Question 1

The consistency concept:

Accepted Answer

A) Prescribes that a company use the same accounting method period after period except when a change of method will improve financial reporting. 
B) Requires a company to use a single method of inventory valuation for all categories of inventory. 
C) Requires that all companies in the same industry use the same method of inventory valuation. 
D) Is also called the full disclosure concept. 
E) Is also called the matching concept. 
A) Prescribes that a company use the same accounting method period after period except when a change of method will improve financial reporting. 
B) Requires a company to use a single method of inventory valuation for all categories of inventory. 
C) Requires that all companies in the same industry use the same method of inventory valuation. 
D) Is also called the full disclosure concept. 
E) Is also called the matching concept.

Question 2

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Accepted Answer

A) True 
 B)False

Question 3

Monthly or quarterly statements are called interim statements because they are prepared for periods of less than one year.

Accepted Answer

A) True 
 B)False

Question 4

The assignment of costs to cost of goods sold and ending inventory using specific identification is the same for both the perpetual and periodic systems.

Accepted Answer

A) True 
 B)False

Question 5

A company made the following merchandise purchases and sales during the month of July:   There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 6

Given the following information, determine the cost of ending inventory at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.

Accepted Answer

A) $51.75 
B) $83.22 
C) $41.30 
D) $94.00 
E) $50.75 
A) $51.75 
B) $83.22 
C) $41.30 
D) $94.00 
E) $50.75

Question 7

LIFO assumes that inventory costs flow in the order they were incurred.

Accepted Answer

A) True 
 B)False

Question 8

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 9

The cost of goods purchased will differ under the four inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

Accepted Answer

A) True 
 B)False

Question 10

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

Accepted Answer

A) $304 
B) $296 
C) $288 
D) $280 
E) $276 
A) $304 
B) $296 
C) $288 
D) $280 
E) $276

Question 11

As part of its year end adjusting process, Jasper Industries has compared the $802,400 original cost of its inventory to the current replacement cost of $797,980 and determined that it must make a lower-of-cost-or-market adjustment. The journal entry for this adjustment should be:

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 12

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

Accepted Answer

A) True 
 B)False

Question 13

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

Accepted Answer

A) True 
 B)False

Question 14

An overstated beginning inventory will ______________ cost of goods sold and _____________ net income in that year.

Accepted Answer

overstate;

Question 15

A company had 260 units of inventory at a cost of $152 each on January 1. On June 5, the company purchased 460 units for $172 each. On November 10, the company purchased 160 units for $212 each. On December 15, the company sold 520 units. Given this information, determine the cost of the 520 units sold using the weighted average periodic inventory method. (Do not round your intermediate calculations; round the final answer to nearest dollar amount.)

Accepted Answer

A) $67,920 
B) $69,920 
C) $90,149 
D) $92,149 
E) $152,557 
A) $67,920 
B) $69,920 
C) $90,149 
D) $92,149 
E) $152,557

Question 16

The inventory valuation method that results in the lowest taxable income in a period of rising costs is:

Accepted Answer

A) LIFO method 
B) FIFO method 
C) Weighted average cost method 
D) Specific identification method 
E) Gross profit method 
A) LIFO method 
B) FIFO method 
C) Weighted average cost method 
D) Specific identification method 
E) Gross profit method

Question 17

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12, they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory on August 15 after the sale?

Accepted Answer

A) $140 
B) $160 
C) $210 
D) $380 
E) $590 
A) $140 
B) $160 
C) $210 
D) $380 
E) $590

Question 18

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

Accepted Answer

The retail method is generally used to p

The consistency concept:

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Monthly or quarterly statements are called interim statements because they are prepared for periods of less than one year.

The assignment of costs to cost of goods sold and ending inventory using specific identification is the same for both the perpetual and periodic systems.

A company made the following merchandise purchases and sales during the month of July: There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

LIFO assumes that inventory costs flow in the order they were incurred.

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

The cost of goods purchased will differ under the four inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

As part of its year end adjusting process, Jasper Industries has compared the $802,400 original cost of its inventory to the current replacement cost of $797,980 and determined that it must make a lower-of-cost-or-market adjustment. The journal entry for this adjustment should be:

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

An overstated beginning inventory will __ cost of goods sold and _ net income in that year.

The inventory valuation method that results in the lowest taxable income in a period of rising costs is:

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

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 5: Reporting and Analyzing Inventories

The consistency concept:

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Monthly or quarterly statements are called interim statements because they are prepared for periods of less than one year.

The assignment of costs to cost of goods sold and ending inventory using specific identification is the same for both the perpetual and periodic systems.

A company made the following merchandise purchases and sales during the month of July: There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

LIFO assumes that inventory costs flow in the order they were incurred.

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

The cost of goods purchased will differ under the four inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

As part of its year end adjusting process, Jasper Industries has compared the $802,400 original cost of its inventory to the current replacement cost of $797,980 and determined that it must make a lower-of-cost-or-market adjustment. The journal entry for this adjustment should be:

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

An overstated beginning inventory will ______________ cost of goods sold and _____________ net income in that year.

The inventory valuation method that results in the lowest taxable income in a period of rising costs is:

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

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

An overstated beginning inventory will __ cost of goods sold and _ net income in that year.