Question 1

Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated(U), overstated(O), or correctly(C) stated for Year 2.

Accepted Answer

The answer of Assume that in Year 1, the ending...

Question 2

In a perpetual inventory system, Sales Returns and Allowances is credited when a sales return occurs.

Accepted Answer

A) True 
 B)False

Question 3

An incorrect inventory figure will affect the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

Prescott Plates uses a periodic inventory system. Prescott sold 35 dining sets during September. Other data for September include:  Prescott sold 10 units from the Sept 1 balance, 15 from the Sept 6 purchase, and 10 from the Sept 12 purchase. Cost of Goods Sold under the Specific Invoice method is:

Accepted Answer

A)  $5,020. 
B)  $9,750. 
C)  $9,170. 
D)  $11,050.

Question 5

American Lumber has the following company information for October: goods available for sale at cost are $24,000, retail is $38,400, and sales at retail equal $30,400. Bert has a normal gross profit of 30%. The cost of estimated ending inventory under the gross profit method is: (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

Accepted Answer

A)  $8,000. 
B)  $14,880. 
C)  $5,600. 
D)  $2,720.

Question 6

Emile Landscaping had the following data for April:  The cost of the estimated inventory on April 30 under the retail method is: (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

Accepted Answer

A)  $4,400. 
B)  $3,358. 
C)  $2,842. 
D)  $1,000.

Question 7

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Accepted Answer

A) True 
 B)False

Question 8

Mack Industries uses the periodic inventory system. What is the entry to record a $450 merchandise purchase on account from Nickel Corporation?

Accepted Answer

A)  Debit Accounts Payable for $450; credit Sales for $450. 
B)  Debit Purchases for $450; credit Accounts Payable for $450. 
C)  Debit Purchases for $450; credit Merchandise Inventory for $450. 
D)  Debit Merchandise Inventory for $450; credit Accounts Payable for $450.

Question 9

Indicate the account(s) to be debited and credited to record the following transactions.

-Sold merchandise in exchange for cash. - Periodic
Debit ________ Credit ________

Accepted Answer

A)  Cash 
B)  Accounts receivable 
C)  Merchandise inventory 
D)  Supplies 
E)  Accounts payable
F) Sales
G) Sales returns and allowances
H) Sales discounts
I) Cost of goods sold
J) Purchases
K) Purchase returns and allowances
L)Purchase discounts
M) Freight-in

Question 10

LIFO reflects the oldest costs for inventory on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

A disadvantage of the FIFO method is that:

Accepted Answer

A)  recent sales are not matched with recent costs. 
B)  the cost flow tends to follow the physical flow. 
C)  the figure for ending inventory is made up of current costs on the income statement. 
D)  None of the above is correct.

Question 12

Which of the following items should NOT be included in merchandise inventory?

Accepted Answer

A)  Goods that are damaged or obsolete 
B)  Goods that have been consigned to another company 
C)  Goods in transit shipped to another company FOB destination 
D)  All of the above

Question 13

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

Accepted Answer

A) True 
 B)False

Question 14

Mack Industries uses the periodic inventory system. What is the entry to record a $300 sale on account to customer Jake Sanders, with a $100 cost of sale?

Accepted Answer

A)  Debit Accounts Receivable for $300; credit Sales for $300; debit Cost of Goods Sold for $100; credit Merchandise Inventory for $100. 
B)  Debit Accounts Receivable for $300; credit Sales for $100; debit Cost of Goods Sold for $300; credit Merchandise Inventory for $100. 
C)  Debit Sales for $300; credit Accounts Receivable for $300. 
D)  Debit Accounts Receivable for $300; credit Sales for $300.

Question 15

The weighted-average method assumes each item is assigned a different unit cost.

Accepted Answer

A) True 
 B)False

Question 16

In a periodic inventory system, Purchases, Freight-In, and Purchases Returns and Allowances accounts are used.

Accepted Answer

A) True 
 B)False

Question 17

A business uses the retail inventory method to estimate the value of the ending inventory. For the month of June, the cost of goods available for sale is $15,900 at cost and $22,100 at retail. The cost ratio is:

Accepted Answer

A)  71.9%. 
B)  28.05%. 
C)  39%. 
D)  None of these is correct.

Question 18

An understatement of ending inventory in one period results in:

Accepted Answer

A)  an overstatement of net income for the next period. 
B)  no effect on net income for the next period. 
C)  an overstatement of the ending inventory for the next period. 
D)  an understatement of net income for the next period.

Question 19

Nicki's Pet Supply needs to estimate its ending inventory. Using the data below, compute Nicki's estimated cost of ending inventory for the month of April.  Normal gross profit average 30%

Accepted Answer

The answer of Nicki's Pet Supply needs to estimate its...

Question 20

The inventory method that matches most recently acquired costs with current selling prices is:

Accepted Answer

A)  LIFO. 
B)  FIFO. 
C)  weighted-average. 
D)  specific invoice.

Exam 15: Accounting for Merchandise Inventory

Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated(U), overstated(O), or correctly(C) stated for Year 2.

In a perpetual inventory system, Sales Returns and Allowances is credited when a sales return occurs.

An incorrect inventory figure will affect the balance sheet.

Prescott Plates uses a periodic inventory system. Prescott sold 35 dining sets during September. Other data for September include: Prescott sold 10 units from the Sept 1 balance, 15 from the Sept 6 purchase, and 10 from the Sept 12 purchase. Cost of Goods Sold under the Specific Invoice method is:

Emile Landscaping had the following data for April: The cost of the estimated inventory on April 30 under the retail method is: (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Mack Industries uses the periodic inventory system. What is the entry to record a $450 merchandise purchase on account from Nickel Corporation?

Indicate the account(s) to be debited and credited to record the following transactions. -Sold merchandise in exchange for cash. - Periodic Debit Credit

LIFO reflects the oldest costs for inventory on the balance sheet.

A disadvantage of the FIFO method is that:

Which of the following items should NOT be included in merchandise inventory?

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

Mack Industries uses the periodic inventory system. What is the entry to record a $300 sale on account to customer Jake Sanders, with a $100 cost of sale?

The weighted-average method assumes each item is assigned a different unit cost.

In a periodic inventory system, Purchases, Freight-In, and Purchases Returns and Allowances accounts are used.

A business uses the retail inventory method to estimate the value of the ending inventory. For the month of June, the cost of goods available for sale is $15,900 at cost and $22,100 at retail. The cost ratio is:

An understatement of ending inventory in one period results in:

Nicki's Pet Supply needs to estimate its ending inventory. Using the data below, compute Nicki's estimated cost of ending inventory for the month of April. Normal gross profit average 30%

The inventory method that matches most recently acquired costs with current selling prices is:

Exam 15: Accounting for Merchandise Inventory

Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated(U), overstated(O), or correctly(C) stated for Year 2.

In a perpetual inventory system, Sales Returns and Allowances is credited when a sales return occurs.

An incorrect inventory figure will affect the balance sheet.

Prescott Plates uses a periodic inventory system. Prescott sold 35 dining sets during September. Other data for September include: Prescott sold 10 units from the Sept 1 balance, 15 from the Sept 6 purchase, and 10 from the Sept 12 purchase. Cost of Goods Sold under the Specific Invoice method is:

Emile Landscaping had the following data for April: The cost of the estimated inventory on April 30 under the retail method is: (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.)

LIFO provides an up-to-date ending inventory on the income statement because it uses the latest purchases to calculate ending inventory.

Mack Industries uses the periodic inventory system. What is the entry to record a $450 merchandise purchase on account from Nickel Corporation?

Indicate the account(s) to be debited and credited to record the following transactions. -Sold merchandise in exchange for cash. - Periodic Debit ________ Credit ________

LIFO reflects the oldest costs for inventory on the balance sheet.

A disadvantage of the FIFO method is that:

Which of the following items should NOT be included in merchandise inventory?

A company should use the specific invoice method to value items that are in large quantities and are low-cost goods.

Mack Industries uses the periodic inventory system. What is the entry to record a $300 sale on account to customer Jake Sanders, with a $100 cost of sale?

The weighted-average method assumes each item is assigned a different unit cost.

In a periodic inventory system, Purchases, Freight-In, and Purchases Returns and Allowances accounts are used.

A business uses the retail inventory method to estimate the value of the ending inventory. For the month of June, the cost of goods available for sale is $15,900 at cost and $22,100 at retail. The cost ratio is:

An understatement of ending inventory in one period results in:

Nicki's Pet Supply needs to estimate its ending inventory. Using the data below, compute Nicki's estimated cost of ending inventory for the month of April. Normal gross profit average 30%

The inventory method that matches most recently acquired costs with current selling prices is:

Indicate the account(s) to be debited and credited to record the following transactions. -Sold merchandise in exchange for cash. - Periodic Debit Credit