Question 1

Damaged merchandise that can be sold only at prices below cost should be valued at

Accepted Answer

A)  net realizable value 
B)  LIFO 
C)  FIFO 
D)  average 
A)  net realizable value 
B)  LIFO 
C)  FIFO 
D)  average

Question 2

Use of the retail inventory method requires taking a physical count of inventory.

Accepted Answer

A) True 
 B)False

Question 3

The following data were taken from the annual reports of Jong Inc., a manufacturer of fireworks, and Hobson Inc., a manufacturer of computers.
   (a) Determine the (1) inventory turnover and (2) number of day's sales in inventory for Jong and Hobson. Round your answer to two decimal places.
(b) How would you expect these measures to compare between the companies? Why?

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 4

While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?

Accepted Answer

Net income

Question 5

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are in the possession of the consignor.

Accepted Answer

A) True 
 B)False

Question 6

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Accepted Answer

A) True 
 B)False

Question 7

If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?

Accepted Answer

A)  No change to net income. 
B)  Net income will be overstated 
C)  Net income will be understated. 
D)  Only gross profit will be affected. 
A)  No change to net income. 
B)  Net income will be overstated 
C)  Net income will be understated. 
D)  Only gross profit will be affected.

Question 8

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Accepted Answer

A) True 
 B)False

Question 9

Most large companies will use only one inventory costing methods for all of its different segments.

Accepted Answer

A) True 
 B)False

Question 10

Inventory errors, if not discovered, will self-correct in two years.

Accepted Answer

A) True 
 B)False

Question 11

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

Accepted Answer

A) True 
 B)False

Question 12

The following data were taken from Bowman Inc.
   Determine the inventory turnover ratio and the number of days' sales in inventory for Bowman Inc. Round to two decimal places.
Inventory turnover = Cost of merchandise sold / Average inventory
Inventory turnover = 894,000 / ((78,000 + 92,000)/2)
Inventory turnover = 894,000 / 85,000
Inventory turnover = 10.52

Accepted Answer

Number of days' sales in inventory = Ave

Question 13

The average cost inventory method is the rarely used with a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 14

The lower of cost or market is a method of inventory valuation.

Accepted Answer

A) True 
 B)False

Question 15

Assume that three identical units of merchandise are purchased during October, as follows:
   Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method.

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 16

Under the _________ inventory method, accounting records maintain a continuously updated inventory value.

Accepted Answer

A)  retail 
B)  periodic 
C)  physical 
D)  perpetual 
A)  retail 
B)  periodic 
C)  physical 
D)  perpetual

Question 17

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

Accepted Answer

A)  net income is understated 
B)  net income is overstated 
C)  cost of merchandise sold is understated 
D)  merchandise inventory reported on the balance sheet is overstated 
A)  net income is understated 
B)  net income is overstated 
C)  cost of merchandise sold is understated 
D)  merchandise inventory reported on the balance sheet is overstated

Question 18

All of the following are reasons to use an estimated method of costing inventory except:

Accepted Answer

A)  Perpetual inventory records are not maintained. 
B)  Purchase records are not maintained. 
C)  A disaster has destroyed the inventory records and the inventory. 
D)  Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period. 
A)  Perpetual inventory records are not maintained. 
B)  Purchase records are not maintained. 
C)  A disaster has destroyed the inventory records and the inventory. 
D)  Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period.

Question 19

Three identical units of Item Magnesium XP are purchased during May, as shown below.
   Assume that two units are sold on May 23 for $313. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

Accepted Answer

@#IMG-DLM&_TB2085_00

Question 20

In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.

Accepted Answer

A) True 
 B)False

Damaged merchandise that can be sold only at prices below cost should be valued at

Use of the retail inventory method requires taking a physical count of inventory.

While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are in the possession of the consignor.

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Most large companies will use only one inventory costing methods for all of its different segments.

Inventory errors, if not discovered, will self-correct in two years.

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

The average cost inventory method is the rarely used with a perpetual inventory system.

The lower of cost or market is a method of inventory valuation.

Assume that three identical units of merchandise are purchased during October, as follows: Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method.

Under the _________ inventory method, accounting records maintain a continuously updated inventory value.

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

All of the following are reasons to use an estimated method of costing inventory except:

Three identical units of Item Magnesium XP are purchased during May, as shown below. Assume that two units are sold on May 23 for $313. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.

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

Damaged merchandise that can be sold only at prices below cost should be valued at

Use of the retail inventory method requires taking a physical count of inventory.

While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are in the possession of the consignor.

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Most large companies will use only one inventory costing methods for all of its different segments.

Inventory errors, if not discovered, will self-correct in two years.

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

The average cost inventory method is the rarely used with a perpetual inventory system.

The lower of cost or market is a method of inventory valuation.

Assume that three identical units of merchandise are purchased during October, as follows: Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method.

Under the _________ inventory method, accounting records maintain a continuously updated inventory value.

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

All of the following are reasons to use an estimated method of costing inventory except:

Three identical units of Item Magnesium XP are purchased during May, as shown below. Assume that two units are sold on May 23 for $313. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.

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