Question 1

What was the cost of goods sold for the month?

Accepted Answer

A)  $129,000. 
B)  $171,000. 
C)  $235,000. 
D)  $304,750. 
A)  $129,000. 
B)  $171,000. 
C)  $235,000. 
D)  $304,750.

Question 2

Retail method
Omega Signs uses the retail method to estimate ending inventory in its monthly financial statements. The following information is available for the month ended April 30:
  
Using the retail method:

Accepted Answer

The answer of Retail method
Omega Signs uses the retail method...

Question 3

On Saturday, June 30, BD Pool Supplies sold merchandise to

Accepted Answer

A)  Overstated by $6,400. 
B)  Overstated by $5,300. 
C)  Overstated by $1,100. 
D)  Not affected, but the net income for July is understated. 
E)  Luang on account. The sales price was $6,400, and the cost of goods sold was $5,300. The sales revenue was recorded immediately, but the entry recording the cost of goods sold was dated Monday, July 2. As a result, net income for June was: 
A)  Overstated by $6,400. 
B)  Overstated by $5,300. 
C)  Overstated by $1,100. 
D)  Not affected, but the net income for July is understated. 
E)  Luang on account. The sales price was $6,400, and the cost of goods sold was $5,300. The sales revenue was recorded immediately, but the entry recording the cost of goods sold was dated Monday, July 2. As a result, net income for June was:

Question 4

Estimate the cost of the May 31 inventory using the retail method.

Accepted Answer

A)  $116,964. 
B)  $137,400. 
C)  $150,425. 
D)  $204,000. 
A)  $116,964. 
B)  $137,400. 
C)  $150,425. 
D)  $204,000.

Question 5

The lower of cost or market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on:

Accepted Answer

A)  Individual inventory items. 
B)  Major inventory categories. 
C)  The entire inventory. 
D)  Any of the three: individual inventory items, major inventory categories, or the entire inventory. 
A)  Individual inventory items. 
B)  Major inventory categories. 
C)  The entire inventory. 
D)  Any of the three: individual inventory items, major inventory categories, or the entire inventory.

Question 6

In which of these inventory cost flow assumptions is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?

Accepted Answer

A)  LIFO. 
B)  FIFO. 
C)  Specific identification. 
D)  Weighted average. 
A)  LIFO. 
B)  FIFO. 
C)  Specific identification. 
D)  Weighted average.

Question 7

If the ending inventory is overstated in the current year:

Accepted Answer

A)  Net income will be understated in the current year. 
B)  Next year's beginning inventory will also be overstated. 
C)  Next year's net income will be overstated. 
D)  Next year's beginning inventory will be understated. 
A)  Net income will be understated in the current year. 
B)  Next year's beginning inventory will also be overstated. 
C)  Next year's net income will be overstated. 
D)  Next year's beginning inventory will be understated.

Question 8

Assume that Castle TV, Inc. uses the LIFO flow assumption. The cost of the 200 units in the year-end inventory is:

Accepted Answer

A)  $37,000. 
B)  $46,000. 
C)  $41,500. 
D)  $83,000. 
A)  $37,000. 
B)  $46,000. 
C)  $41,500. 
D)  $83,000.

Question 9

What were the gross sales for the month?

Accepted Answer

A)  $129,000. 
B)  $171,000. 
C)  $300,000. 
D)  $304,750. 
A)  $129,000. 
B)  $171,000. 
C)  $300,000. 
D)  $304,750.

Question 10

Effects of errors in inventory valuation
Show the effect, if any, of each of the following errors on ending inventory, cost of goods sold, gross profit on sales, and net income by placing the appropriate symbol in each column. In use is the periodic inventory system. Use the following symbols: O = Overstated, U = Understated, NE = No Effect.

Accepted Answer

The answer of Effects of errors in inventory valuation
Show the...

Question 11

Assuming that Beech Soda uses the FIFO flow assumption, the cost of goods sold to be recorded at January 14 is:

Accepted Answer

A)  $278. 
B)  $268. 
C)  $393. 
D)  $673. 
A)  $278. 
B)  $268. 
C)  $393. 
D)  $673.

Question 12

Which of the following results in the inventory being stated at the most current acquisition costs?

Accepted Answer

A)  Specific identification. 
B)  LIFO. 
C)  FIFO. 
D)  Average cost. 
A)  Specific identification. 
B)  LIFO. 
C)  FIFO. 
D)  Average cost.

Question 13

The principle of consistency prohibits a company from changing an inventory valuation method once one is selected.

Accepted Answer

A) True 
 B)False

Question 14

Merchandise that has been sold but not yet recorded in the accounts should not be included in the physical inventory at year-end.

Accepted Answer

A) True 
 B)False

Question 15

The lower-of-cost-or-market rule:

Accepted Answer

A)  Is used in conjunction with the other inventory cost flow assumptions. 
B)  Cannot be used if LIFO or FIFO are also used. 
C)  Can be used in conjunction with LIFO but not FIFO. 
D)  Can only be used with the specific identification cost flow assumption. 
A)  Is used in conjunction with the other inventory cost flow assumptions. 
B)  Cannot be used if LIFO or FIFO are also used. 
C)  Can be used in conjunction with LIFO but not FIFO. 
D)  Can only be used with the specific identification cost flow assumption.

Question 16

Which of the following inventory valuation methods is only an estimate of actual costs?

Accepted Answer

A)  The retail method. 
B)  The gross profit method. 
C)  Both retail and gross profit methods are only estimations. 
D)  Neither the retail nor the gross profit methods are estimations. 
A)  The retail method. 
B)  The gross profit method. 
C)  Both retail and gross profit methods are only estimations. 
D)  Neither the retail nor the gross profit methods are estimations.

Question 17

The inventory turnover rate is equal to the average inventory divided by the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

In a periodic inventory system, recording a sale on account involves debiting which of the following accounts?

Accepted Answer

A)  Only Accounts Receivable. 
B)  Accounts Receivable and Inventory. 
C)  Accounts Receivable and Cost of Goods Sold. 
D)  Accounts Receivable, Cost of Goods Sold, and Inventory. 
A)  Only Accounts Receivable. 
B)  Accounts Receivable and Inventory. 
C)  Accounts Receivable and Cost of Goods Sold. 
D)  Accounts Receivable, Cost of Goods Sold, and Inventory.

Question 19

Compute the cost of goods sold for the current year based on the FIFO method of inventory valuation.

Accepted Answer

A)  $12,500. 
B)  $29,175. 
C)  $10,975. 
D)  $27,650. 
A)  $12,500. 
B)  $29,175. 
C)  $10,975. 
D)  $27,650.

Question 20

Assume that the replacement cost of this monitor at year-end is $220 per unit. Using the FIFO flow assumption and the lower-of-cost-or-market rule, Castle TV should write down the carrying value of this inventory by:

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000. 
A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000.

Exam 8: Inventories and the Cost of Goods Sold

What was the cost of goods sold for the month?

Retail method Omega Signs uses the retail method to estimate ending inventory in its monthly financial statements. The following information is available for the month ended April 30: Using the retail method:

On Saturday, June 30, BD Pool Supplies sold merchandise to

Estimate the cost of the May 31 inventory using the retail method.

The lower of cost or market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on:

In which of these inventory cost flow assumptions is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?

If the ending inventory is overstated in the current year:

Assume that Castle TV, Inc. uses the LIFO flow assumption. The cost of the 200 units in the year-end inventory is:

What were the gross sales for the month?

Assuming that Beech Soda uses the FIFO flow assumption, the cost of goods sold to be recorded at January 14 is:

Which of the following results in the inventory being stated at the most current acquisition costs?

The principle of consistency prohibits a company from changing an inventory valuation method once one is selected.

Merchandise that has been sold but not yet recorded in the accounts should not be included in the physical inventory at year-end.

The lower-of-cost-or-market rule:

Which of the following inventory valuation methods is only an estimate of actual costs?

The inventory turnover rate is equal to the average inventory divided by the cost of goods sold.

In a periodic inventory system, recording a sale on account involves debiting which of the following accounts?

Compute the cost of goods sold for the current year based on the FIFO method of inventory valuation.

Assume that the replacement cost of this monitor at year-end is $220 per unit. Using the FIFO flow assumption and the lower-of-cost-or-market rule, Castle TV should write down the carrying value of this inventory by:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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