Question 1

Which of the following statements is true?

Accepted Answer

A)  A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting. 
B)  A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement. 
C)  Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO. 
D)  LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes. 
A)  A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting. 
B)  A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement. 
C)  Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO. 
D)  LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes.

Question 2

Assume that a company records purchases net of discount.If the company bought merchandise valued at $15,000 on credit terms 3/15,net 30,the entry to record a payment for half of the purchase within the discount period would include a debit to

Accepted Answer

A)  Accounts Payable for $7,275 and a credit to Cash for $7,275 
B)  Accounts Payable for $7,500 and a credit to Cash for $7,500 
C)  Accounts Payable for $7,275 and to Interest Expense for $250,and a credit to Cash for $7,500 
D)  Accounts Payable for $7,275 and to Interest Revenue for $250 and a credit to Cash for $7,500. 
A)  Accounts Payable for $7,275 and a credit to Cash for $7,275 
B)  Accounts Payable for $7,500 and a credit to Cash for $7,500 
C)  Accounts Payable for $7,275 and to Interest Expense for $250,and a credit to Cash for $7,500 
D)  Accounts Payable for $7,275 and to Interest Revenue for $250 and a credit to Cash for $7,500.

Question 3

Cost of goods sold is equal to

Accepted Answer

A)  the cost of inventory on hand at the end of a period plus net purchases minus the cost of inventory on hand at the beginning of a period. 
B)  the cost of inventory on hand at the beginning of a period minus net purchases plus the cost of inventory on hand at the end of a period. 
C)  the cost of inventory on hand at the beginning of a period plus net sales minus the cost of inventory on hand at the end of a period. 
D)  the cost of inventory on hand at the beginning of a period plus net purchases minus the cost of inventory on hand at the end of a period. 
A)  the cost of inventory on hand at the end of a period plus net purchases minus the cost of inventory on hand at the beginning of a period. 
B)  the cost of inventory on hand at the beginning of a period minus net purchases plus the cost of inventory on hand at the end of a period. 
C)  the cost of inventory on hand at the beginning of a period plus net sales minus the cost of inventory on hand at the end of a period. 
D)  the cost of inventory on hand at the beginning of a period plus net purchases minus the cost of inventory on hand at the end of a period.

Question 4

The LIFO inventory cost flow method may be applied to which of the following inventory systems? Periodic Perpetual

Accepted Answer

A)  No No 
B)  No Yes 
C)  Yes Yes 
D)  Yes No 
A)  No No 
B)  No Yes 
C)  Yes Yes 
D)  Yes No

Question 5

Kendall Company reported the following net income amounts:
   In 2017,the company discovered errors that had been made in computing the ending inventories for 2014 and 2015,as follows:
   Compute the correct net incomes for (1)2014, (2)2015,and (3)2016.

Accepted Answer

The answer of Kendall Company reported the following net income...

Question 6

The following information is available for the Crystal Company for the three months ended June 30 of this year:   The gross margin was 25 percent of sales.What is the estimated inventory balance at June 30?

Accepted Answer

A)  $880,000 
B)  $933,000 
C)  $1,200,000 
D)  $1,500,000 
A)  $880,000 
B)  $933,000 
C)  $1,200,000 
D)  $1,500,000

Question 7

The following data are available for Lion's Share Company:
   The company has experienced a temporary LIFO liquidation by not maintaining the base year inventory of 20,000 units.The company uses a perpetual inventory system.
Prepare the entries to account for the temporary liquidation and the replacement of the liquidated units assuming that 8,000 units will be replaced at $1.60 per unit

Accepted Answer

The answer of The following data are available for Lion's...

Question 8

May Retailers purchased merchandise with a list price of $100,000,subject to a trade discount of 20 percent and credit terms of 2/10,n/30.At what amount should May record the cost of this merchandise if the gross method is used?

Accepted Answer

A)  $100,000 
B)  $78,400 
C)  $98,000 
D)  $80,000 
A)  $100,000 
B)  $78,400 
C)  $98,000 
D)  $80,000

Question 9

Budson Company needs an estimate of its ending inventory balance.The following information is available:   Given this information,when using the gross margin estimation method,ending inventory is approximately

Accepted Answer

A)  $1,000. 
B)  $9,000. 
C)  $19,000. 
D)  $11,650. 
A)  $1,000. 
B)  $9,000. 
C)  $19,000. 
D)  $11,650.

Question 10

From the following information,determine the amount of freight-in.

Accepted Answer

A)  $1,000 
B)  $2,000 
C)  $3,000 
D)  $4,000 
A)  $1,000 
B)  $2,000 
C)  $3,000 
D)  $4,000

Question 11

On August 1,Patron Company recorded purchases of inventory of $80,000 and $100,000 under credit terms of 2/15,net 30.The payment due on the $80,000 purchase was remitted on August 14.The payment due on the $100,000 purchase was remitted on August 29.Under the net method and the gross method,these purchases should be included at what respective net amounts in the determination of cost of goods available for sale? Net Method Gross Method

Accepted Answer

A)  $178,400 $176,400 
B)  $176,400 $176,400 
C)  $176,400 $178,400 
D)  $180,000 $176,400 
A)  $178,400 $176,400 
B)  $176,400 $176,400 
C)  $176,400 $178,400 
D)  $180,000 $176,400

Question 12

The skeleton of the basic retail inventory calculation is presented below:
   Required:
Explain how the following items would affect the computation of ending inventory using the retail inventory method:

Accepted Answer

The answer of The skeleton of the basic retail inventory...

Question 13

Digipro Inc.is a wholesaler of photography equipment.The activity for the VTC cameras during July is shown below:
  
-Following are the account balances from Canarsie Company's income statement:   Given this information,the cost of goods sold during 2014 is

Accepted Answer

A)  $51,000. 
B)  $46,000. 
C)  $56,000. 
D)  $66,000. 
A)  $51,000. 
B)  $46,000. 
C)  $56,000. 
D)  $66,000.

Question 14

Paper Depot is a wholesaler of office supplies.The activity for Model III calculators during August is shown below:
  
-See information for Paper Depot above.If Paper Depot uses a FIFO cost perpetual inventory system,the ending inventory of Model III calculators at August 31 is reported as

Accepted Answer

A)  $150,080. 
B)  $150,160. 
C)  $152,232. 
D)  $152,960. 
A)  $150,080. 
B)  $150,160. 
C)  $152,232. 
D)  $152,960.

Question 15

Tonale Company began operations in 2014.During the first two years of operations,Tonale made undiscovered errors in taking its year-end inventories that overstated 2014 ending inventory by $50,000 and overstated 2015 ending inventory by $40,000.The combined effect of these errors on reported income is 2014 2015 2016

Accepted Answer

A)  overstated $50,000 overstated $90,000 understated $40,000 
B)  overstated $50,000 overstated $40,000 not affected 
C)  understated $50,000 understated $90,000 not affected 
D)  overstated $50,000 understated $10,000 understated $40,000 
A)  overstated $50,000 overstated $90,000 understated $40,000 
B)  overstated $50,000 overstated $40,000 not affected 
C)  understated $50,000 understated $90,000 not affected 
D)  overstated $50,000 understated $10,000 understated $40,000

Question 16

When valuing raw materials inventory at lower of cost or market,what is the general meaning of the term "market"?

Accepted Answer

A)  Net realizable value 
B)  Net realizable value less a normal profit margin 
C)  Current replacement cost 
D)  Discounted present value 
A)  Net realizable value 
B)  Net realizable value less a normal profit margin 
C)  Current replacement cost 
D)  Discounted present value

Question 17

Knitness Menswear,Inc.maintains a markup of 60 percent based on cost.The company's selling and administrative expenses average 30 percent of sales.Annual sales were $1,440,000.Petersen's cost of goods sold and operating profit for the year are Cost of Operating
Goods Sold Profit

Accepted Answer

A)  $864,000 $144,000 
B)  $864,000 $432,000 
C)  $900,000 $108,000 
D)  $900,000 $432,000 
A)  $864,000 $144,000 
B)  $864,000 $432,000 
C)  $900,000 $108,000 
D)  $900,000 $432,000

Question 18

If a company experiences a liquidation of a LIFO inventory layer in the second quarter that is expected to be restored by the end of the annual financial reporting period,the company should

Accepted Answer

A)  treat the layer as if it were liquidated and include in cost of goods sold the expected replacement cost of the inventory sold. 
B)  deplete the LIFO layer as if the interim period were an annual period. 
C)  change to an alternative inventory cost method,such as FIFO,so that the of LIFO liquidation is not encountered. 
D)  delay the recognition of both revenue and cost of goods sold on the inventory involved until a final determination of the LIFO inventory can be made at the end of the annual period. 
A)  treat the layer as if it were liquidated and include in cost of goods sold the expected replacement cost of the inventory sold. 
B)  deplete the LIFO layer as if the interim period were an annual period. 
C)  change to an alternative inventory cost method,such as FIFO,so that the of LIFO liquidation is not encountered. 
D)  delay the recognition of both revenue and cost of goods sold on the inventory involved until a final determination of the LIFO inventory can be made at the end of the annual period.

Question 19

Carryon Co. ,a manufacturer,had inventories at the beginning and end of its current year as follows:   During the year,the following costs and expenses were incurred:
  Carryon's cost of goods sold for the year is

Accepted Answer

A)  $257,000. 
B)  $260,500. 
C)  $261,000. 
D)  $269,500. 
A)  $257,000. 
B)  $260,500. 
C)  $261,000. 
D)  $269,500.

Question 20

An overstatement of ending inventory in Period 1 would result in income of Period 2 being

Accepted Answer

A)  overstated. 
B)  understated. 
C)  correctly stated. 
D)  The answer cannot be determined from the information given. 
A)  overstated. 
B)  understated. 
C)  correctly stated. 
D)  The answer cannot be determined from the information given.

Which of the following statements is true?

Assume that a company records purchases net of discount.If the company bought merchandise valued at $15,000 on credit terms 3/15,net 30,the entry to record a payment for half of the purchase within the discount period would include a debit to

Cost of goods sold is equal to

The LIFO inventory cost flow method may be applied to which of the following inventory systems? Periodic Perpetual

Kendall Company reported the following net income amounts: In 2017,the company discovered errors that had been made in computing the ending inventories for 2014 and 2015,as follows: Compute the correct net incomes for (1)2014, (2)2015,and (3)2016.

The following information is available for the Crystal Company for the three months ended June 30 of this year: The gross margin was 25 percent of sales.What is the estimated inventory balance at June 30?

May Retailers purchased merchandise with a list price of $100,000,subject to a trade discount of 20 percent and credit terms of 2/10,n/30.At what amount should May record the cost of this merchandise if the gross method is used?

Budson Company needs an estimate of its ending inventory balance.The following information is available: Given this information,when using the gross margin estimation method,ending inventory is approximately

From the following information,determine the amount of freight-in.

The skeleton of the basic retail inventory calculation is presented below: Required: Explain how the following items would affect the computation of ending inventory using the retail inventory method:

Digipro Inc.is a wholesaler of photography equipment.The activity for the VTC cameras during July is shown below: -Following are the account balances from Canarsie Company's income statement: Given this information,the cost of goods sold during 2014 is

Paper Depot is a wholesaler of office supplies.The activity for Model III calculators during August is shown below: -See information for Paper Depot above.If Paper Depot uses a FIFO cost perpetual inventory system,the ending inventory of Model III calculators at August 31 is reported as

When valuing raw materials inventory at lower of cost or market,what is the general meaning of the term "market"?

Knitness Menswear,Inc.maintains a markup of 60 percent based on cost.The company's selling and administrative expenses average 30 percent of sales.Annual sales were $1,440,000.Petersen's cost of goods sold and operating profit for the year are Cost of Operating Goods Sold Profit

If a company experiences a liquidation of a LIFO inventory layer in the second quarter that is expected to be restored by the end of the annual financial reporting period,the company should

Carryon Co. ,a manufacturer,had inventories at the beginning and end of its current year as follows: During the year,the following costs and expenses were incurred: Carryon's cost of goods sold for the year is

An overstatement of ending inventory in Period 1 would result in income of Period 2 being

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 9: Inventory and Cost of Goods Sold

Which of the following statements is true?

Assume that a company records purchases net of discount.If the company bought merchandise valued at $15,000 on credit terms 3/15,net 30,the entry to record a payment for half of the purchase within the discount period would include a debit to

Cost of goods sold is equal to

The LIFO inventory cost flow method may be applied to which of the following inventory systems? Periodic Perpetual

Kendall Company reported the following net income amounts: In 2017,the company discovered errors that had been made in computing the ending inventories for 2014 and 2015,as follows: Compute the correct net incomes for (1)2014, (2)2015,and (3)2016.

The following information is available for the Crystal Company for the three months ended June 30 of this year: The gross margin was 25 percent of sales.What is the estimated inventory balance at June 30?

May Retailers purchased merchandise with a list price of $100,000,subject to a trade discount of 20 percent and credit terms of 2/10,n/30.At what amount should May record the cost of this merchandise if the gross method is used?

Budson Company needs an estimate of its ending inventory balance.The following information is available: Given this information,when using the gross margin estimation method,ending inventory is approximately

From the following information,determine the amount of freight-in.

The skeleton of the basic retail inventory calculation is presented below: Required: Explain how the following items would affect the computation of ending inventory using the retail inventory method:

Digipro Inc.is a wholesaler of photography equipment.The activity for the VTC cameras during July is shown below: -Following are the account balances from Canarsie Company's income statement: Given this information,the cost of goods sold during 2014 is

Paper Depot is a wholesaler of office supplies.The activity for Model III calculators during August is shown below: -See information for Paper Depot above.If Paper Depot uses a FIFO cost perpetual inventory system,the ending inventory of Model III calculators at August 31 is reported as

When valuing raw materials inventory at lower of cost or market,what is the general meaning of the term "market"?

Knitness Menswear,Inc.maintains a markup of 60 percent based on cost.The company's selling and administrative expenses average 30 percent of sales.Annual sales were $1,440,000.Petersen's cost of goods sold and operating profit for the year are Cost of Operating Goods Sold Profit

If a company experiences a liquidation of a LIFO inventory layer in the second quarter that is expected to be restored by the end of the annual financial reporting period,the company should

Carryon Co. ,a manufacturer,had inventories at the beginning and end of its current year as follows: During the year,the following costs and expenses were incurred: Carryon's cost of goods sold for the year is

An overstatement of ending inventory in Period 1 would result in income of Period 2 being

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters