Question 1

Henderson Sales purchased $6,000 of inventory on account.Provide the journal entry.(Assume a perpetual inventory system. )

Accepted Answer

The answer of Henderson Sales purchased $6,000 of inventory on...

Question 2

A company is uncertain whether a complex transaction should be recorded as an asset or an expense.Under the conservatism principle,it should choose to treat it as an asset.

Accepted Answer

A) True 
 B)False  False

Question 3

Murphy,Inc.had the following balances and transactions during 2017.
 
The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2017 using the lower-of-cost-or-market rule.

Accepted Answer

A) $1,275 
B) $1,340 
C) $1,005 
D) $2,010 
A) $1,275 
B) $1,340 
C) $1,005 
D) $2,010 C

Question 4

Which of the following inventory costing methods requires the calculation of a new average cost after each purchase?

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 5

The ending merchandise inventory for the current accounting period is overstated by $3,500.What will be the effect of this error?

Accepted Answer

A) The net income for the current accounting period will be overstated by $3,500. 
B) The cost of goods sold for the current accounting period will be overstated by $3,500. 
C) The ending merchandise inventory for the next accounting period will be overstated by $3,500. 
D) The cost of goods sold for the next accounting period will be understated by $3,500. 
A) The net income for the current accounting period will be overstated by $3,500. 
B) The cost of goods sold for the current accounting period will be overstated by $3,500. 
C) The ending merchandise inventory for the next accounting period will be overstated by $3,500. 
D) The cost of goods sold for the next accounting period will be understated by $3,500.

Question 6

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 7

The consistency principle states that a business should use the same accounting methods and procedures from period to period.

Accepted Answer

A) True 
 B)False

Question 8

If the merchandise inventory's market value is greater than its cost,then it must be adjusted for the difference.

Accepted Answer

A) True 
 B)False

Question 9

For inventories,market value generally means the current replacement cost.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following inventory costing methods yields the highest cost of goods sold 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 11

Shipman,Inc.has 6 units in inventory on December 31.The units were purchased in November for $200 each.The price lists from suppliers indicate the current replacement cost of the item to be $198 each.What is the effect on gross profit if Shipman values its ending merchandise inventory using the lower-of-cost-or-market rule?

Accepted Answer

A) The gross profit would increase by $2. 
B) The gross profit would not be affected. 
C) The gross profit would decrease by $12. 
D) The gross profit would increase by $12. 
A) The gross profit would increase by $2. 
B) The gross profit would not be affected. 
C) The gross profit would decrease by $12. 
D) The gross profit would increase by $12.

Question 12

Changing from the LIFO (Last-In,First-Out)to the specific identification method of valuing inventory ignores the principle of ________.

Accepted Answer

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

Question 13

A company purchased 100 units for $50 each on January 31.It purchased 200 units for $30 each on February 28.It sold a total of 250 units for $60 each from March 1 through December 31.If the company uses the weighted-average inventory costing method,calculate the amount of ending inventory on December 31.(Assume that the company uses a perpetual inventory system.Round any intermediate calculations two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

A) $11,000 
B) $1,833.5 
C) $9,167 
D) $2,000 
A) $11,000 
B) $1,833.5 
C) $9,167 
D) $2,000

Question 14

The tracking of inventory shrinkage due to theft,damage,or errors is done with the help of a (n)________ of inventory.

Accepted Answer

A) authorization 
B) sale 
C) physical count 
D) delivery 
A) authorization 
B) sale 
C) physical count 
D) delivery

Question 15

A company is uncertain whether a complex transaction should be recorded as gain or loss.Under the conservatism principle,it should choose to treat it a loss.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is affected as a result of an error in performing the physical count of inventory at the end of the accounting period?

Accepted Answer

A) sales revenue 
B) operating expenses 
C) net income 
D) net cost of purchases 
A) sales revenue 
B) operating expenses 
C) net income 
D) net cost of purchases

Question 17

The Cost of Goods Sold account is credited to write down the inventory as per the lower-of-cost-or-market rule.

Accepted Answer

A) True 
 B)False

Question 18

In a period of rising costs,the first-in,first-out (FIFO)method results in lower cost of goods sold and higher gross profit than the last-in,first-out (LIFO)method.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following inventory costing methods yields the highest 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

If the current replacement cost of inventory is less than its historical cost,the business must adjust the inventory value.

Accepted Answer

A) True 
 B)False

Exam 6: Merchandise Inventory

Henderson Sales purchased $6,000 of inventory on account.Provide the journal entry.(Assume a perpetual inventory system. )

A company is uncertain whether a complex transaction should be recorded as an asset or an expense.Under the conservatism principle,it should choose to treat it as an asset.

Which of the following inventory costing methods requires the calculation of a new average cost after each purchase?

The ending merchandise inventory for the current accounting period is overstated by $3,500.What will be the effect of this error?

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

The consistency principle states that a business should use the same accounting methods and procedures from period to period.

If the merchandise inventory's market value is greater than its cost,then it must be adjusted for the difference.

For inventories,market value generally means the current replacement cost.

Which of the following inventory costing methods yields the highest cost of goods sold during a period of rising inventory costs?

Changing from the LIFO (Last-In,First-Out)to the specific identification method of valuing inventory ignores the principle of ________.

The tracking of inventory shrinkage due to theft,damage,or errors is done with the help of a (n)________ of inventory.

A company is uncertain whether a complex transaction should be recorded as gain or loss.Under the conservatism principle,it should choose to treat it a loss.

Which of the following is affected as a result of an error in performing the physical count of inventory at the end of the accounting period?

The Cost of Goods Sold account is credited to write down the inventory as per the lower-of-cost-or-market rule.

In a period of rising costs,the first-in,first-out (FIFO)method results in lower cost of goods sold and higher gross profit than the last-in,first-out (LIFO)method.

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

If the current replacement cost of inventory is less than its historical cost,the business must adjust the inventory value.

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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