Question 1

If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity?

Accepted Answer

A)  Understated 
B)  Overstated 
C)  Correctly Stated 
D)  None of the above 
A)  Understated 
B)  Overstated 
C)  Correctly Stated 
D)  None of the above

Question 2

The following lots of a particular commodity were available for sale during the year:   The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.
What is the amount of cost of goods sold for the year according to the FIFO method?

Accepted Answer

A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250 
A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250

Question 3

During times of rising prices, which of the following is not an accurate statement?

Accepted Answer

A)  Average costing will yield results that are between those of FIFO and LIFO. 
B)  LIFO will result in a higher cost of goods sold than FIFO. 
C)  FIFO will result in a higher net income than LIFO. 
D)  LIFO will result in higher income taxes than FIFO. 
A)  Average costing will yield results that are between those of FIFO and LIFO. 
B)  LIFO will result in a higher cost of goods sold than FIFO. 
C)  FIFO will result in a higher net income than LIFO. 
D)  LIFO will result in higher income taxes than FIFO.

Question 4

The units of an item available for sale during the year were as follows:
   There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method. Show your work.

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 5

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.

Accepted Answer

A) True 
 B)False

Question 6

The following lots of a particular commodity were available for sale during the year:   The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?

Accepted Answer

A)  $655 
B)  $620 
C)  $690 
D)  $659 
A)  $655 
B)  $620 
C)  $690 
D)  $659

Question 7

Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

Accepted Answer

A) True 
 B)False

Question 8

A physical inventory should be taken at the end of every month.

Accepted Answer

A) True 
 B)False

Question 9

The units of an item available for sale during the year were as follows:
   There are 19 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using LIFO.

Accepted Answer

$466 (10 u

Question 10

Which of the following measures the length of time it takes to acquire, sell and replace inventory?

Accepted Answer

A)  inventory turnover 
B)  number of days' sales in inventory 
C)  retail method of inventory costing 
D)  gross profit method of inventory costing 
A)  inventory turnover 
B)  number of days' sales in inventory 
C)  retail method of inventory costing 
D)  gross profit method of inventory costing

Question 11

In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal.

Accepted Answer

A) True 
 B)False

Question 12

List three different security measures taken by stores to safeguard inventory.

Accepted Answer

Answers may vary.
- Inventory should be

Question 13

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
  Assuming that the company uses the perpetual inventory system, determine the Gross Profit for the month of May using the LIFO cost method

Accepted Answer

A)  $348 
B)  $452 
C)  $444 
D)  $356 
A)  $348 
B)  $452 
C)  $444 
D)  $356

Question 14

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
  Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory cost method.

Accepted Answer

A)  $136 
B)  $144 
C)  $180 
D)  $120 
A)  $136 
B)  $144 
C)  $180 
D)  $120

Question 15

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Accepted Answer

A) True 
 B)False

Question 16

Match the following cost flow assumption to their inventory costing method:

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 17

Under a periodic inventory system

Accepted Answer

A)  accounting records continuously disclose the amount of inventory 
B)  a separate account for each type of merchandise is maintained in a subsidiary ledger 
C)  a physical inventory is taken at the end of the period 
D)  merchandise inventory is debited when goods are returned to vendors 
A)  accounting records continuously disclose the amount of inventory 
B)  a separate account for each type of merchandise is maintained in a subsidiary ledger 
C)  a physical inventory is taken at the end of the period 
D)  merchandise inventory is debited when goods are returned to vendors

Question 18

Complete the chart using the LIFO and FIFO costing methods, assuming a period of increasing costs:

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 19

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Accepted Answer

A) True 
 B)False

Question 20

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be as follows:

Accepted Answer

A)  assets overstated by $70,000;retained earnings understated by $70,000; net income statement understated by $70,000. 
B)  assets overstated by $70,000;retained earnings understated by $70,000; no effect on the income statement. 
C)  assets and retained earnings overstated by $70,000; net income overstated by $70,000. 
D)  assets and retained earnings overstated by $70,000; net income understated by $70,000. 
A)  assets overstated by $70,000;retained earnings understated by $70,000; net income statement understated by $70,000. 
B)  assets overstated by $70,000;retained earnings understated by $70,000; no effect on the income statement. 
C)  assets and retained earnings overstated by $70,000; net income overstated by $70,000. 
D)  assets and retained earnings overstated by $70,000; net income understated by $70,000.

If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity?

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of goods sold for the year according to the FIFO method?

During times of rising prices, which of the following is not an accurate statement?

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?

Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

A physical inventory should be taken at the end of every month.

The units of an item available for sale during the year were as follows: There are 19 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using LIFO.

Which of the following measures the length of time it takes to acquire, sell and replace inventory?

In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal.

List three different security measures taken by stores to safeguard inventory.

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Match the following cost flow assumption to their inventory costing method:

Under a periodic inventory system

Complete the chart using the LIFO and FIFO costing methods, assuming a period of increasing costs:

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be as follows:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 7: Inventories

If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity?

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of goods sold for the year according to the FIFO method?

During times of rising prices, which of the following is not an accurate statement?

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?

Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

A physical inventory should be taken at the end of every month.

The units of an item available for sale during the year were as follows: There are 19 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using LIFO.

Which of the following measures the length of time it takes to acquire, sell and replace inventory?

In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal.

List three different security measures taken by stores to safeguard inventory.

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Match the following cost flow assumption to their inventory costing method:

Under a periodic inventory system

Complete the chart using the LIFO and FIFO costing methods, assuming a period of increasing costs:

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be as follows:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters