Question 1

An overstatement of ending merchandise inventory in the current period results in an understatement of net income in the current period.

Accepted Answer

A) True 
 B)False  False

Question 2

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for sales revenue.

Accepted Answer

A) True 
 B)False  False

Question 3

State the effects of inventory errors on cost of goods sold and net income for periods 1 and 2.The response should be overstated or understated.
Period 1 Ending Merchandise Inventory is overstated

Accepted Answer

The answer of State the effects of inventory errors on...

Question 4

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 $120 and the current replacement cost is $80?

Accepted Answer

A)  $200 
B)  The average of $80 and $120 
C)  $120 
D)  $80 
A)  $200 
B)  The average of $80 and $120 
C)  $120 
D)  $80

Question 5

The last-in,first-out (LIFO)costing system may or may not match the physical flow of goods.

Accepted Answer

A) True 
 B)False

Question 6

"The amounts obtained for cost of goods sold and ending merchandise inventory are always the same for FIFO perpetual and FIFO periodic." Is this statement TRUE? Why or why not?

Accepted Answer

This is a true statement.This occurs bec

Question 7

When inventory costs are declining,which of the following inventory costing methods will result in the highest cost of goods sold?

Accepted Answer

A)  first-in, first-out 
B)  last-in, first-out 
C)  weighted-average 
D)  specific identification 
A)  first-in, first-out 
B)  last-in, first-out 
C)  weighted-average 
D)  specific identification

Question 8

A company that uses the periodic inventory system provided the following information: 1.Beginning inventory $5,000
2)Purchases $140,000
3)Purchase discounts $2,300
4)Purchase returns and allowances $600
At the end of the period,the physical count of inventory reveals that $15,000 worth of inventory is on hand.What is the amount of cost of goods sold?

Accepted Answer

A)  $127,100 
B)  $142,100 
C)  $157,100 
D)  $137,100 
A)  $127,100 
B)  $142,100 
C)  $157,100 
D)  $137,100

Question 9

Classic Autos specializes in selling gently used specialty sports cars and uses the specific identification method of determining ending inventory and cost of goods sold.Item 507K was sold for $90,000.Classic purchased the sports car for $51,000 and paid $1,300 for freight in and $1,400 for freight out.What is the cost of goods sold?

Accepted Answer

A)  $37,700 
B)  $52,300 
C)  $52,400 
D)  $51,000 
A)  $37,700 
B)  $52,300 
C)  $52,400 
D)  $51,000

Question 10

The lower-of-cost-or-market rule demonstrates accounting conservatism in action.

Accepted Answer

A) True 
 B)False

Question 11

Modern Lifestyle Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500.During the month,Modern purchased and sold merchandise on account as follows:
 $$\begin{array} { | r | r | r | } 
\hline \text { June } 7 & \text { Purchase } & 25 \text { sofas @ } \$ 750 \text { each } \
\hline 14 & \text { Sale } & \text { 30 sofas @ } \$ 1,150 \text { each } \
\hline 18 & \text { Purchase } & 50 \text { sofas @ } \$ 775 \text { each } \
\hline 27 & \text { Sale } & \text { 35 sofas @ } \$ 1,200 \text { each } \
\hline
\end{array}$$ Prepare a perpetual inventory record,using the FIFO inventory costing method,and determine the company's cost of goods sold,ending merchandise inventory,and gross profit.

Accepted Answer

@#IMG-DLM& Gross Profit = Sales - Cost o

Question 12

Which of the following inventory valuation methods minimizes income tax expense during a period of rising inventory costs?

Accepted Answer

A)  first-in, first-out 
B)  last-in, first-out 
C)  weighted-average 
D)  specific identification 
A)  first-in, first-out 
B)  last-in, first-out 
C)  weighted-average 
D)  specific identification

Question 13

A company purchased 130 units for $30 each on January 31.It purchased 150 units for $35 each on February 28.It sold 150 units for $80 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 income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)

Accepted Answer

A)  $3,900 
B)  $5,250 
C)  $4,600 
D)  $9,150 
A)  $3,900 
B)  $5,250 
C)  $4,600 
D)  $9,150

Question 14

The disclosure principle states that a company should disclose all major accounting methods and procedures in the ________.

Accepted Answer

A)  balance sheet 
B)  income statement 
C)  footnotes to the financial statements 
D)  internal accounting documents 
A)  balance sheet 
B)  income statement 
C)  footnotes to the financial statements 
D)  internal accounting documents

Question 15

Assuming that costs are changing during the accounting period,under the last-in,first-out inventory costing method,the amount of cost of goods sold calculated using the perpetual inventory system will usually differ from the amount calculated using the periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 16

Western Sky Company sold 500 units of inventory at $25 per unit for cash.The company uses the perpetual inventory system and the FIFO inventory costing method.The beginning inventory included 550 units at a cost of $15 per unit.The cost of the most recent purchases is $10 per unit.Prepare the journal entries to record the sale.Omit explanations.

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 17

The goal of reporting realistic figures and never overstating assets or net income applies to the ________.

Accepted Answer

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

Question 18

Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases?

Accepted Answer

A)  specific identification 
B)  weighted-average 
C)  last-in, first-out 
D)  first-in, first-out 
A)  specific identification 
B)  weighted-average 
C)  last-in, first-out 
D)  first-in, first-out

Question 19

Which of the following inventory costing methods yields the lowest net income during a period of rising inventory costs?

Accepted Answer

A)  specific identification 
B)  weighted-average 
C)  last-in, first-out 
D)  first-in, first-out 
A)  specific identification 
B)  weighted-average 
C)  last-in, first-out 
D)  first-in, first-out

Question 20

The accounting principles followed for a $5,000 cost in a small company must be the same as the accounting principles followed for a $5,000 cost in a large company.

Accepted Answer

A) True 
 B)False

Exam 6: Merchandise Inventory

An overstatement of ending merchandise inventory in the current period results in an understatement of net income in the current period.

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for sales revenue.

State the effects of inventory errors on cost of goods sold and net income for periods 1 and 2.The response should be overstated or understated. Period 1 Ending Merchandise Inventory is overstated

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 $120 and the current replacement cost is $80?

The last-in,first-out (LIFO)costing system may or may not match the physical flow of goods.

"The amounts obtained for cost of goods sold and ending merchandise inventory are always the same for FIFO perpetual and FIFO periodic." Is this statement TRUE? Why or why not?

When inventory costs are declining,which of the following inventory costing methods will result in the highest cost of goods sold?

The lower-of-cost-or-market rule demonstrates accounting conservatism in action.

Which of the following inventory valuation methods minimizes income tax expense during a period of rising inventory costs?

The disclosure principle states that a company should disclose all major accounting methods and procedures in the ________.

Assuming that costs are changing during the accounting period,under the last-in,first-out inventory costing method,the amount of cost of goods sold calculated using the perpetual inventory system will usually differ from the amount calculated using the periodic inventory system.

The goal of reporting realistic figures and never overstating assets or net income applies to the ________.

Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases?

Which of the following inventory costing methods yields the lowest net income during a period of rising inventory costs?

The accounting principles followed for a $5,000 cost in a small company must be the same as the accounting principles followed for a $5,000 cost in a large company.

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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