 
D) Specific identification

Question 14

In a period of rising inventory costs,the LIFO method would result in the highest net income.

Accepted Answer

A) True 
 B)False

Question 15

Assume Tyler,Inc.had a gross profit ratio of 30%,25%,and 20% over the most recent three years.Which statement below is the best interpretation of the data?

Accepted Answer

A) The company is selling more inventory than in previous years. 
B) The company is decreasing its selling price per unit or having its inventory costs per unit increase. 
C) The company's managers are doing a good job of controlling inventory costs and selling price. 
D) The company is not selling as much inventory as in previous years. 
A) The company is selling more inventory than in previous years. 
B) The company is decreasing its selling price per unit or having its inventory costs per unit increase. 
C) The company's managers are doing a good job of controlling inventory costs and selling price. 
D) The company is not selling as much inventory as in previous years.

Question 16

Match between columns
                        Premises: is difficult to apply when the inventory items are identical
results in the highest ending inventory value in a period of falling prices
results in the lowest net income in a period of rising inventory purchase costs
results in the highest net income in a period of rising inventory purchase costs
matches the costs of the most recently purchased items with sales on the income statement

Accepted Answer

The Answer of S = Specific identification method and W is...

Question 17

Buy & Large,Inc.'s inventory activity in October was:
   Show the correct effect on the accounting equation of the October 25th sale on account using the perpetual LIFO method of accounting for inventory.

Accepted Answer

Question 18

The gross profit ratio measures the percentage of revenue left over after deducting cost of goods sold from net sales.

Accepted Answer

A) True 
 B)False

Question 19

In times of rising prices,a company that uses LIFO will report a higher Accounts payable balance than if it had used FIFO.

Accepted Answer

A) True 
 B)False

Question 20

The accountants for Ruiz Imports use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information:
   Required:
1.Determine the amount of inventory that will be reported on the balance sheet.
2.What principle of accounting supports the lower of cost or market rule for inventory?

Accepted Answer

1.The lower of the historical cost and r

The main objective of the lower-of-cost-or-market rule is to ________.

Tarheel Company purchases inventory from McGardy Wholesalers.The per unit cost of the items purchased during the current accounting period was $5.50,$5.70,$5.90 and $6.23.Which statement below regarding Tarheel's choice of inventory cost flow methods is TRUE?

Inventory information for Cut Above,Inc.is provided below.Sales for the period were 2,000 units at $10 each.The company uses FIFO. Determine the gross profit ratio at January 31.

An example of an internal control procedure to protect inventory is to limit access to inventory deliveries to the accountants.

The purchase of inventory is recorded as an expense called cost of goods sold.

Which financial statement(s)do you need to calculate a company's gross profit ratio?

The accountants for Q-Logic Integrated Systems use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP rules.The accountants have gathered the following information: At what amount will inventory will be reported on the balance sheet?

If the terms of purchase are FOB shipping point,title to the goods passes from the vendor to the buyer ________.

The accountants for Sandoval Products use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information: Required: Determine the amount of inventory that will be reported on the balance sheet.

Which financial statement(s)is/are needed in order to calculate the average days in inventory?

The following inventory data are from the records of Hobo Widget Company: A physical inventory count revealed that the inventory was actually $75,000.If this error were not corrected,what effect would it have on the income statements for this fiscal year and the following fiscal year?

Which method requires the unit cost is calculated by dividing the total cost of goods available for sale by the total number of units available for sale?

In a period of rising inventory costs,the LIFO method would result in the highest net income.

Assume Tyler,Inc.had a gross profit ratio of 30%,25%,and 20% over the most recent three years.Which statement below is the best interpretation of the data?

Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25^th sale on account using the perpetual LIFO method of accounting for inventory.

The gross profit ratio measures the percentage of revenue left over after deducting cost of goods sold from net sales.

In times of rising prices,a company that uses LIFO will report a higher Accounts payable balance than if it had used FIFO.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters

Exam 5: The Purchase and Sale of Inventory

The main objective of the lower-of-cost-or-market rule is to ________.

Tarheel Company purchases inventory from McGardy Wholesalers.The per unit cost of the items purchased during the current accounting period was $5.50,$5.70,$5.90 and $6.23.Which statement below regarding Tarheel's choice of inventory cost flow methods is TRUE?

Inventory information for Cut Above,Inc.is provided below.Sales for the period were 2,000 units at $10 each.The company uses FIFO. Determine the gross profit ratio at January 31.

An example of an internal control procedure to protect inventory is to limit access to inventory deliveries to the accountants.

The purchase of inventory is recorded as an expense called cost of goods sold.

Which financial statement(s)do you need to calculate a company's gross profit ratio?

The accountants for Q-Logic Integrated Systems use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP rules.The accountants have gathered the following information: At what amount will inventory will be reported on the balance sheet?

If the terms of purchase are FOB shipping point,title to the goods passes from the vendor to the buyer ________.

The accountants for Sandoval Products use the lower of cost or market (LCM)method to value inventory on the balance sheet in accordance with GAAP.The accountants have gathered the following information: Required: Determine the amount of inventory that will be reported on the balance sheet.

Which financial statement(s)is/are needed in order to calculate the average days in inventory?

The following inventory data are from the records of Hobo Widget Company: A physical inventory count revealed that the inventory was actually $75,000.If this error were not corrected,what effect would it have on the income statements for this fiscal year and the following fiscal year?

Which method requires the unit cost is calculated by dividing the total cost of goods available for sale by the total number of units available for sale?

In a period of rising inventory costs,the LIFO method would result in the highest net income.

Assume Tyler,Inc.had a gross profit ratio of 30%,25%,and 20% over the most recent three years.Which statement below is the best interpretation of the data?

Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25th sale on account using the perpetual LIFO method of accounting for inventory.

The gross profit ratio measures the percentage of revenue left over after deducting cost of goods sold from net sales.

In times of rising prices,a company that uses LIFO will report a higher Accounts payable balance than if it had used FIFO.

Business: Whats It All About

Qualities of Accounting Information

Accruals and Deferrals: Timing Is Everything in Accounting

Payment for Goods and Services: Cash and Accounts Receivable

Acquisition and Use of Long-Term Assets

Accounting for Liabilities

Accounting for Shareholders Equity

Preparing and Analyzing the Statement of Cash Flows

Using Financial Statement Analysis to Evaluate Firm Performance

Quality of Earnings, corporate Governance, and Ifrs

Filters

Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25^th sale on account using the perpetual LIFO method of accounting for inventory.