Question 1

To determine the cost of ending inventory using the LIFO method:

Accepted Answer

A) the latest purchase costs are used. 
B) the specific unit cost of the inventory is used. 
C) the average cost of the inventory is used. 
D) the beginning inventory and earliest purchase costs are used. 
A) the latest purchase costs are used. 
B) the specific unit cost of the inventory is used. 
C) the average cost of the inventory is used. 
D) the beginning inventory and earliest purchase costs are used.

Question 2

Using the following data,by how much would taxable income change if LIFO is used rather than FIFO?

Accepted Answer

A) There is no difference. 
B) Increase by $20,000. 
C) Decrease by $20,000. 
D) Decrease by $60,000. 
A) There is no difference. 
B) Increase by $20,000. 
C) Decrease by $20,000. 
D) Decrease by $60,000.

Question 3

Kennel Company reported the following:   Based on this information,the purchases for the next period should be:

Accepted Answer

A) $285,000. 
B) $355,000. 
C) $380,000. 
D) $415,000. 
A) $285,000. 
B) $355,000. 
C) $380,000. 
D) $415,000.

Question 4

The inventory turnover ratio:

Accepted Answer

A) is determined by dividing cost of goods sold by net sales. 
B) shows how many times the company sold its average level of inventory. 
C) should be high for a company that sells high-end merchandise. 
D) will be lower for companies that have many low-priced items in their inventory. 
A) is determined by dividing cost of goods sold by net sales. 
B) shows how many times the company sold its average level of inventory. 
C) should be high for a company that sells high-end merchandise. 
D) will be lower for companies that have many low-priced items in their inventory.

Question 5

On June 1,Neighbor Company purchased inventory on account with a cost of $3,000.The credit terms were 3/10,net 30.On June 2,Neighbor returned 50 percent of the inventory.Neighbor uses the perpetual inventory system.On June 8,Neighbor paid for the inventory.What journal entry did Neighbor Company prepare on June 8?

Accepted Answer

A) debit Purchase Discount for $45,debit Cash for $1,455 and credit Accounts Payable for $1,500 
B) debit Accounts Payable for $1,500 and credit Cash for $1,500 
C) debit Accounts Payable for $1,500 credit Purchase Discount for $45 and credit Cash for $1,455 
D) debit Accounts Payable for $1,500,credit Inventory for $45 and credit Cash for $1,455 
A) debit Purchase Discount for $45,debit Cash for $1,455 and credit Accounts Payable for $1,500 
B) debit Accounts Payable for $1,500 and credit Cash for $1,500 
C) debit Accounts Payable for $1,500 credit Purchase Discount for $45 and credit Cash for $1,455 
D) debit Accounts Payable for $1,500,credit Inventory for $45 and credit Cash for $1,455

Question 6

Given the following data,calculate the cost of ending inventory using the average cost method.(Round any intermediary and final answers to two decimal places. )

Accepted Answer

A) $620.10 
B) $631.20 
C) $300.00 
D) $1,120.00 
A) $620.10 
B) $631.20 
C) $300.00 
D) $1,120.00

Question 7

If ending inventory for a year is overstated,then gross profit for that year will be overstated.

Accepted Answer

A) True 
 B)False

Question 8

In 2019,ending inventory is overstated.What is the effect of the error on total stockholders' equity in 2019 and 2020?

Accepted Answer

A) Total stockholders' equity is overstated in 2019 and 2020. 
B) Total stockholders' equity is understated in 2019 and 2020. 
C) Total stockholders' equity is overstated in 2019 and correctly stated at the end of 2020. 
D) Total stockholders' equity is overstated in 2019 and understated in 2020. 
A) Total stockholders' equity is overstated in 2019 and 2020. 
B) Total stockholders' equity is understated in 2019 and 2020. 
C) Total stockholders' equity is overstated in 2019 and correctly stated at the end of 2020. 
D) Total stockholders' equity is overstated in 2019 and understated in 2020.

Question 9

Beginning inventory and ending inventory have opposite effects on cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 10

List three ways in which the gross profit method can be used by a retailer.

Accepted Answer

The gross profit method can be used to:

Question 11

Using a perpetual inventory system,which journal entry(ies)is(are)prepared when two units of merchandise are sold on account?

Accepted Answer

A) debit Accounts Receivable and credit Sales Revenue only 
B) debit Cash and credit Sales Revenue;debit Cost of Goods Sold and credit Inventory 
C) debit Accounts Receivable and credit Sales Revenue;debit Cost of Goods Sold and credit Inventory 
D) debit Accounts Receivable and credit Sales Revenue;debit Inventory and credit Cost of Goods Sold 
A) debit Accounts Receivable and credit Sales Revenue only 
B) debit Cash and credit Sales Revenue;debit Cost of Goods Sold and credit Inventory 
C) debit Accounts Receivable and credit Sales Revenue;debit Cost of Goods Sold and credit Inventory 
D) debit Accounts Receivable and credit Sales Revenue;debit Inventory and credit Cost of Goods Sold

Question 12

Freight in is accounted for as a delivery expense.

Accepted Answer

A) True 
 B)False

Question 13

The inventory cost under the average cost per unit method will generally fall in between the inventory cost using the LIFO and FIFO methods.

Accepted Answer

A) True 
 B)False

Question 14

It is the end of the year and Katerinos Company is applying the lower-of-cost-or-market (LCM)rule to inventory.The company uses the perpetual inventory system and LIFO.Katerinos has provided the following information before any year-end adjustments:
   Required: Prepare the required journal entry at year-end
following U.S.GAAP.

Accepted Answer

1.
 @#IMG-DLM& ($120

Question 15

Cost of Goods Sold is an operating expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 16

Given the following data,calculate cost of goods sold using the FIFO costing method.

Accepted Answer

A) $720 
B) $888 
C) $1,004 
D) $1,354 
A) $720 
B) $888 
C) $1,004 
D) $1,354

Question 17

On May 1,Santelle Company purchased $700 of inventory on account with credit terms of 4/10,net 30.Santelle uses the perpetual inventory system.On May 2,the seller gave Santelle a $100 allowance due to a product defect.What journal entry did Santelle Company prepare on May 2?

Accepted Answer

A) debit Accounts Payable for $100 and credit Purchase Returns and Allowances for $100 
B) debit Accounts Payable for $100 and credit Purchase Discounts for $100 
C) debit Cash for $100 and credit Accounts Payable for $100 
D) debit Accounts Payable for $100 and credit Inventory for $100 
A) debit Accounts Payable for $100 and credit Purchase Returns and Allowances for $100 
B) debit Accounts Payable for $100 and credit Purchase Discounts for $100 
C) debit Cash for $100 and credit Accounts Payable for $100 
D) debit Accounts Payable for $100 and credit Inventory for $100

Question 18

In 2019,beginning inventory is overstated.What is the effect of the error on total stockholders' equity in 2020?

Accepted Answer

A) Total stockholders' equity is overstated in 2020. 
B) Total stockholders' equity is understated in 2020. 
C) Total stockholders' equity is correctly stated in 2020. 
D) none of the above. 
A) Total stockholders' equity is overstated in 2020. 
B) Total stockholders' equity is understated in 2020. 
C) Total stockholders' equity is correctly stated in 2020. 
D) none of the above.

Question 19

Under the average-cost inventory method,to determine the average cost per unit:

Accepted Answer

A) the cost of beginning inventory is divided by the number of units available. 
B) the cost of beginning inventory plus the cost of purchases is divided by the number of units sold. 
C) the cost of purchases for the period are divided by the number of units available. 
D) the cost of beginning inventory plus the cost of purchases is divided by the number of units available. 
A) the cost of beginning inventory is divided by the number of units available. 
B) the cost of beginning inventory plus the cost of purchases is divided by the number of units sold. 
C) the cost of purchases for the period are divided by the number of units available. 
D) the cost of beginning inventory plus the cost of purchases is divided by the number of units available.

Question 20

Inventory is reported on the balance sheet at the selling price of the inventory still on hand.

Accepted Answer

A) True 
 B)False

To determine the cost of ending inventory using the LIFO method:

Using the following data,by how much would taxable income change if LIFO is used rather than FIFO?

Kennel Company reported the following: Based on this information,the purchases for the next period should be:

The inventory turnover ratio:

Given the following data,calculate the cost of ending inventory using the average cost method.(Round any intermediary and final answers to two decimal places. )

If ending inventory for a year is overstated,then gross profit for that year will be overstated.

In 2019,ending inventory is overstated.What is the effect of the error on total stockholders' equity in 2019 and 2020?

Beginning inventory and ending inventory have opposite effects on cost of goods sold.

List three ways in which the gross profit method can be used by a retailer.

Using a perpetual inventory system,which journal entry(ies)is(are)prepared when two units of merchandise are sold on account?

Freight in is accounted for as a delivery expense.

The inventory cost under the average cost per unit method will generally fall in between the inventory cost using the LIFO and FIFO methods.

Cost of Goods Sold is an operating expense on the income statement.

Given the following data,calculate cost of goods sold using the FIFO costing method.

On May 1,Santelle Company purchased $700 of inventory on account with credit terms of 4/10,net 30.Santelle uses the perpetual inventory system.On May 2,the seller gave Santelle a $100 allowance due to a product defect.What journal entry did Santelle Company prepare on May 2?

In 2019,beginning inventory is overstated.What is the effect of the error on total stockholders' equity in 2020?

Under the average-cost inventory method,to determine the average cost per unit:

Inventory is reported on the balance sheet at the selling price of the inventory still on hand.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

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Exam 6: Inventory Cost of Goods Sold

To determine the cost of ending inventory using the LIFO method:

Using the following data,by how much would taxable income change if LIFO is used rather than FIFO?

Kennel Company reported the following: Based on this information,the purchases for the next period should be:

The inventory turnover ratio:

Given the following data,calculate the cost of ending inventory using the average cost method.(Round any intermediary and final answers to two decimal places. )

If ending inventory for a year is overstated,then gross profit for that year will be overstated.

In 2019,ending inventory is overstated.What is the effect of the error on total stockholders' equity in 2019 and 2020?

Beginning inventory and ending inventory have opposite effects on cost of goods sold.

List three ways in which the gross profit method can be used by a retailer.

Using a perpetual inventory system,which journal entry(ies)is(are)prepared when two units of merchandise are sold on account?

Freight in is accounted for as a delivery expense.

The inventory cost under the average cost per unit method will generally fall in between the inventory cost using the LIFO and FIFO methods.

Cost of Goods Sold is an operating expense on the income statement.

Given the following data,calculate cost of goods sold using the FIFO costing method.

On May 1,Santelle Company purchased $700 of inventory on account with credit terms of 4/10,net 30.Santelle uses the perpetual inventory system.On May 2,the seller gave Santelle a $100 allowance due to a product defect.What journal entry did Santelle Company prepare on May 2?

In 2019,beginning inventory is overstated.What is the effect of the error on total stockholders' equity in 2020?

Under the average-cost inventory method,to determine the average cost per unit:

Inventory is reported on the balance sheet at the selling price of the inventory still on hand.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters