Question 1

A company must disclose any change in its inventory costing method in its financial statements.

Accepted Answer

A) True 
 B)False

Question 2

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Accepted Answer

A) True 
 B)False

Question 3

Explain the reason a company might use the retail inventory method for valuing inventory.

Accepted Answer

The retail method is generally used to p

Question 4

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 5

Damaged and obsolete goods that can be sold:

Accepted Answer

A)  Are assigned a value of zero. 
B)  Are included in inventory at their full cost. 
C)  Should be disposed of immediately. 
D)  Are included in inventory at their net realizable value. 
E)  Are never counted as inventory. 
A)  Are assigned a value of zero. 
B)  Are included in inventory at their full cost. 
C)  Should be disposed of immediately. 
D)  Are included in inventory at their net realizable value. 
E)  Are never counted as inventory.

Question 6

A company's cost of inventory was $219,500. Due to phenomenal demand the market value of its inventory increased to $221,700. This company should record the inventory at its market value.

Accepted Answer

A) True 
 B)False

Question 7

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Accepted Answer

The specific identification method exact

Question 8

Overstating beginning inventory will understate cost of goods sold and net income.

Accepted Answer

A) True 
 B)False

Question 9

A company made the following merchandise purchases and sales during the month of May:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { May l } & \text { Purchased } & 380 \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 } & \text { Purchased } & 270 \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 } & \text { Purchased } & 300 \text { units at } & \$ 22 \text { each } \
\hline \text { May 25 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$$ There was no beginning inventory. If the company uses the FIFO periodic inventory method, what would be the cost of the ending inventory?

Accepted Answer

\[\begin{array} { | l | r | } 
\hline 38

Question 10

A company made the following merchandise purchases and sales during the month of May:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { May l } & \text { Pur chased } & 380 \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 } & \text { Pur chased } & 270 \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 } & \text { Pur chased } & 300 \text { units at } & \$ 22 \text { each } \
\hline \text { May 25 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$$ There was no beginning inventory. If the company uses the LIFO periodic inventory method, what would be the cost of the ending inventory?

Accepted Answer

None

Question 11

Hull Company reported the following income statement information for the current year: 35
$\begin{array} { | l | l | } 
\hline & \
\hline \text { Sales } & \$ 410,000 \
\hline \text { Cost of goods sold: } & \
\hline
\end{array}$
 $$\begin{array} { | l | r | } 
\hline \text { Beginning inventory } & \$ 132,000 \
\hline \text { Cost of goods purchased } & \underline { 273,000 } \
\hline \begin{array} { l } 
\text { Cost of goods available } \
\text { for sale }
\end{array} & 405,000 \
\hline \text { Fnding inventory } & \underline { 144,000 } \
\hline \text { Cost of goods sold } & \underline { 261,000 } \
\hline \text { Gross profit } & \$ 149,000 \
\hline
\end{array}$$ The beginning inventory balance is correct. However, the ending inventory figure was overstated by
$20,000. Given this information, the correct gross profit would be:

Accepted Answer

A)  $149,000. 
B)  $142,000. 
C)  $129,000. 
D)  $112,000. 
E)  $169,000. 
A)  $149,000. 
B)  $142,000. 
C)  $129,000. 
D)  $112,000. 
E)  $169,000.

Question 12

Eastview Company uses a perpetual LIFO inventory system, and has the following purchases and sales: $$\begin{array} { | l | l | } 
\hline \text { January 1 } & 150 \text { units were purchased at \$9 per unit. } \
\hline \text { January 17 } & 120 \text { units were sold } \
\hline \text { January 20 } & 160 \text { units were purchased at \$11 per unit. } \
\hline \text { January 29 } & 150 \text { units were sold } \
\hline
\end{array}$$
- What is the value of cost of goods sold?

Accepted Answer

A)  $2,670. 
B)  $2,750. 
C)  $2,730. 
D)  $380. 
E)  $440. 
A)  $2,670. 
B)  $2,750. 
C)  $2,730. 
D)  $380. 
E)  $440.

Question 13

A company had the following purchases and sales during its first year of operations: $$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sales } \
\hline \text { January. } & 10 \text { units at \$120 } & 6 \text { units } \
\hline \text { February. } & 20 \text { units at \$125 } & 5 \text { units } \
\hline \text { May. } & 15 \text { units at \$130 } & 9 \text { units } \
\hline \text { September: } & 12 \text { units at \$135 } & 8 \text { units } \
\hline \text { November: } & 10 \text { units at \$140 } & 13 \text { units } \
\hline
\end{array}$$ On December 31, there were 26 units remaining in ending inventory. 
-Using the Perpetual LIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

Accepted Answer

A)  $3,200. 
B)  $3,405. 
C)  $5,400. 
D)  $3,364. 
E)  $3,270. 
A)  $3,200. 
B)  $3,405. 
C)  $5,400. 
D)  $3,364. 
E)  $3,270.

Question 14

Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to the ending inventory using FIFO.
$\begin{array}{|r|l|c|c|}
\hline \text { Date } & \text { Activities } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \
\hline \text { May 1 } & \text { Beginning Inventory } & 150 \text { units @ } \$ 10.00 & \
\hline 5 & \text { Purchase } & 220 \text { units @ } \$ 12.00 & \
\hline 10 & \text { Sales } & & 140 \text { units @ } \$ 20.00 \
\hline 15 & \text { Purchase } & 100 \text { units @\$13.00 } & \
\hline 24 & \text { Sales } & & 90 \text { units @ } \$ 21.00\
\hline  
\end{array}$

Accepted Answer

A)  $2,460 
B)  $2,850 
C)  $2,860 
D)  $2,590 
E)  $2,980 
A)  $2,460 
B)  $2,850 
C)  $2,860 
D)  $2,590 
E)  $2,980

Question 15

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

Accepted Answer

The costs of merchandise inventory inclu

Question 16

The cost of an inventory item includes its invoice cost minus any discount, plus any added or incidental costs necessary to put it in a place and condition for sale.

Accepted Answer

A) True 
 B)False

Question 17

Match between columns
                        Premises: Consignor
Gross profit method
Consistency concept
Days' sales in inventory
Consignee
Specific identification method
Inventory turnover
Lower of cost or market
Retail inventory method
Conservatism principle

Accepted Answer

The Answer of The required method of reporting inventory at is...

Question 18

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

Accepted Answer

A)  FIFO and weighted-average cost 
B)  FIFO and LIFO 
C)  Specific identification and FIFO 
D)  LIFO and weighted-average cost 
E)  LIFO and specific identification 
A)  FIFO and weighted-average cost 
B)  FIFO and LIFO 
C)  Specific identification and FIFO 
D)  LIFO and weighted-average cost 
E)  LIFO and specific identification

Question 19

Salmone Company reported the following purchases and sales for its only product. Salmone uses a periodic inventory system. Determine the cost assigned to cost of goods sold using LIFO. $\begin{array}{|r|l|c|c|}
\hline\text { Date } & \text { Activities } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \
\hline \text { May 1 } & \text { Beginning Inventory } & 150 \text { units @ } \$ 10.00 & \
\hline 5 & \text { Purchase } & 220 \text { units @ } \$ 12.00 & \
\hline 10 & \text { Sales } & & 140 \text { units @ } \$ 20.00 \
\hline 15 & \text { Purchase } & 100 \text { units@ } \$ 13.00 & \
\hline 24 & \text { Sales } && 90 \text { units@ } \$ 21.00\
\hline 
\end{array}$

Accepted Answer

A)  $2,460 
B)  $2,590 
C)  $2,850 
D)  $2,860 
E)  $2,580 
A)  $2,460 
B)  $2,590 
C)  $2,850 
D)  $2,860 
E)  $2,580

Question 20

The ________ method is commonly used to estimate the value of inventory that has been destroyed, lost, or stolen.

Accepted Answer

The answer of The ________ method is commonly used to...

A company must disclose any change in its inventory costing method in its financial statements.

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Explain the reason a company might use the retail inventory method for valuing inventory.

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Damaged and obsolete goods that can be sold:

A company's cost of inventory was $219,500. Due to phenomenal demand the market value of its inventory increased to $221,700. This company should record the inventory at its market value.

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Overstating beginning inventory will understate cost of goods sold and net income.

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

The cost of an inventory item includes its invoice cost minus any discount, plus any added or incidental costs necessary to put it in a place and condition for sale.

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

The ________ method is commonly used to estimate the value of inventory that has been destroyed, lost, or stolen.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Exam 6: Inventories and Cost of Sales

A company must disclose any change in its inventory costing method in its financial statements.

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Explain the reason a company might use the retail inventory method for valuing inventory.

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Damaged and obsolete goods that can be sold:

A company's cost of inventory was $219,500. Due to phenomenal demand the market value of its inventory increased to $221,700. This company should record the inventory at its market value.

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Overstating beginning inventory will understate cost of goods sold and net income.

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

The cost of an inventory item includes its invoice cost minus any discount, plus any added or incidental costs necessary to put it in a place and condition for sale.

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

The ________ method is commonly used to estimate the value of inventory that has been destroyed, lost, or stolen.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters