Question 1

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO,assuming a tax rate of 40%,how much tax savings resulted from using LIFO?

Accepted Answer

A) There would be no tax savings. 
B) $ 800 
C) $ 1,200 
D) $ 2,000 
A) There would be no tax savings. 
B) $ 800 
C) $ 1,200 
D) $ 2,000

Question 2

When the market value of inventory items has declined below its cost,which method would be the most appropriate in complying with GAAP?

Accepted Answer

A) Gross Profit 
B) LIFO 
C) Lower of Cost or market 
D) Retail 
A) Gross Profit 
B) LIFO 
C) Lower of Cost or market 
D) Retail

Question 3

The lower of cost or market (LCM)rule violates the historical cost principle.

Accepted Answer

A) True 
 B)False

Question 4

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result,this will cause:

Accepted Answer

A) an overstatement of inventory on the year-end balance sheet. 
B) an understatement of gross profit in the following year. 
C) an overstatement of retained earnings at the end of the year. 
D) an overstatement of cost of goods sold for the current year. 
A) an overstatement of inventory on the year-end balance sheet. 
B) an understatement of gross profit in the following year. 
C) an overstatement of retained earnings at the end of the year. 
D) an overstatement of cost of goods sold for the current year.

Question 5

Which one of the following ratios is a common analytical tool used by merchandise corporations,but not by service corporations?

Accepted Answer

A) Gross profit ratio 
B) Earnings per share 
C) Current ratio 
D) Profit margin 
A) Gross profit ratio 
B) Earnings per share 
C) Current ratio 
D) Profit margin

Question 6

Klein's Shoe Company uses a perpetual inventory system.The beginning balance in its inventory account is $1,500 and the ending balance is $1,000.Cost of goods sold is $6,500.What was the amount of inventory purchased during the year?

Accepted Answer

A) $ 500 
B) $6,000 
C) $7,000 
D) $7,500 
A) $ 500 
B) $6,000 
C) $7,000 
D) $7,500

Question 7

Flores Department Store currently uses the periodic inventory system.
REQUIRED: Explain what the advantages would be to Flores if it uses the perpetual inventory system.Assume that Flores can use a computer system which is linked to its cash registers and that all products have bar codes that can be read by bar code readers attached to the cash registers.

Accepted Answer

If Flores uses the perpetual system,it w

Question 8

If ending inventory is overstated,then net income is overstated as well.

Accepted Answer

A) True 
 B)False

Question 9

Readers.com uses a perpetual inventory system.   If Readers.com uses the moving average method,how much is cost of goods sold for the units sold on February 15?

Accepted Answer

A) $245 
B) $255 
C) $260 
D) $270 
A) $245 
B) $255 
C) $260 
D) $270

Question 10

Which one of the following statements is true?

Accepted Answer

A) The flow of inventory costs should match the physical flow of the merchandise. 
B) Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold 
C) Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold. 
D) Alternative inventory cost flow assumptions have the same effect on the amount of net income reported. 
A) The flow of inventory costs should match the physical flow of the merchandise. 
B) Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold 
C) Accountants have developed methods which make assumptions concerning how costs should be assigned to inventory and cost of goods sold. 
D) Alternative inventory cost flow assumptions have the same effect on the amount of net income reported.

Question 11

Eversoll Inc.uses the periodic inventory system.   If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase,Eversoll's cost of goods sold for June under the specific identification method would be

Accepted Answer

A) $2,263.00 
B) $2.373.00 
C) $2,945.00 
D) $3,626.50 
A) $2,263.00 
B) $2.373.00 
C) $2,945.00 
D) $3,626.50

Question 12

Blenham,Inc.sells merchandise on credit.If a customer pays its balance due within the discount period,what is the effect of the payment on Blenham's accounting equation?

Accepted Answer

A) Assets and stockholders' equity decrease 
B) Assets and stockholders' equity increase 
C) Assets decrease and liabilities increase 
D) Stockholders' equity decreases and liabilities increase 
A) Assets and stockholders' equity decrease 
B) Assets and stockholders' equity increase 
C) Assets decrease and liabilities increase 
D) Stockholders' equity decreases and liabilities increase

Question 13

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid reason for a change in methods.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following terms best describes "Cost of goods available for sale"?

Accepted Answer

A) Cost of goods available for sale is an expense account. 
B) Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. 
C) Cost of goods available for sale is subtracted from net sales to arrive at the gross margin 
D) Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year 
A) Cost of goods available for sale is an expense account. 
B) Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. 
C) Cost of goods available for sale is subtracted from net sales to arrive at the gross margin 
D) Cost of goods available for sale is allocated into cost of goods on hand and cost of goods sold at the end of the fiscal year

Question 15

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Accepted Answer

A) As a direct reduction to the Purchases account. 
B) In contra accounts to the Purchases account. 
C) As operating expenses. 
D) As miscellaneous expenses. 
A) As a direct reduction to the Purchases account. 
B) In contra accounts to the Purchases account. 
C) As operating expenses. 
D) As miscellaneous expenses.

Question 16

Under the ____________________ method,the amount of cash paid to suppliers of inventory is shown as a deduction in the operating activities category of the cash flow statement.

Accepted Answer

The answer of Under the ____________________ method,the amount of cash...

Question 17

The understatement of ending inventories in one period leads to a(n)____________________ of cost of goods sold expense in the same period.

Accepted Answer

The answer of The understatement of ending inventories in one...

Question 18

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

Accepted Answer

A) matching principle 
B) full disclosure principle 
C) revenue realization principle 
D) historical cost principle 
A) matching principle 
B) full disclosure principle 
C) revenue realization principle 
D) historical cost principle

Question 19

The amount recognized on the Income Statement as the cost of inventory will be recognized as a(n)_________________________.

Accepted Answer

cost of go

Question 20

Chen's Department Store Chen's Department Store is a merchandising company that uses the periodic inventory system.Selected account balances are listed below:
  Refer to the account information for Chen's Department Store.
Calculate Chen's net sales.

Accepted Answer

A) $162,000 
B) $167,000 
C) $170,000 
D) $175,000 
A) $162,000 
B) $167,000 
C) $170,000 
D) $175,000

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO,assuming a tax rate of 40%,how much tax savings resulted from using LIFO?

When the market value of inventory items has declined below its cost,which method would be the most appropriate in complying with GAAP?

The lower of cost or market (LCM)rule violates the historical cost principle.

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result,this will cause:

Which one of the following ratios is a common analytical tool used by merchandise corporations,but not by service corporations?

Klein's Shoe Company uses a perpetual inventory system.The beginning balance in its inventory account is $1,500 and the ending balance is $1,000.Cost of goods sold is $6,500.What was the amount of inventory purchased during the year?

If ending inventory is overstated,then net income is overstated as well.

Readers.com uses a perpetual inventory system. If Readers.com uses the moving average method,how much is cost of goods sold for the units sold on February 15?

Which one of the following statements is true?

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase,Eversoll's cost of goods sold for June under the specific identification method would be

Blenham,Inc.sells merchandise on credit.If a customer pays its balance due within the discount period,what is the effect of the payment on Blenham's accounting equation?

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid reason for a change in methods.

Which of the following terms best describes "Cost of goods available for sale"?

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Under the ____________________ method,the amount of cash paid to suppliers of inventory is shown as a deduction in the operating activities category of the cash flow statement.

The understatement of ending inventories in one period leads to a(n)____________________ of cost of goods sold expense in the same period.

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

The amount recognized on the Income Statement as the cost of inventory will be recognized as a(n)_________________________.

Chen's Department Store Chen's Department Store is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: Refer to the account information for Chen's Department Store. Calculate Chen's net sales.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, plant, and Equipment, and Intangibles

Current Liabilities, contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

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Exam 5: Inventories and Cost of Goods Sold

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO,assuming a tax rate of 40%,how much tax savings resulted from using LIFO?

When the market value of inventory items has declined below its cost,which method would be the most appropriate in complying with GAAP?

The lower of cost or market (LCM)rule violates the historical cost principle.

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result,this will cause:

Which one of the following ratios is a common analytical tool used by merchandise corporations,but not by service corporations?

Klein's Shoe Company uses a perpetual inventory system.The beginning balance in its inventory account is $1,500 and the ending balance is $1,000.Cost of goods sold is $6,500.What was the amount of inventory purchased during the year?

If ending inventory is overstated,then net income is overstated as well.

Readers.com uses a perpetual inventory system. If Readers.com uses the moving average method,how much is cost of goods sold for the units sold on February 15?

Which one of the following statements is true?

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase,Eversoll's cost of goods sold for June under the specific identification method would be

Blenham,Inc.sells merchandise on credit.If a customer pays its balance due within the discount period,what is the effect of the payment on Blenham's accounting equation?

Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid reason for a change in methods.

Which of the following terms best describes "Cost of goods available for sale"?

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Under the ____________________ method,the amount of cash paid to suppliers of inventory is shown as a deduction in the operating activities category of the cash flow statement.

The understatement of ending inventories in one period leads to a(n)____________________ of cost of goods sold expense in the same period.

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

The amount recognized on the Income Statement as the cost of inventory will be recognized as a(n)_________________________.

Chen's Department Store Chen's Department Store is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: Refer to the account information for Chen's Department Store. Calculate Chen's net sales.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, plant, and Equipment, and Intangibles

Current Liabilities, contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters