Question 1

Accounting is simpler in a periodic inventory system because the company keeps a daily running record of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 2

A company reports in its financial statements that it uses the FIFO method of inventory costing.This is an example of the disclosure principle.

Accepted Answer

A) True 
 B)False

Question 3

Boulevard Home Furnishings had the following balances and transactions during 2018. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \text { 20 units at \$74 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$84 } \
\hline \text { December 30 } & \text { Sold 30 units } \
\hline \text { December 31 } & \text { Replacement cost \$86 } \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the FIFO inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2018 using the lower-of-cost-or-market rule.

Accepted Answer

A)  $2,520 
B)  $2,580 
C)  $3,440 
D)  $5,160 
A)  $2,520 
B)  $2,580 
C)  $3,440 
D)  $5,160

Question 4

When using the FIFO inventory costing method,ending merchandise inventory will be the highest,as compared to LIFO and weighted-average inventory costing methods,when costs are decreasing.

Accepted Answer

A) True 
 B)False

Question 5

Inventory turnover measures the number of times a company sells its average level of merchandise inventory during a period.

Accepted Answer

A) True 
 B)False

Question 6

A company should not change the inventory costing method each period in order to maximize net income.This is an example of the disclosure principle.

Accepted Answer

A) True 
 B)False

Question 7

A company purchased 130 units for $20 each on January 31.It purchased 200 units for $35 each on February 28.It sold 200 units for $80 each from March 1 through December 31.If the company uses the weighted-average inventory costing method,calculate the amount of Cost of Goods Sold on the income statement for the year ending December 31.(Assume the company uses the perpetual inventory system.Round any intermediate calculations two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $9,600 
B)  $5,818 
C)  $2,600 
D)  $7,000 
A)  $9,600 
B)  $5,818 
C)  $2,600 
D)  $7,000

Question 8

Kelley Company provided the following account balances for 2018: $$\begin{array} { | l | r| } 
\hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,300,000 \
\hline \text { Beginning Merchandise Inventory } & 340,000 \
\hline \text { Ending Merchandise Inventory } & 350,000 \
\hline
\end{array}$$ Calculate the average number of days that inventory was held by Kelley Company during 2018.(Assume 365 days in a year.Round your intermediate calculations and final answer to two decimal places.)

Accepted Answer

A)  194.15 days 
B)  98.38 days 
C)  95.55 days 
D)  96.82 days 
A)  194.15 days 
B)  98.38 days 
C)  95.55 days 
D)  96.82 days

Question 9

Under International Financial Reporting Standards (IFRS),which of the following statements regarding the lower-of-cost-or-market rule is incorrect?

Accepted Answer

A)  It is not necessary to record inventory at the lower-of-cost-or-market. 
B)  The market value is defined as net realizable value. 
C)  If the historical cost is higher than the net realizable value, the inventory must be written down. 
D)  The IFRS approach results in fewer write-downs of inventory than U.S. GAAP. 
A)  It is not necessary to record inventory at the lower-of-cost-or-market. 
B)  The market value is defined as net realizable value. 
C)  If the historical cost is higher than the net realizable value, the inventory must be written down. 
D)  The IFRS approach results in fewer write-downs of inventory than U.S. GAAP.

Question 10

Meadows Company sold 500 units of inventory at $25 per unit on account.The company uses the perpetual inventory system and the FIFO inventory costing method.The beginning inventory included 400 units at $15 per unit.The most recent purchases include 600 units at $18 per unit.Prepare the journal entries to record the sale.Omit explanations.

Accepted Answer

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

Question 11

Each inventory costing method matches the flow of inventory costs in a business and is used to determine ending inventory and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 12

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Overstated } & \text { Overstated } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Understated } & \text { Overstated } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Overstated } & \text { Understated } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Understated } & \text { Understated } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Overstated } & \text { Overstated } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Understated } & \text { Overstated } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Overstated } & \text { Understated } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Understated } & \text { Understated } \
\hline
\end{array}$$

Question 13

The periodic inventory records of Hawk Dental Supply indicate the following for the month of April:
 $$\begin{array} { | l | l | l | } 
\hline \text { Apr. 1 } & \begin{array} { l } 
\text { Beginning merchandise } \
\text { inventory }
\end{array} & 15 \text { units @ \$32 each } \
\hline 7 & \text { Purchase } & 7 \text { units @ \$34 each } \
\hline 18 & \text { Purchase } & 12 \text { units @ \$37 each } \
\hline 26 & \text { Purchase } & 10 \text { units @ \$40 each } \
\hline
\end{array}$$ As of April 30,Hawk counts 8 units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Hawk using the FIFO inventory method.

Accepted Answer

Ending Merchandise Inventory: 8 units ×

Question 14

The periodic inventory system ________.

Accepted Answer

A)  is more difficult to maintain than a perpetual inventory system 
B)  works well for businesses in which the inventory is large in size or dollar amount 
C)  involves the use of inventory costing methods 
D)  cannot be used with a specific identification costing method 
A)  is more difficult to maintain than a perpetual inventory system 
B)  works well for businesses in which the inventory is large in size or dollar amount 
C)  involves the use of inventory costing methods 
D)  cannot be used with a specific identification costing method

Question 15

The days' sales in inventory ratio is calculated by dividing cost of goods sold by the average merchandise inventory.

Accepted Answer

A) True 
 B)False

Question 16

The periodic inventory records of Northstar Sales indicate the following for the month of April:
 $\begin{array}{|r|c|c|}
\hline \text { Apr. }1&\begin{array}{l}
\text { Beginning merchandise } \
\text { inventory }
\end{array} & 15 \text { units@\$32 each } \
\hline 7& \text { Purchase } & 7 \text { units @\$34 each } \
\hline 18& \text { Purchase } & 12 \text { units @ \$37 each } \
\hline 26& \text { Purchase } & 10 \text { units@\$40 each } \
\hline
\end{array}$  As of April 30,Northstar counts 8 units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Northstar using the LIFO inventory method.

Accepted Answer

Ending inventory: 8 units @ $32 = $ 256

Question 17

Companies try to manage their inventory levels such that they will have just enough inventory to meet customer demand without investing large amounts of money in inventory or having it sit on the shelves gathering dust.

Accepted Answer

A) True 
 B)False

Question 18

Properly recording inventory when sold and removing the units sold from the inventory count will prevent a company from running out of inventory.

Accepted Answer

A) True 
 B)False

Question 19

Anderson Farms Company provided the following for 2018: $$\begin{array} { | l | r |} 
\hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,200,000 \
\hline \text { Beginning Merchandise Inventory } & 300,000 \
\hline \text { Ending Merchandise Inventory } & 640,000 \
\hline
\end{array}$$ Calculate the company's inventory turnover ratio for the year.(Round your answer to two decimal places.)

Accepted Answer

A)  4.00 times per year 
B)  2.55 times per year 
C)  1.88 times per year 
D)  1.28 times per year 
A)  4.00 times per year 
B)  2.55 times per year 
C)  1.88 times per year 
D)  1.28 times per year

Accounting is simpler in a periodic inventory system because the company keeps a daily running record of inventory on hand.

A company reports in its financial statements that it uses the FIFO method of inventory costing.This is an example of the disclosure principle.

When using the FIFO inventory costing method,ending merchandise inventory will be the highest,as compared to LIFO and weighted-average inventory costing methods,when costs are decreasing.

Inventory turnover measures the number of times a company sells its average level of merchandise inventory during a period.

A company should not change the inventory costing method each period in order to maximize net income.This is an example of the disclosure principle.

Under International Financial Reporting Standards (IFRS),which of the following statements regarding the lower-of-cost-or-market rule is incorrect?

Each inventory costing method matches the flow of inventory costs in a business and is used to determine ending inventory and cost of goods sold.

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

The periodic inventory system ________.

The days' sales in inventory ratio is calculated by dividing cost of goods sold by the average merchandise inventory.

Companies try to manage their inventory levels such that they will have just enough inventory to meet customer demand without investing large amounts of money in inventory or having it sit on the shelves gathering dust.

Properly recording inventory when sold and removing the units sold from the inventory count will prevent a company from running out of inventory.

Anderson Farms Company provided the following for 2018: Cost of Goods Sold (Cost of sales) \ 1,200,000 Beginning Merchandise Inventory 300,000 Ending Merchandise Inventory 640,000 Calculate the company's inventory turnover ratio for the year.(Round your answer to two decimal places.)

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

Filters

Exam 6: Merchandise Inventory

Accounting is simpler in a periodic inventory system because the company keeps a daily running record of inventory on hand.

A company reports in its financial statements that it uses the FIFO method of inventory costing.This is an example of the disclosure principle.

When using the FIFO inventory costing method,ending merchandise inventory will be the highest,as compared to LIFO and weighted-average inventory costing methods,when costs are decreasing.

Inventory turnover measures the number of times a company sells its average level of merchandise inventory during a period.

A company should not change the inventory costing method each period in order to maximize net income.This is an example of the disclosure principle.

Under International Financial Reporting Standards (IFRS),which of the following statements regarding the lower-of-cost-or-market rule is incorrect?

Each inventory costing method matches the flow of inventory costs in a business and is used to determine ending inventory and cost of goods sold.

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

The periodic inventory system ________.

The days' sales in inventory ratio is calculated by dividing cost of goods sold by the average merchandise inventory.

Companies try to manage their inventory levels such that they will have just enough inventory to meet customer demand without investing large amounts of money in inventory or having it sit on the shelves gathering dust.

Properly recording inventory when sold and removing the units sold from the inventory count will prevent a company from running out of inventory.

Anderson Farms Company provided the following for 2018: Cost of Goods Sold (Cost of sales) \ 1,200,000 Beginning Merchandise Inventory 300,000 Ending Merchandise Inventory 640,000 Calculate the company's inventory turnover ratio for the year.(Round your answer to two decimal places.)

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

Filters