Question 1

Which of the following is a CORRECT statement about the lower-of-cost-or market rule when applied to inventories?

Accepted Answer

A) Under U.S.GAAP,once inventory has been written down to market value,the write-downs can be reversed in future periods. 
B) Under U.S.GAAP,the lower-of-cost-or-market rule is optional. 
C) Currently,the lower-of-cost-or-market rules are the same for both U.S.GAAP and IFRS. 
D) Under IFRS,some lower-of-cost-or-market write-downs may be reversed. 
A) Under U.S.GAAP,once inventory has been written down to market value,the write-downs can be reversed in future periods. 
B) Under U.S.GAAP,the lower-of-cost-or-market rule is optional. 
C) Currently,the lower-of-cost-or-market rules are the same for both U.S.GAAP and IFRS. 
D) Under IFRS,some lower-of-cost-or-market write-downs may be reversed.

Question 2

Since a perpetual inventory system continuously updates the inventory account,a physical inventory count is not necessary to prove the inventory records.

Accepted Answer

A) True 
 B)False

Question 3

Service entities report cost of goods sold on the income statement.

Accepted Answer

A) True 
 B)False

Question 4

Speedy Corporation reported net income of $465,000 for the current year.After the financial statements had been prepared,it was discovered that ending inventory had been understated by $45,000.If the tax rate is 40%,after the error has been corrected,net income,after tax,will:

Accepted Answer

A) increase by $27,000. 
B) decrease by $27,000. 
C) increase by $45,000. 
D) decrease by $45,000. 
A) increase by $27,000. 
B) decrease by $27,000. 
C) increase by $45,000. 
D) decrease by $45,000.

Question 5

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

Accepted Answer

A) Decrease by $10,000. 
B) Decrease by $90,000. 
C) Increase by $10,000. 
D) Increase by $90,000. 
A) Decrease by $10,000. 
B) Decrease by $90,000. 
C) Increase by $10,000. 
D) Increase by $90,000.

Question 6

Under the periodic inventory system,the journal entry to record the cost of ending inventory determined by a physical count is:

Accepted Answer

A) debit Inventory and credit Cost of Goods Sold. 
B) debit Inventory and credit Sales Revenue. 
C) debit Purchases and credit Inventory. 
D) debit Cost of Goods Sold and credit Inventory. 
A) debit Inventory and credit Cost of Goods Sold. 
B) debit Inventory and credit Sales Revenue. 
C) debit Purchases and credit Inventory. 
D) debit Cost of Goods Sold and credit Inventory.

Question 7

A fire destroyed the inventory and store of Schlichting Company.The following information is available:
   Prepare a schedule to compute the amount of inventory lost in the fire.

Accepted Answer

The answer of A fire destroyed the inventory and store...

Question 8

IFRS defines market value for inventory as net realizable value.

Accepted Answer

A) True 
 B)False

Question 9

Under U.S.GAAP,the application of the lower-of-cost-or-market rule to inventories is optional.

Accepted Answer

A) True 
 B)False

Question 10

Thomas Industries reported the following:   The gross profit percentage is: (Round your final answer to the nearest percentage. )

Accepted Answer

A) 74%. 
B) 17%. 
C) 37%. 
D) 26%. 
A) 74%. 
B) 17%. 
C) 37%. 
D) 26%.

Question 11

The lower-of-cost-or-market rule for inventory is based on the accounting principle(s)of:

Accepted Answer

A) relevance. 
B) representational faithfulness. 
C) disclosure. 
D) A and B. 
A) relevance. 
B) representational faithfulness. 
C) disclosure. 
D) A and B.

Question 12

To document approval of purchase returns,the buyer issues a credit memorandum meaning that accounts payable are reduced for the amount of the return.

Accepted Answer

A) True 
 B)False

Question 13

Why does U.S.GAAP require companies to apply the lower-of-cost-or-market rule to inventories?

Accepted Answer

If the market value of inventory falls b

Question 14

The income tax saved by using LIFO instead of FIFO is equal to the ________ times the income tax rate.

Accepted Answer

A) cost of the ending inventory 
B) retail price of the ending inventory 
C) cost of the beginning inventory 
D) LIFO Reserve 
A) cost of the ending inventory 
B) retail price of the ending inventory 
C) cost of the beginning inventory 
D) LIFO Reserve

Question 15

The inventory system that uses computer software to keep a running record of inventory on hand is the:

Accepted Answer

A) cost of goods sold inventory system. 
B) periodic inventory system. 
C) perpetual inventory system. 
D) hybrid inventory system. 
A) cost of goods sold inventory system. 
B) periodic inventory system. 
C) perpetual inventory system. 
D) hybrid inventory system.

Question 16

In 2019,ending inventory is overstated.What is the effect of the error on net income in 2019 and 2020?

Accepted Answer

A) Net income is overstated in 2019 and understated in 2020. 
B) Net income is understated in 2019 and overstated in 2020. 
C) Net income is understated in 2019 and 2020. 
D) Net income is overstated in 2019 and 2020. 
A) Net income is overstated in 2019 and understated in 2020. 
B) Net income is understated in 2019 and overstated in 2020. 
C) Net income is understated in 2019 and 2020. 
D) Net income is overstated in 2019 and 2020.

Question 17

During the current year,the following transactions occurred for Marjorie's Jewelry Store:
A.On May 1,the business purchased 10 rings on account at $6,000 each.Credit terms were 2/10,net/30.
B.On May 2,the business returned one ring because of a defect.
C.On May 3,three of the rings were sold on account at $8,000 each,to one customer.Credit terms were n/30.No sales returns were expected.
D.On May 9,the accounts payable was paid in full.
E.On May 10,the customer paid for one ring sold on May 3.
F.On May 31,the business paid rent of $4,000 for the month of May and wages of $5,000.
Required:
1.Journalize the above transactions for Marjorie's Jewelry Store.The store uses the perpetual inventory system.Explanations are not required.
2.Prepare the income statement for the month ending May 31 of the current year.Use the multistep format and ignore taxes.

Accepted Answer

The answer of During the current year,the following transactions occurred...

Question 18

To determine the cost of goods sold,to report on the income statement,multiply the number of units of inventory:

Accepted Answer

A) sold times the retail price per unit. 
B) sold times the cost per unit. 
C) purchased times the retail price per unit. 
D) purchased times the cost per unit. 
A) sold times the retail price per unit. 
B) sold times the cost per unit. 
C) purchased times the retail price per unit. 
D) purchased times the cost per unit.

Question 19

If ending inventory is overstated by $6,000,then:

Accepted Answer

A) stockholders' equity is overstated by $6,000. 
B) cost of goods sold is understated by $6,000. 
C) gross profit is understated by $6,000. 
D) A and B. 
A) stockholders' equity is overstated by $6,000. 
B) cost of goods sold is understated by $6,000. 
C) gross profit is understated by $6,000. 
D) A and B.

Question 20

When inventory costs are increasing,the FIFO costing method will generally yield a cost of goods sold that is:

Accepted Answer

A) higher than cost of goods sold under the LIFO method. 
B) lower than cost of goods sold under the LIFO method. 
C) equal to the gross profit under the LIFO method. 
D) equal to cost of goods sold under the LIFO method. 
A) higher than cost of goods sold under the LIFO method. 
B) lower than cost of goods sold under the LIFO method. 
C) equal to the gross profit under the LIFO method. 
D) equal to cost of goods sold under the LIFO method.

Which of the following is a CORRECT statement about the lower-of-cost-or market rule when applied to inventories?

Since a perpetual inventory system continuously updates the inventory account,a physical inventory count is not necessary to prove the inventory records.

Service entities report cost of goods sold on the income statement.

Speedy Corporation reported net income of $465,000 for the current year.After the financial statements had been prepared,it was discovered that ending inventory had been understated by $45,000.If the tax rate is 40%,after the error has been corrected,net income,after tax,will:

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

Under the periodic inventory system,the journal entry to record the cost of ending inventory determined by a physical count is:

A fire destroyed the inventory and store of Schlichting Company.The following information is available: Prepare a schedule to compute the amount of inventory lost in the fire.

IFRS defines market value for inventory as net realizable value.

Under U.S.GAAP,the application of the lower-of-cost-or-market rule to inventories is optional.

Thomas Industries reported the following: The gross profit percentage is: (Round your final answer to the nearest percentage. )

The lower-of-cost-or-market rule for inventory is based on the accounting principle(s)of:

To document approval of purchase returns,the buyer issues a credit memorandum meaning that accounts payable are reduced for the amount of the return.

Why does U.S.GAAP require companies to apply the lower-of-cost-or-market rule to inventories?

The income tax saved by using LIFO instead of FIFO is equal to the ________ times the income tax rate.

The inventory system that uses computer software to keep a running record of inventory on hand is the:

In 2019,ending inventory is overstated.What is the effect of the error on net income in 2019 and 2020?

To determine the cost of goods sold,to report on the income statement,multiply the number of units of inventory:

If ending inventory is overstated by $6,000,then:

When inventory costs are increasing,the FIFO costing method will generally yield a cost of goods sold that is:

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

Which of the following is a CORRECT statement about the lower-of-cost-or market rule when applied to inventories?

Since a perpetual inventory system continuously updates the inventory account,a physical inventory count is not necessary to prove the inventory records.

Service entities report cost of goods sold on the income statement.

Speedy Corporation reported net income of $465,000 for the current year.After the financial statements had been prepared,it was discovered that ending inventory had been understated by $45,000.If the tax rate is 40%,after the error has been corrected,net income,after tax,will:

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

Under the periodic inventory system,the journal entry to record the cost of ending inventory determined by a physical count is:

A fire destroyed the inventory and store of Schlichting Company.The following information is available: Prepare a schedule to compute the amount of inventory lost in the fire.

IFRS defines market value for inventory as net realizable value.

Under U.S.GAAP,the application of the lower-of-cost-or-market rule to inventories is optional.

Thomas Industries reported the following: The gross profit percentage is: (Round your final answer to the nearest percentage. )

The lower-of-cost-or-market rule for inventory is based on the accounting principle(s)of:

To document approval of purchase returns,the buyer issues a credit memorandum meaning that accounts payable are reduced for the amount of the return.

Why does U.S.GAAP require companies to apply the lower-of-cost-or-market rule to inventories?

The income tax saved by using LIFO instead of FIFO is equal to the ________ times the income tax rate.

The inventory system that uses computer software to keep a running record of inventory on hand is the:

In 2019,ending inventory is overstated.What is the effect of the error on net income in 2019 and 2020?

To determine the cost of goods sold,to report on the income statement,multiply the number of units of inventory:

If ending inventory is overstated by $6,000,then:

When inventory costs are increasing,the FIFO costing method will generally yield a cost of goods sold that is:

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