Question 1

Explain how to calculate the gross profit ratio and interpret its meaning.

Accepted Answer

The gross profit ratio measure

Question 2

Explain the difference between the retail method and gross profit method for valuing inventory.

Accepted Answer

The retail method is generally used to p

Question 3

Generally accepted accounting principles require that the inventory of a company be reported at:

Accepted Answer

A)  Net realizable value. 
B)  Historical cost. 
C)  Lower of cost and net realizable value. 
D)  Replacement cost. 
E)  Purchase price. 
A)  Net realizable value. 
B)  Historical cost. 
C)  Lower of cost and net realizable value. 
D)  Replacement cost. 
E)  Purchase price.

Question 4

During January,a company that uses a perpetual inventory system had beginning inventory,purchases,and sales as follows:   Prepare a schedule to show the cost of goods sold and ending inventory using the FIFO cost flow assumption.

Accepted Answer

The answer of During January,a company that uses a perpetual...

Question 5

The consistency principle:

Accepted Answer

A)  Requires a company to use the same accounting methods period after period. 
B)  Requires a company to use one cost flow assumption exclusively. 
C)  Allows a company to change its cost flow assumption period after period in order to maximize net income. 
D)  Is also called the matching principle. 
E)  Allows a company to change its cost flow assumption period after period in order to minimize income taxes. 
A)  Requires a company to use the same accounting methods period after period. 
B)  Requires a company to use one cost flow assumption exclusively. 
C)  Allows a company to change its cost flow assumption period after period in order to maximize net income. 
D)  Is also called the matching principle. 
E)  Allows a company to change its cost flow assumption period after period in order to minimize income taxes.

Question 6

During a period of steadily rising prices,which inventory cost flow assumption results in reporting the highest inventory value?

Accepted Answer

A)  Specific identification. 
B)  Average cost. 
C)  Moving weighted average. 
D)  FIFO. 
E)  Any of the above. 
A)  Specific identification. 
B)  Average cost. 
C)  Moving weighted average. 
D)  FIFO. 
E)  Any of the above.

Question 7

The expected sales price of an item minus the cost of making the sale is called: ______________.

Accepted Answer

Net realiz

Question 8

If your inventory is destroyed by fire you can estimate the amount of inventory destroyed if you know: beginning inventory,purchases,net sales,and gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 9

An inventory error carried forward into the next period causes misstatements in:

Accepted Answer

A)  Cost of goods sold. 
B)  Gross profit. 
C)  Net income. 
D)  Gross profit and net income. 
E)  All of these answers are correct. 
A)  Cost of goods sold. 
B)  Gross profit. 
C)  Net income. 
D)  Gross profit and net income. 
E)  All of these answers are correct.

Question 10

A company sells a single product and had the following beginning inventory,purchases,and sales during March.   Calculate the cost of the ending inventory under each assumption below:

Accepted Answer

(1)Periodi

Question 11

A company that has operated with a 30% average gross profit ratio for a number of years had $110,000 in net sales during the first quarter of this year.If it began the quarter with $28,000 in inventory at cost and purchased $75,000 of merchandise during the quarter,its estimated ending inventory by the gross profit method is:

Accepted Answer

A)  $20,000. 
B)  $21,000. 
C)  $24,000. 
D)  $25,000. 
E)  $26,000. 
A)  $20,000. 
B)  $21,000. 
C)  $24,000. 
D)  $25,000. 
E)  $26,000.

Question 12

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Trekking Company's cost of goods sold was $15,550.Its average merchandise inventory was $4,575.Its merchandise turnover was 3.4.

Accepted Answer

A) True 
 B)False

Question 14

The retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Accepted Answer

A) True 
 B)False

Question 15

Explain why the lower of cost and net realizable value rule is used to value inventory.

Accepted Answer

The principle of faithful representation

Question 16

A company's store was destroyed by a fire on February 10.The only information that could be salvaged included the following:
(1)Inventory,January 1: $34,000
(2)Purchases: $118,000
(3)Sales: $140,000
The company's gross profit rate was 30%.Calculate the estimated value of the destroyed inventory.

Accepted Answer

The answer of A company's store was destroyed by a...

Question 17

For the current month,Brixell Company had net sales of $12,000.Brixell typically achieves a gross profit of 15%.Cost of goods sold under the gross profit method would be:

Accepted Answer

A)  $6,000. 
B)  $7,000. 
C)  $8,000. 
D)  $10,200. 
E)  $16,000. 
A)  $6,000. 
B)  $7,000. 
C)  $8,000. 
D)  $10,200. 
E)  $16,000.

Question 18

The gross profit ratio measures how much of each dollar of gross sales is gross profit.

Accepted Answer

A) True 
 B)False

Question 19

Annie's Attic reported the following data:   Instructions:
(1)Calculate the days' sales in inventory for each year,rounded to the nearest full day.
(2)Comment on the trend in inventory management.

Accepted Answer

The answer of Annie's Attic reported the following data: ...

Question 20

The consistency principle allows companies to use different inventory valuation methods period to period as long as the changes are fully disclosed.

Accepted Answer

A) True 
 B)False

Explain how to calculate the gross profit ratio and interpret its meaning.

Explain the difference between the retail method and gross profit method for valuing inventory.

Generally accepted accounting principles require that the inventory of a company be reported at:

During January,a company that uses a perpetual inventory system had beginning inventory,purchases,and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the FIFO cost flow assumption.

The consistency principle:

During a period of steadily rising prices,which inventory cost flow assumption results in reporting the highest inventory value?

The expected sales price of an item minus the cost of making the sale is called: ______________.

If your inventory is destroyed by fire you can estimate the amount of inventory destroyed if you know: beginning inventory,purchases,net sales,and gross profit ratio.

An inventory error carried forward into the next period causes misstatements in:

A company sells a single product and had the following beginning inventory,purchases,and sales during March. Calculate the cost of the ending inventory under each assumption below:

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

Trekking Company's cost of goods sold was $15,550.Its average merchandise inventory was $4,575.Its merchandise turnover was 3.4.

The retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Explain why the lower of cost and net realizable value rule is used to value inventory.

A company's store was destroyed by a fire on February 10.The only information that could be salvaged included the following: (1)Inventory,January 1: $34,000 (2)Purchases: $118,000 (3)Sales: $140,000 The company's gross profit rate was 30%.Calculate the estimated value of the destroyed inventory.

For the current month,Brixell Company had net sales of $12,000.Brixell typically achieves a gross profit of 15%.Cost of goods sold under the gross profit method would be:

The gross profit ratio measures how much of each dollar of gross sales is gross profit.

Annie's Attic reported the following data: Instructions: (1)Calculate the days' sales in inventory for each year,rounded to the nearest full day. (2)Comment on the trend in inventory management.

The consistency principle allows companies to use different inventory valuation methods period to period as long as the changes are fully disclosed.

Accounting in Business

Analyzing and Reporting Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Accounting Information Systems

Internal Control and Cash

Receivables

Filters

Exam 6: Merchandise Inventory and Cost of Sales

Explain how to calculate the gross profit ratio and interpret its meaning.

Explain the difference between the retail method and gross profit method for valuing inventory.

Generally accepted accounting principles require that the inventory of a company be reported at:

During January,a company that uses a perpetual inventory system had beginning inventory,purchases,and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the FIFO cost flow assumption.

The consistency principle:

During a period of steadily rising prices,which inventory cost flow assumption results in reporting the highest inventory value?

The expected sales price of an item minus the cost of making the sale is called: ______________.

If your inventory is destroyed by fire you can estimate the amount of inventory destroyed if you know: beginning inventory,purchases,net sales,and gross profit ratio.

An inventory error carried forward into the next period causes misstatements in:

A company sells a single product and had the following beginning inventory,purchases,and sales during March. Calculate the cost of the ending inventory under each assumption below:

The choice of an inventory cost flow assumption can have a dramatic impact on amounts in financial statements.

Trekking Company's cost of goods sold was $15,550.Its average merchandise inventory was $4,575.Its merchandise turnover was 3.4.

The retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Explain why the lower of cost and net realizable value rule is used to value inventory.

A company's store was destroyed by a fire on February 10.The only information that could be salvaged included the following: (1)Inventory,January 1: $34,000 (2)Purchases: $118,000 (3)Sales: $140,000 The company's gross profit rate was 30%.Calculate the estimated value of the destroyed inventory.

For the current month,Brixell Company had net sales of $12,000.Brixell typically achieves a gross profit of 15%.Cost of goods sold under the gross profit method would be:

The gross profit ratio measures how much of each dollar of gross sales is gross profit.

Annie's Attic reported the following data: Instructions: (1)Calculate the days' sales in inventory for each year,rounded to the nearest full day. (2)Comment on the trend in inventory management.

The consistency principle allows companies to use different inventory valuation methods period to period as long as the changes are fully disclosed.

Accounting in Business

Analyzing and Reporting Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Accounting Information Systems

Internal Control and Cash

Receivables

Filters