Question 1

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.)
-Freight costs incurred by the seller to ship goods to its customers.

Accepted Answer

A) Add to inventory cost 
B) Subtract from inventory cost 
C) Not an inventory cost

Question 2

The following data are available for one of the products sold by Paschal Exports, which uses a perpetual inventory system. 
-Refer to the information provided for Paschal Exports. If the moving average cost method of inventory costing is used, determine the following amounts:
A) Cost of goods sold for the units sold on July 10th
B) Ending inventory on July 31st

Accepted Answer

The answer of The following data are available for one...

Question 3

Under a periodic inventory system, the Purchases account accumulates the cost of the inventory acquired during the period.

Accepted Answer

A) True 
 B)False

Question 4

The difference between the FIFO, LIFO, and average cost methods is that each of these methods of inventory costing makes a specific assumption about the flow of costs.

Accepted Answer

A) True 
 B)False

Question 5

Roe Company purchased merchandise on account from Rodriguez Company on December 12, 2019. On December 13, 2019, Roe Company returned damaged merchandise to Rodriguez Company and was granted an adjustment on its account. Roe Company uses the periodic inventory system. What effect does the merchandise return have on Roe Company's accounting equation?

Accepted Answer

A) assets and stockholders' equity decrease 
B) assets and liabilities decrease 
C) liabilities decrease and stockholders' equity increases 
D) liabilities and stockholders' equity decrease

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

With the perpetual inventory system, the inventory account is updated after each sale or purchase.

Accepted Answer

A) True 
 B)False

Question 8

The lower of cost or market rule applies to the write-down of inventory values when market value exceeds cost. Why does this rule not allow for write-ups in inventory value?

Accepted Answer

A) Write-ups in inventory value are more uncertain than write-downs. 
B) The most prudent approach to preparing financial statements involves avoidance of pessimistic projections regarding the company's future prospects. 
C) Writing up inventory to market value would be inconsistent with the conservatism principle. 
D) Write-ups in inventory value are inconsistent with the matching principle.

Question 9

The amount recognized on the balance sheet as the cost of inventory will ultimately be recognized as a(n) ____________________.

Accepted Answer

The answer of The amount recognized on the balance sheet...

Question 10

Re Company prepared the following analysis of its year-end inventory at June 30th:  Determine the lower of cost or market value for each product in Re Company's inventory and prepare the journal entry needed at year-end to value the inventory at LCM.

Accepted Answer

The answer of Re Company prepared the following analysis of...

Question 11

Match the terms with the descriptions provided.
-The time span during which purchase discounts are available.

Accepted Answer

A) Consignment 
B) Discount period 
C) Inventory 
D) LIFO Reserve 
E) Lower of cost or market rule
F)Purchase allowance
G)Purchase discounts
H)Purchase returns
I)Purchases

Question 12

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
-Cost of ingredients used to make a product.

Accepted Answer

A) merchandise inventory 
B) raw materials 
C) work-in-process 
D) finished goods 
E) cost of goods sold

Question 13

Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January:
 
-Refer to the information provided for Tedder Co. If the company uses the LIFO inventory method, how much is inventory on the balance sheet at the end of January?

Accepted Answer

A) $40 
B) $50 
C) $58 
D) $60

Question 14

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Accepted Answer

A) raw materials inventory 
B) work in process inventory 
C) finished goods inventory 
D) merchandise inventory

Question 15

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.)
-Prices are declining; income taxes are higher with this method.

Accepted Answer

A) Add to inventory cost 
B) Subtract from inventory cost 
C) Not an inventory cost

Question 16

Under the FIFO method of inventory costing, the units in the ending inventory represent the oldest purchase(s).

Accepted Answer

A) True 
 B)False

Question 17

The buyer must include goods purchased FOB shipping point in its inventory account if the goods are still in transit.

Accepted Answer

A) True 
 B)False

Question 18

Match the terms with the descriptions provided.
-Represents a departure from reporting assets at their historical cost.

Accepted Answer

A) Consignment 
B) Discount period 
C) Inventory 
D) LIFO Reserve 
E) Lower of cost or market rule
F)Purchase allowance
G)Purchase discounts
H)Purchase returns
I)Purchases

Question 19

The following contains information from the 2020 balance sheet of Kayla Enterprises, all amounts have been rounded to millions of dollars.  Answer the following questions:
A)Describe what costs are included in each of the three types of inventories listed for Kayla Enterprises.
B)Even though a footnote describing the inventory costing method(s) used by the company is not provided here, what can you conclude about the inventory costing methods(s) used by the company?
C)Explain what the amount "Adjustment to LIFO" represents. What effect does this adjustment have on the company's net earnings in 2019 and 2020?

Accepted Answer

The answer of The following contains information from the 2020...

Question 20

Shipping terms of FOB Destination means that the shipping costs are paid by the ______.

Accepted Answer

The answer of Shipping terms of FOB Destination means that...

Exam 6: Cost Of Goods Sold and Inventory

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.) -Freight costs incurred by the seller to ship goods to its customers.

Under a periodic inventory system, the Purchases account accumulates the cost of the inventory acquired during the period.

The difference between the FIFO, LIFO, and average cost methods is that each of these methods of inventory costing makes a specific assumption about the flow of costs.

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

With the perpetual inventory system, the inventory account is updated after each sale or purchase.

The lower of cost or market rule applies to the write-down of inventory values when market value exceeds cost. Why does this rule not allow for write-ups in inventory value?

The amount recognized on the balance sheet as the cost of inventory will ultimately be recognized as a(n) ____________________.

Re Company prepared the following analysis of its year-end inventory at June 30th: Determine the lower of cost or market value for each product in Re Company's inventory and prepare the journal entry needed at year-end to value the inventory at LCM.

Match the terms with the descriptions provided. -The time span during which purchase discounts are available.

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Cost of ingredients used to make a product.

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. (Choices may be used more than once.) -Prices are declining; income taxes are higher with this method.

Under the FIFO method of inventory costing, the units in the ending inventory represent the oldest purchase(s).

The buyer must include goods purchased FOB shipping point in its inventory account if the goods are still in transit.

Match the terms with the descriptions provided. -Represents a departure from reporting assets at their historical cost.

Shipping terms of FOB Destination means that the shipping costs are paid by the ______.