Question 1

When using the specific identification inventory costing method,ending inventory costs depend on which costs are assigned to the inventory sold.

Accepted Answer

A) True 
 B)False

Question 2

A company that uses the perpetual inventory system sold goods for $2,400 to a customer on account.The company had purchased the inventory for $800.Which of the following journal entries correctly records the cost of goods sold?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cost of Goods Sold } & 800 & \
\hline \text { Sales Revenue } & & 800 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Merchandise Inventory } & 800 \
\hline \text { Cost of Goods Sold } & & 800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cost of Goods Sold } & 800 & \
\hline \text { Merchandise Inventory } & & 800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 800 & \
\hline \text { Sales Revenue } & & 800 \
\hline
\end{array}$$

Question 3

Designer Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500.During the month,Designer Furniture purchased and sold merchandise on account as follows:
 $$\begin{array} { | r | r | r | } 
\hline \text { June } 7 & \text { Purchase } & 25 \text { sofas @ } \$ 750 \text { each } \
\hline 14 & \text { Sale } & \text { 30 sofas @ } \$ 1,150 \text { each } \
\hline 18 & \text { Purchase } & 50 \text { sofas @ } \$ 775 \text { each } \
\hline 27 & \text { Sale } & \text { 35 sofas @ } \$ 1,200 \text { each } \
\hline
\end{array}$$ Prepare a perpetual inventory record,using the LIFO inventory costing method,and determine the company's cost of goods sold,ending merchandise inventory,and gross profit.

Accepted Answer

The answer of Designer Furniture began June with merchandise inventory...

Question 4

Southwood Motors is considering which inventory costing method it should use.The business wants to maximize gross profit during a period of rising costs.Which inventory method should Southwood select? Discuss your selection.

Accepted Answer

The answer of Southwood Motors is considering which inventory costing...

Question 5

Inventory turnover measures ________.

Accepted Answer

A)  the days' sales in inventory ratio 
B)  how rapidly merchandise inventory is purchased 
C)  how rapidly merchandise inventory is sold 
D)  the time period for inventory to become obsolete

Question 6

Smart Phones Company had the following balances and transactions during 2019. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \text { 20 units at \$73 } \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at \$76 } \
\hline \text { December 30 } & \text { Sold 33 units } \
\hline \text { December 31 } & \text { Replacement cost \$78 } \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2019 using the lower-of-cost-or-market rule.(Round any intermediate calculations two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $1,460 
B)  $1,992 
C)  $2,106 
D)  $2,052

Question 7

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for net income.

Accepted Answer

A) True 
 B)False

Question 8

Rally Wheels Company had the following balances and transactions during 2018: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory as of } & \
\text { January } 1,2018 & 150 \text { units at } \$ 73 \
\hline \text { March 10 } & \text { Sold 50 units } \
\hline \text { June 10 } & \text { Purchased } 450 \text { units at } \$ 77 \
\hline \text { October 30 } & \text { Sold } 150 \text { units } \
\hline
\end{array}$$ What would the company's ending merchandise inventory cost be on December 31,2018 if the perpetual inventory system and the last-in,first-out inventory costing method are used?

Accepted Answer

A)  $15,200 
B)  $45,600 
C)  $30,400 
D)  $34,650

Question 9

Changing the method of valuing inventory ignores the principle of ________.

Accepted Answer

A)  conservatism 
B)  consistency 
C)  disclosure 
D)  materiality

Question 10

Which of the following statements regarding a periodic inventory system is incorrect?

Accepted Answer

A)  A periodic inventory system is simpler than a perpetual inventory system. 
B)  A periodic inventory system works well for small businesses in which inventory costs can be controlled by visual inspection. 
C)  The only way to determine the ending merchandise inventory and cost of goods sold in a periodic inventory system is to take a physical inventory. 
D)  The various inventory costing methods are not used in a periodic inventory system.

Question 11

A lower days' sales in inventory for Samson Company,when compared to other companies,indicates that it is ________.

Accepted Answer

A)  selling its inventory more quickly 
B)  spending more on inventory storage 
C)  incurring higher insurance costs 
D)  holding excess obsolete inventory

Question 12

An overstatement of ending merchandise inventory in the current period results in an overstatement of cost of goods sold in the current period.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT included in a perpetual inventory record?

Accepted Answer

A)  identification of the inventory item 
B)  cost per unit 
C)  unit selling price 
D)  quantity on hand

Question 14

Third Avenue Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500.During the month,the company purchased and sold merchandise on account as follows:
 $$\begin{array} { | r | r | r | } 
\hline \text { June } 7 & \text { Purchase } & 25 \text { sofas @ } \$ 750 \text { each } \
\hline 14 & \text { Sale } & \text { 30 sofas @ } \$ 1,150 \text { each } \
\hline 18 & \text { Purchase } & 50 \text { sofas @ } \$ 775 \text { each } \
\hline 27 & \text { Sale } & \text { 35 sofas @ } \$ 1,200 \text { each } \
\hline
\end{array}$$ Prepare a perpetual inventory record,using the weighted-average inventory costing method,and determine the company's cost of goods sold,ending merchandise inventory,and gross profit.(Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Accepted Answer

The answer of Third Avenue Furniture began June with merchandise...

Question 15

Martha Company had 21,000 units of ending inventory that were recorded at the cost of $7.00 per unit using the FIFO method.The current replacement cost is $4.25 per unit.Which of the following amounts would be reported as ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?

Accepted Answer

A)  $147,000 
B)  $236,250 
C)  $168,000 
D)  $89,250

Question 16

Two ratios that help businesses monitor their inventory levels are days' sales in inventory and the inventory level ratio.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following states that a company must perform strictly proper accounting only for items that are significant to the business's financial statements?

Accepted Answer

A)  conservatism 
B)  materiality concept 
C)  disclosure principle 
D)  consistency principle

Question 18

Delaware Retail Company had the following balances and transactions during 2019. $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \text { 20 units at } \$ 70 \
\hline \text { Tune } 10 & \text { Purchased } 40 \text { units at } \$ 83 \
\hline \text { December 30 } & \text { Sold 30 units } \
\hline \text { December 31 } & \text { Replacement cost } \$ 60 \
\hline
\end{array}$$ The company maintains its records of inventory on a perpetual basis using the last-in,first-out inventory costing method.Calculate the amount of ending Merchandise Inventory at December 31,2019 using the lower-of-cost-or-market rule.

Accepted Answer

A)  $2,490 
B)  $2,400 
C)  $1,800 
D)  $3,600

Question 19

Which of the following assets must be reported at the lower-of-cost-or-market value?

Accepted Answer

A)  Accounts Receivable 
B)  Merchandise Inventory 
C)  Prepaid Insurance 
D)  Notes Receivable

Question 20

State the accounting term that applies to each of the following definitions.
 $$\begin{array} { | l | l | } 
\hline \text { Definition } & \text { Accounting Term } \
\hline \text { Businesses should use the same } & \
\text { accounting methods from period to } & \
\text { period. } & \
\hline \text { Treats the oldest inventory purchases } & \
\text { as the first units sold. } & \
\hline \text { Principle whose foundation is to } & \
\text { exercise caution in reporting financial } & \
\text { information. } & \
\hline \text { Treats the most recent/newest } & \
\text { purchases as cost of goods sold. } & \
\hline
\end{array}$$

Accepted Answer

The answer of State the accounting term that applies to...

Exam 6: Merchandise Inventory

When using the specific identification inventory costing method,ending inventory costs depend on which costs are assigned to the inventory sold.

A company that uses the perpetual inventory system sold goods for $2,400 to a customer on account.The company had purchased the inventory for $800.Which of the following journal entries correctly records the cost of goods sold?

Southwood Motors is considering which inventory costing method it should use.The business wants to maximize gross profit during a period of rising costs.Which inventory method should Southwood select? Discuss your selection.

Inventory turnover measures ________.

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for net income.

Changing the method of valuing inventory ignores the principle of ________.

Which of the following statements regarding a periodic inventory system is incorrect?

A lower days' sales in inventory for Samson Company,when compared to other companies,indicates that it is ________.

An overstatement of ending merchandise inventory in the current period results in an overstatement of cost of goods sold in the current period.

Which of the following is NOT included in a perpetual inventory record?

Two ratios that help businesses monitor their inventory levels are days' sales in inventory and the inventory level ratio.

Which of the following states that a company must perform strictly proper accounting only for items that are significant to the business's financial statements?

Which of the following assets must be reported at the lower-of-cost-or-market value?