Question 1

When a company uses a perpetual inventory system,purchase returns will be recorded by:

Accepted Answer

A)  debiting inventory.
B)  debiting purchase returns.
C)  crediting accounts payable.
D)  crediting inventory.E) B) and C)
F) A) and D)

Question 2

An understatement of the beginning inventory balance causes:

Accepted Answer

A)  Cost of goods sold to be understated and net income to be understated.
B)  Cost of goods sold to be understated and net income to be overstated.
C)  Cost of goods sold to be overstated and net income to be understated.
D)  Cost of goods sold to be overstated and net income to be correct.E) C) and D)
F) B) and C)

Question 3

Which one of the following statements regarding inventory is not true?

Accepted Answer

A)  An increase in inventory levels is always a sign of inefficiency in inventory management.
B)  The measurement of inventory affects both the balance sheet and the income statement within an accounting period.
C)  The ending inventory of one accounting period becomes the beginning inventory of the next accounting period.
D)  The cost of merchandise can vary over time and may be affected by weather,politics,and technological innovation.E) A) and D)
F) A) and C)

Question 4

Which of the following will occur when inventory costs are decreasing?

Accepted Answer

A)  FIFO will result in a lower net income but a higher ending inventory then will LIFO.
B)  FIFO will result in a higher net income but a lower ending inventory then will LIFO.
C)  FIFO will result in a lower net income and a lower ending inventory then will LIFO.
D)  FIFO will result in a higher net income and a higher ending inventory then will LIFO.E) A) and B)
F) B) and C)

Question 5

Use the information above to answer the following question.If the company uses the FIFO method,what is the cost of its ending inventory?

Accepted Answer

A)  $24
B)  $42
C)  $58
D)  $76E) None of the above
F) B) and C)

Question 6

Which of the following would be in the raw materials inventory of a company making cheese?

Accepted Answer

A)  Milk and cream used to make the cheese.
B)  Cheese that has been made but is curing before being ready to sell.
C)  Cured cheese that is waiting to be shipped to retailers.
D)  Partially processed cheese.E) All of the above
F) None of the above

Question 7

The inventory costing method that smoothes out changes in costs is

Accepted Answer

A)  FIFO.
B)  LIFO.
C)  Weighted average.
D)  Specific identification.E) B) and D)
F) B) and C)

Question 8

An adjustment to ending inventory under the lower of cost or market (LCM) rule would be least likely to be recorded by a company that sells:

Accepted Answer

A)  a household staple like laundry detergent.
B)  a fad product like bathing suits.
C)  seasonal items like snow blowers.
D)  high-tech goods like Personal Digital Assistants.E) A) and C)
F) A) and B)

Question 9

Which of the following would be in the finished goods inventory of a company making cheese?

Accepted Answer

A)  Milk and cream used to make the cheese.
B)  Cheese that has been made but is curing before being ready to sell.
C)  Cured cheese that is waiting to be shipped to retailers.
D)  Cured cheese that has been sold to retailers.E) B) and C)
F) A) and D)

Question 10

Use the information above to answer the following question.What is the amount of the gross profit?

Accepted Answer

A)  $720,000
B)  $150,000
C)  $200,000
D)  $72,000E) C) and D)
F) A) and D)

Question 11

Given the following information for Maynor Company in 2014,calculate the company's ending inventory and cost of goods sold using the following inventory costing methods,assuming the company uses a perpetual inventory system:
a)Weighted Average
b)FIFO
c)LIFO

Accepted Answer

The answer of Given the following information for Maynor Company...

Question 12

On July 1,B.Darin Company sold merchandise costing $4,500 to S.Dee Company for $6,000,terms 2/10,n/30.Both companies use a perpetual inventory system.What is the journal entry that S.Dee Company will make on July 1?

Accepted Answer

A)  Option A
B)  Option B
C)   Option C
D)  Option DE) All of the above
F) B) and C)

Question 13

Carrying insufficient quantities of inventory on hand:

Accepted Answer

A)  would not affect the company's profitability.
B)  may result in lost sales.
C)  has little effect on customer satisfaction.
D)  will increase the costs of carrying inventory.E) None of the above
F) B) and C)

Question 14

Generally accepted accounting principles (GAAP) require that the inventory be reported at:

Accepted Answer

A)  market value.
B)  historical cost.
C)  lower of cost or market.
D)  retail value.E) All of the above
F) None of the above

Question 15

Fill in the blanks below with the words "higher" and "lower" to indicate which inventory costing method causes the value to be higher and which causes it to be lower.Assume that the cost of merchandise is decreasing.

Accepted Answer

The answer of Fill in the blanks below with the...

Question 16

Your company has 500 units in inventory that had been purchased for $12 each and that would currently cost $15 to replace.Your supplier has just announced the cost of these goods is rising to $16.50.

Accepted Answer

A)  Your company should make no adjustments to the inventory account.
B)  Your company should adjust the inventory account using the lower of the recent market values,which is $15.
C)  Your company should adjust the inventory account using the cost,which is $12.00.
D)  Your company should adjust the inventory account using the average of the recent market values,which is $14.50.E) A) and B)
F) None of the above

Question 17

Use the information above to answer the following question.If the company uses the weighted average inventory costing method,what is the cost of its ending inventory?

Accepted Answer

A)  $4,200.
B)  $2,700.
C)  $1,400.
D)  $1,365.E) A) and D)
F) A) and C)

Question 18

Which of the following statements regarding inventory measures is

Accepted Answer

A)  If the inventory turnover ratio increases,the days to sell measure decreases.
B)  The days to sell measure can help managers make ordering decisions for inventory.
C)  A higher inventory turnover ratio indicates that inventory is moving more quickly from purchase to sale.
D)  It is rare for a company with a lower gross profit percentage to have a faster inventory turnover.E) All of the above
F) B) and D)

Question 19

The net sales of a company is $300,000.The cost of goods available for sale is $280,000 and the gross profit percentage is 35%.What is the amount of ending inventory?

Accepted Answer

A)  $105,000
B)  $195,000
C)  $85,000
D)  $70,000E) None of the above
F) A) and B)

Question 20

An understatement of beginning inventory causes net income to be understated.

Accepted Answer

A) True 
 B)False

Exam 7: Inventories and Cost of Goods Sold

Use the information above to answer the following question.What is the amount of the gross profit?

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Use the information above to answer the following question.If the company uses the FIFO method,what is the cost of its ending inventory?

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Which of the following statements regarding inventory measures is

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When a company uses a perpetual inventory system,purchase returns will be recorded by:

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Which of the following will occur when inventory costs are decreasing?

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Generally accepted accounting principles (GAAP) require that the inventory be reported at:

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Which of the following would be in the finished goods inventory of a company making cheese?

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An understatement of beginning inventory causes net income to be understated.

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The inventory costing method that smoothes out changes in costs is

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On July 1,B.Darin Company sold merchandise costing $4,500 to S.Dee Company for $6,000,terms 2/10,n/30.Both companies use a perpetual inventory system.What is the journal entry that S.Dee Company will make on July 1?

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Use the information above to answer the following question.If the company uses the weighted average inventory costing method,what is the cost of its ending inventory?

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Your company has 500 units in inventory that had been purchased for $12 each and that would currently cost $15 to replace.Your supplier has just announced the cost of these goods is rising to $16.50.

Correct AnswerverifiedShow Answer

Carrying insufficient quantities of inventory on hand:

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The net sales of a company is $300,000.The cost of goods available for sale is $280,000 and the gross profit percentage is 35%.What is the amount of ending inventory?

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An understatement of the beginning inventory balance causes:

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Which one of the following statements regarding inventory is not true?

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Fill in the blanks below with the words "higher" and "lower" to indicate which inventory costing method causes the value to be higher and which causes it to be lower.Assume that the cost of merchandise is decreasing.

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Which of the following would be in the raw materials inventory of a company making cheese?

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An adjustment to ending inventory under the lower of cost or market (LCM) rule would be least likely to be recorded by a company that sells:

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Given the following information for Maynor Company in 2014,calculate the company's ending inventory and cost of goods sold using the following inventory costing methods,assuming the company uses a perpetual inventory system: a)Weighted Average b)FIFO c)LIFO

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