Question 1

On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?

Accepted Answer

A)   $250,000
B)   $360,000
C)   $172,500
D)   $187,500 D

Question 2

"Market," as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner.

Accepted Answer

A) True 
 B)False  False

Question 3

The method of computing inventory that uses records of the selling prices of the merchandise is called

Accepted Answer

A)   retail method
B)   last-in, first-out
C)   first-in, first-out
D)   average cost A

Question 4

The specific identification inventory method should be used when the inventory consists of identical, low cost units that are purchased and sold frequently.

Accepted Answer

A) True 
 B)False

Question 5

The following lots of a particular commodity were available for sale during the year:  The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the average cost method?

Accepted Answer

A)   $655
B)   $620
C)   $690
D)   $659

Question 6

Beginning inventory, purchases and sales data for tennis rackets are as follows:
 Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Accepted Answer

The answer of Beginning inventory, purchases and sales data for...

Question 7

Direct disposal costs do not include special advertising or sales commissions.

Accepted Answer

A) True 
 B)False

Question 8

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

Accepted Answer

A) True 
 B)False

Question 9

If the perpetual inventory system is used, the account entitled Merchandise Inventory is debited for purchases of merchandise.

Accepted Answer

A) True 
 B)False

Question 10

Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

Accepted Answer

A)   owner's equity is overstated
B)   cost of merchandise sold is overstated
C)   gross profit is understated
D)   net income is understated

Question 11

Match between columns
                        Premises:  Cost flow matches the unit sold to the unit purchased.
 Cost flow is in the reverse order in which the cost were incurred.
 Cost flow is an average of the costs.
 Cost flow is in the order in which the costs were incurred.

Accepted Answer

The Answer of Average Cost and Last-in, Last-out (LIFO) and is...

Question 12

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account:

Accepted Answer

The answer of The following data regarding purchases and sales...

Question 13

Beginning inventory, purchases and sales data for hammers are as follows:
  Assuming the business maintains a perpetual inventory system, complete the inventory cards and calculate the cost of merchandise sold and ending inventory under the following assumptions:
a. First-in, first-out
  b. Last-in, first-out

Accepted Answer

The answer of Beginning inventory, purchases and sales data for...

Question 14

Assume that three identical units of merchandise are purchased during October, as follows:
  Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross Profit, and Ending Inventory under the Average Cost method.

Accepted Answer

The answer of Assume that three identical units of merchandise...

Question 15

Kristin's Boutiques has identified the following items for possible inclusion in its December 31, 2010 inventory. Which of the following would not be included in the year end inventory?

Accepted Answer

A)   Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31, 2010.
B)   Kristin has in its warehouse merchandise on consignment from Abby Co.
C)   Kristin has sent merchandise to various retailers on a consignment basis.
D)   Kristin has merchandise on hand which has been returned by customers because of wrong size.

Question 16

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work.

Accepted Answer

The answer of On the basis of the following data,...

Question 17

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $700,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

Accepted Answer

The answer of During August, the first month of the...

Question 18

The units of an item available for sale during the year were as follows:
  There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

Accepted Answer

The answer of The units of an item available for...

Question 19

Determine the total value of the merchandise using Net Realizable Value:

Accepted Answer

A)   $35
B)   $80
C)   $115
D)   $25

Question 20

Beginning inventory, purchases and sales data for widgets are as follows:
  Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Accepted Answer

The answer of Beginning inventory, purchases and sales data for...

Exam 7: Inventories

On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?

"Market," as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner.

The method of computing inventory that uses records of the selling prices of the merchandise is called

The specific identification inventory method should be used when the inventory consists of identical, low cost units that are purchased and sold frequently.

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the average cost method?

Beginning inventory, purchases and sales data for tennis rackets are as follows: Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Direct disposal costs do not include special advertising or sales commissions.

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

If the perpetual inventory system is used, the account entitled Merchandise Inventory is debited for purchases of merchandise.

Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

Match the following cost flow assumption to their inventory costing method:

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account:

Assume that three identical units of merchandise are purchased during October, as follows: Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold, Gross Profit, and Ending Inventory under the Average Cost method.

Kristin's Boutiques has identified the following items for possible inclusion in its December 31, 2010 inventory. Which of the following would not be included in the year end inventory?

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work.

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $700,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

The units of an item available for sale during the year were as follows: There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

Determine the total value of the merchandise using Net Realizable Value:

Beginning inventory, purchases and sales data for widgets are as follows: Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.