Question 1

Beckenworth had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its days' sales in inventory equals: (Use 365 days a year.)

Accepted Answer

A)  4.51. 
B)  0.21. 
C)  76.1 days. 
D)  80.9 days. 
E)  4.79.

Question 2

Salmone Company reported the following purchases and sales for its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO.
$$\begin{array} { | r | l | l | l | } 
\hline \text { Date } & \text { Activities } & \text { Units Acquired at Cast } & \text { Units Sold at Ret ail } \
\hline \text { May 1 } & \text { Beginning Inventory } & 150 \text { units @ \$10.00 } & \
\hline 5 & \text { Purchase } & 220 \text { units @ @ } \$ 12.00 & \
\hline 10 & \text { Sales } & & 140 \text { units @ \$20.00 } \
\hline 15 & \text { Pur chase } & 100 \text { units @ \$13.00 } & \
\hline 24 & \text { Sales } & & 90 \text { units @ \$21.00 } \
\hline
\end{array}$$

Accepted Answer

A)  $2,980 
B)  $2,590 
C)  $2,850 
D)  $2,860 
E)  $2,460

Question 3

In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost.

Accepted Answer

A) True 
 B)False

Question 4

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

Accepted Answer

A)  $90,000 
B)  $120,000 
C)  $180,000 
D)  $60,000 
E)  $30,000

Question 5

A company has beginning inventory of 15 units at a cost of $12 each on October 1. On October 5, it purchases 10 units at $13 per unit. On October 12 it purchases 20 units at $14 per unit. On October 15, it sells 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at October 15 after the sale?

Accepted Answer

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

Question 6

One application of internal control when taking a physical count of inventory is the use of pre-numbered inventory tickets.

Accepted Answer

A) True 
 B)False

Question 7

The ________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of particular items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Accepted Answer

The answer of The ________ method of assigning costs to...

Question 8

A company reports the following information regarding its inventory. Beginning inventory: cost is $80,000; retail is $130,000 Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory shows $135,000 worth of merchandise available at retail prices. What is the cost of the ending inventory calculated using the retail inventory method?

Accepted Answer

A)  $78,300. 
B)  $73,125. 
C)  $135,000. 
D)  $72,900. 
E)  $105,000.

Question 9

A company made the following merchandise purchases and sales during the month of May:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { May l } & \text { Pur chased } & 380 \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 } & \text { Pur chased } & 270 \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 } & \text { Pur chased } & 300 \text { units at } & \$ 22 \text { each } \
\hline \text { May 25 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$$ There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

Accepted Answer

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

Question 10

An understatement of ending inventory will cause

Accepted Answer

A)  An overstatement of assets and an understatement of equity on the balance sheet. 
B)  An understatement of assets and an overstatement of equity on the balance sheet. 
C)  An overstatement of assets and equity on the balance sheet. 
D)  An understatement of assets and equity on the balance sheet. 
E)  No effect on the balance sheet.

Question 11

Goods that are in transit and were shipped FOB shipping point should be included in the inventory records of the ________.

Accepted Answer

The answer of Goods that are in transit and were...

Question 12

The ________ ratio reflects how much inventory is available in terms of days' sales.

Accepted Answer

The answer of The ________ ratio reflects how much inventory...

Question 13

Use the information below to determine the sales revenue, cost of goods sold and gross profit that would be reported for the company related to the March 16 sale assuming the company uses LIFO inventory valuation and a perpetual inventory system.
 $$\begin{array} { | l | l | } 
\hline \text { January 1: } & \text { Purchased } 100 \text { units at \$10 per unit. } \
\hline \text { February 5: } & \text { Purchased } 60 \text { units at \$12 per unit. } \
\hline \text { March 16: } & \text { Sold } 40 \text { units for \$16 per unit. } \
\hline
\end{array}$$

Accepted Answer

The answer of Use the information below to determine the...

Question 14

LIFO assumes that inventory costs flow in the order incurred.

Accepted Answer

A) True 
 B)False

Question 15

In a period of rising purchase costs, LIFO usually gives a lower taxable income and therefore, yields a tax advantage.

Accepted Answer

A) True 
 B)False

Question 16

Companies can and often do use different costing methods for financial reporting and tax reporting. An exception to this is the:

Accepted Answer

A)  FIFO inventory valuation method. 
B)  Matching principle. 
C)  Consistency concept. 
D)  LIFO conformity rule. 
E)  Full disclosure principle.

Question 17

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.

Accepted Answer

A) True 
 B)False

Question 18

On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory. At the beginning of April, the company reported beginning inventory of $226,750. Inventory purchased during April (until the date of the tornado) was $197,800. Sales for the month of April through April 24 were $642,500. Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado.

Accepted Answer

A)  $212,275 
B)  $103,300 
C)  $321,250 
D)  $217,950 
E)  $157,788

Question 19

Goods that are in transit and were shipped FOB destination should be included in the inventory records of the ________.

Accepted Answer

The answer of Goods that are in transit and were...

Question 20

Costs included in the Merchandise Inventory account can include all of the following except:

Accepted Answer

A)  Damaged inventory that cannot be sold. 
B)  Storage. 
C)  Invoice price minus any discount. 
D)  Insurance. 
E)  Transportation-in.

Exam 6: Inventories and Cost of Sales

Beckenworth had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its days' sales in inventory equals: (Use 365 days a year.)

In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost.

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

One application of internal control when taking a physical count of inventory is the use of pre-numbered inventory tickets.

The ________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of particular items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

An understatement of ending inventory will cause

Goods that are in transit and were shipped FOB shipping point should be included in the inventory records of the ________.

The ________ ratio reflects how much inventory is available in terms of days' sales.

LIFO assumes that inventory costs flow in the order incurred.

In a period of rising purchase costs, LIFO usually gives a lower taxable income and therefore, yields a tax advantage.

Companies can and often do use different costing methods for financial reporting and tax reporting. An exception to this is the:

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.

Goods that are in transit and were shipped FOB destination should be included in the inventory records of the ________.

Costs included in the Merchandise Inventory account can include all of the following except: