Question 1

Which financial statement line item will be misstated if the 2011 ending inventory balance is overstated?

Accepted Answer

A) 2011 Balance sheet only 
B) 2011 and 2012 Balance sheets only 
C) 2011 and 2012 Income statements and 2011 Balance sheet only 
D) 2011 and 2012 Income statements only 
A) 2011 Balance sheet only 
B) 2011 and 2012 Balance sheets only 
C) 2011 and 2012 Income statements and 2011 Balance sheet only 
D) 2011 and 2012 Income statements only

Question 2

Inventory data for Patterson Enterprises are below.Two hundred units were sold during the quarter.
   Required: Fill in the missing amounts for (A),(B),and (C)in the income statement below.Use the inventory method that will give the lowest possible federal income taxes.

Accepted Answer

LIFO will give the lowest poss

Question 3

The asset turnover ratio is the most useful way to determine if a merchandising company is selling its inventory effectively.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is inventory for an office supply store such as Office Max?

Accepted Answer

A) paper used to maintain Office Max's accounting records 
B) paper available to sell to Office Max's customers 
C) paper used in Office Max's employee washroom 
D) office supply storage costs 
A) paper used to maintain Office Max's accounting records 
B) paper available to sell to Office Max's customers 
C) paper used in Office Max's employee washroom 
D) office supply storage costs

Question 5

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit.   Determine the ending inventory for the period.

Accepted Answer

A) $2,925 
B) $2,600 
C) $2,725 
D) $3,120 
A) $2,925 
B) $2,600 
C) $2,725 
D) $3,120

Question 6

At the end of its first year of business,Payless,Inc.had Sales of $800,000 and Cost of goods sold of $500,000 prior to a lower-of-cost-or-market write down.Payless reported its inventory at the lower market value of $90,000 instead of the cost of $100,000.The adjusting entry to record the write down included a decrease to Inventory and Cost of goods sold.
Required: Put an X in the appropriate box to show the effect of lower-of-cost-or-market write down:

Accepted Answer

The answer of At the end of its first year...

Question 7

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit.   Determine the cost of goods sold for the January 20th sale.

Accepted Answer

A) $5,425 
B) $5,850 
C) $5,625 
D) $5,725 
A) $5,425 
B) $5,850 
C) $5,625 
D) $5,725

Question 8

An example of a sound control for inventory is ________.

Accepted Answer

A) requiring authorization for all purchases 
B) verifying that the items received are the items ordered 
C) physically protecting the inventory with locked storage rooms 
D) all of these 
A) requiring authorization for all purchases 
B) verifying that the items received are the items ordered 
C) physically protecting the inventory with locked storage rooms 
D) all of these

Question 9

Spring Hill,Inc.sells merchandise to customers worldwide in a highly competitive industry.During June,Spring Hill completed the following transactions:
∙ June 1: Purchased 200 units of merchandise for $11 each, FOB shipping point.
∙ June 1: Paid $205 of freight costs for the merchandise.
∙ June 3: Paid $1,200 to the local radio station for an advertising campaign related to the 	merchandise.
∙ June 9: Sold 180 units of the merchandise to customers for $26 each.
Required:
1.Determine the cost of the inventory on the books of Spring Hill,Inc.,on June2.
2.When will the costs that are included in inventory become expenses?
3.Which financial statement will report the costs that do NOT attach to inventory?

Accepted Answer

1.$2,405 = (200 x $11)+ $205
2

Question 10

How does a perpetual inventory system differ from a periodic system?

Accepted Answer

A) Sales are increased only at the end of the accounting period in a perpetual system. 
B) Cost of goods sold is increased only after an inventory count in a perpetual system. 
C) Inventory is reduced after each sale in a perpetual system. 
D) Inventory is increased after each sale in a periodic system. 
A) Sales are increased only at the end of the accounting period in a perpetual system. 
B) Cost of goods sold is increased only after an inventory count in a perpetual system. 
C) Inventory is reduced after each sale in a perpetual system. 
D) Inventory is increased after each sale in a periodic system.

Question 11

In which way is a perpetual inventory system similar to a periodic system?

Accepted Answer

A) Sales are increased at the time of sale. 
B) Cost of goods sold is increased after an inventory count. 
C) Inventory is reduced after each sale. 
D) Cost of goods sold is increased after each sale. 
A) Sales are increased at the time of sale. 
B) Cost of goods sold is increased after an inventory count. 
C) Inventory is reduced after each sale. 
D) Cost of goods sold is increased after each sale.

Question 12

A vendor offers terms of 1/10,n/30.What is the ANNUAL interest rate the vendor is charging a buyer who does not pay within 10 days? (Assume there are 360 days in the year.

Accepted Answer

A) 1% 
B) 36% 
C) 18% 
D) 54% 
A) 1% 
B) 36% 
C) 18% 
D) 54%

Question 13

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much cash did Inside Outfitters receive?

Accepted Answer

A) $200 
B) $16 
C) $216 
D) $184 
A) $200 
B) $16 
C) $216 
D) $184

Question 14

Describe the function and use of a purchase requisition and a purchase order.

Accepted Answer

A purchase requisition is filled out whe

Question 15

In a time of rising prices,the main reason a company would choose to use FIFO is to save on income taxes.

Accepted Answer

A) True 
 B)False

Question 16

Big Company has a policy of always taking the cash discounts offered by vendors,even if it doesn't pay within the discount period.Big Company thinks that many of the vendors won't notice,or if they do notice won't bother to send another bill for a small amount.
On May 5,Big Company bought $5,000 of merchandise from Little Company,terms 2/10,n/30,FOB destination.Freight on the shipment was $40.
A.How many days does Big Company have to pay the bill and legitimately take the discount?
B.If Big Company pays within the discount period,how much should it pay Little Company?
C.Who should pay the freight on the shipment,Big Company or Little Company?
D.Is it ethical for Big Company to take the cash discount even though it does not pay within the discount period?

Accepted Answer

A.10 days; B.$4,900

Question 17

FILLO, Inc.’s inventory activity in May 2011 was as follows: 
 
Part A: Record the effect of the above inventory activity on the accounting equation assuming perpetual weighted average cost is used.
 
Part B: Record the effect of the above inventory activity on the accounting equation assuming perpetual first-in, first-out (FIFO) is used.
 
Part C: Using the information from Parts A and B above,for each item,write in the amount (even if $0)as of or for the Month Ended May 31,2011.Write in the one financial statement where the line item is found.

Accepted Answer

Part A:
@#IMG-DLM&
Part B: Record the effect of th

Question 18

What are the advantages and disadvantages of using LIFO as a cost flow method?

Accepted Answer

The main advantage is that LIFO results

Question 19

Discuss the risks to be avoided and the control procedures associated with purchasing and paying for inventory.

Accepted Answer

Answers may vary widely,but the grader s

Question 20

Vango,Inc.sells part number 86Z to auto parts stores around the world.Information about part number 86Z is contained in the table below.Vango uses a weighted average cost periodic inventory system.   Determine the cost of goods sold and ending inventory value of part 86Z,if 4,000 units remain unsold in inventory at the end of the accounting period.

Accepted Answer

A) Cost of goods sold is $49,200 and ending inventory is $34,400. 
B) Cost of goods sold is $34,400 and ending inventory is $49,200. 
C) Cost of goods sold is $50,160 and ending inventory is $33,440. 
D) Cost of goods sold is $51,200 and ending inventory is $32,400. 
A) Cost of goods sold is $49,200 and ending inventory is $34,400. 
B) Cost of goods sold is $34,400 and ending inventory is $49,200. 
C) Cost of goods sold is $50,160 and ending inventory is $33,440. 
D) Cost of goods sold is $51,200 and ending inventory is $32,400.

Which financial statement line item will be misstated if the 2011 ending inventory balance is overstated?

Inventory data for Patterson Enterprises are below.Two hundred units were sold during the quarter. Required: Fill in the missing amounts for (A),(B),and (C)in the income statement below.Use the inventory method that will give the lowest possible federal income taxes.

The asset turnover ratio is the most useful way to determine if a merchandising company is selling its inventory effectively.

Which of the following is inventory for an office supply store such as Office Max?

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the ending inventory for the period.

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the cost of goods sold for the January 20^thsale.

An example of a sound control for inventory is ________.

How does a perpetual inventory system differ from a periodic system?

In which way is a perpetual inventory system similar to a periodic system?

A vendor offers terms of 1/10,n/30.What is the ANNUAL interest rate the vendor is charging a buyer who does not pay within 10 days? (Assume there are 360 days in the year.

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much cash did Inside Outfitters receive?

Describe the function and use of a purchase requisition and a purchase order.

In a time of rising prices,the main reason a company would choose to use FIFO is to save on income taxes.

What are the advantages and disadvantages of using LIFO as a cost flow method?

Discuss the risks to be avoided and the control procedures associated with purchasing and paying for inventory.

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

Which financial statement line item will be misstated if the 2011 ending inventory balance is overstated?

Inventory data for Patterson Enterprises are below.Two hundred units were sold during the quarter. Required: Fill in the missing amounts for (A),(B),and (C)in the income statement below.Use the inventory method that will give the lowest possible federal income taxes.

The asset turnover ratio is the most useful way to determine if a merchandising company is selling its inventory effectively.

Which of the following is inventory for an office supply store such as Office Max?

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the ending inventory for the period.

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the cost of goods sold for the January 20th sale.

An example of a sound control for inventory is ________.

How does a perpetual inventory system differ from a periodic system?

In which way is a perpetual inventory system similar to a periodic system?

A vendor offers terms of 1/10,n/30.What is the ANNUAL interest rate the vendor is charging a buyer who does not pay within 10 days? (Assume there are 360 days in the year.

Inside Outfitters sold $200 of merchandise to a customer for cash.The sales tax was 8%.How much cash did Inside Outfitters receive?

Describe the function and use of a purchase requisition and a purchase order.

In a time of rising prices,the main reason a company would choose to use FIFO is to save on income taxes.

What are the advantages and disadvantages of using LIFO as a cost flow method?

Discuss the risks to be avoided and the control procedures associated with purchasing and paying for inventory.

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

Grand Forks Enterprises sells toy airplanes to retailers such as K-Mart and Wal-Mart.Information about inventory is contained in the table below.The company uses a LIFO perpetual inventory system and sells inventory for $5.00 per unit. Determine the cost of goods sold for the January 20^thsale.