Question 1

A physical inventory should be taken annually, at a minimum, to verify the quantity of goods on hand.

Accepted Answer

A) True 
 B)False

Question 2

Under the retail inventory method, if the gross profit ratio is 45% and ending inventory at retail is
$67,000, then estimated ending inventory is $36,850.

Accepted Answer

A) True 
 B)False

Question 3

The following data concerns selected inventory items.
 
Determine the amount to be reported as the inventory valuation at cost or net realizable value, whichever is lower, under each of the following methods.
1. Lower of cost or net realizable value for each item separately
2. Lower of total cost or net realizable value in total
3. Lower of total cost or net realizable value by department

Accepted Answer

The answer of The following data concerns selected inventory items.
...

Question 4

The--------- method of estimating ending inventory involves estimating the cost of goods sold by applying a company's cost/sales ratio to its sales for the current period.

Accepted Answer

The answer of The--------- method of estimating ending inventory involves...

Question 5

A firm that uses a period system sells a single product that had a beginning inventory of 9,000 units with a total cost of $45,000. Early in the year, 15,000 units were purchased at $6 each. At the end of the year there were 4,000 units on hand. Using LIFO, what is the value of the ending inventory of 4,000 units?

Accepted Answer

A) $10,000 
B) $15,000 
C) $24,000 
D) $20,000

Question 6

Alyse Designer Handbags uses the periodic inventory system and had the following inventory figures for its Nicole Model during 2019 as shown below.
  
What is the cost of the ending inventory and the cost of goods sold?
1. Assume the company utilizes the FIFO method
2. Assume the company utilizes the LIFO method
3. Assume the company utilizes the average cost method

Accepted Answer

The answer of Alyse Designer Handbags uses the periodic inventory...

Question 7

What is the specific identification method for valuing inventory? What types of businesses are likely to use this method? Why?

Accepted Answer

The answer of What is the specific identification method for...

Question 8

With the onset of universal product codes and bar-code scanners that track inventory purchased and sold, a physical inventory is no longer necessary to verify inventory on hand.

Accepted Answer

A) True 
 B)False

Question 9

The lower the ending inventory valuation, the---------- the cost of goods sold.

Accepted Answer

The answer of The lower the ending inventory valuation, the----------...

Question 10

The lower of cost or net realizable value rule can be applied on an item-by-item basis, by group or by comparing total inventory at cost to total inventory valued at net realizable value.

Accepted Answer

A) True 
 B)False

Question 11

Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.

Accepted Answer

A) True 
 B)False

Question 12

Inventory valuation methods that are acceptable internationally include all of the following except:

Accepted Answer

A) Specific identification 
B) Weighted average 
C) FIFO 
D) LIFO

Question 13

The retail method is a means of estimating

Accepted Answer

A) selling price. 
B) ending inventory cost. 
C) retail price of inventory. 
D) beginning inventory cost.

Question 14

In periods of falling prices, the inventory valuation procedure that results in the highest ending inventory value is

Accepted Answer

A) the FIFO method. 
B) the LIFO method. 
C) the average cost method. 
D) the lower of cost or net realizable value method.

Question 15

To calculate the cost-to-retail ratio, merchandise available for sale at retail prices is divided by the merchandise available for sale at cost.

Accepted Answer

A) True 
 B)False

Question 16

Cost ratio is calculated by

Accepted Answer

A) dividing merchandise available for sale at cost by merchandise available for sale at retail. 
B) dividing merchandise available for sale at retail by merchandise available for sale at cost. 
C) dividing net retail sales by the cost of the merchandise sold. 
D) dividing the cost of merchandise sold by net retail sales.

Question 17

A company has inventory with a sales value of $34,000, current net realizable value of $22,000 and a total cost of $23,400. Since the sales value exceeds both cost and net realizable value, no write down in inventory value is required.

Accepted Answer

A) True 
 B)False

Question 18

The disclosure principle requires a company to reveal the costing method used to value inventory.

Accepted Answer

A) True 
 B)False

Question 19

Following the consistency principle, once a firm adopts a method of inventory valuation, it should use that method consistently from one period to the next.

Accepted Answer

A) True 
 B)False

Question 20

A firm that uses a periodic inventory system sells a single product that had a beginning inventory of 5,000 units with a total cost of $35,000. Early in the year, 12,000 units were purchased at $9 each and 4,000 units were on hand at the end of the year. Using FIFO, what is the amount of Cost of Goods Sold?

Accepted Answer

A) $117,000 
B) $91,000 
C) $107,000 
D) $115,000

Exam 17: Merchandise Inventory

A physical inventory should be taken annually, at a minimum, to verify the quantity of goods on hand.

Under the retail inventory method, if the gross profit ratio is 45% and ending inventory at retail is $67,000, then estimated ending inventory is $36,850.

The--------- method of estimating ending inventory involves estimating the cost of goods sold by applying a company's cost/sales ratio to its sales for the current period.

What is the specific identification method for valuing inventory? What types of businesses are likely to use this method? Why?

With the onset of universal product codes and bar-code scanners that track inventory purchased and sold, a physical inventory is no longer necessary to verify inventory on hand.

The lower the ending inventory valuation, the---------- the cost of goods sold.

The lower of cost or net realizable value rule can be applied on an item-by-item basis, by group or by comparing total inventory at cost to total inventory valued at net realizable value.

Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.

Inventory valuation methods that are acceptable internationally include all of the following except:

The retail method is a means of estimating

In periods of falling prices, the inventory valuation procedure that results in the highest ending inventory value is

To calculate the cost-to-retail ratio, merchandise available for sale at retail prices is divided by the merchandise available for sale at cost.

Cost ratio is calculated by

A company has inventory with a sales value of $34,000, current net realizable value of $22,000 and a total cost of $23,400. Since the sales value exceeds both cost and net realizable value, no write down in inventory value is required.

The disclosure principle requires a company to reveal the costing method used to value inventory.

Following the consistency principle, once a firm adopts a method of inventory valuation, it should use that method consistently from one period to the next.