Question 1

On September 1 of the current year,Scots Company experienced a flood that destroyed the company's entire inventory.Because the company had not completed its month end reporting for August,it must estimate the amount of inventory lost using the gross profit method.At the beginning of August,the company reported beginning inventory of $215,450.Inventory purchased during August was $192,530.Sales for the month of August were $542,500.Assuming the company's typical gross profit ratio is 40%,estimate the amount of inventory destroyed in the flood.

Accepted Answer

A)  $87,480
B)  $134,520
C)  $109,980
D)  $82,480
E)  $81,480F) C) and D)
G) A) and E)

Question 2

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

Accepted Answer

The costs of merchandise inventory inclu...

Question 3

The simple rule for inventory turnover is that a low ratio is preferable.

Accepted Answer

A) True 
 B)False

Question 4

A company's current LIFO inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

Accepted Answer

A)  Debit Merchandise Inventory $25,000; credit Cost of Goods Sold $25,000.
B)  Debit Cost of Goods Sold $30,000; credit Merchandise Inventory $30,000.
C)  Debit Cost of Goods Sold $5,000; credit Merchandise Inventory $5,000.
D)  Debit Loss on Inventory $5,000; credit Cost of Goods Sold $5,000.
E)  Debit Merchandise Inventory $30,000; credit Cost of Goods Sold $25,000.F) None of the above
G) A) and E)

Question 5

A company had the following purchases and sales during its first month of operations:  Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places,and final answer to the nearest whole dollar.)

Accepted Answer

A)  $84.
B)  $61.
C)  $23.
D)  $27.
E)  $5.F) None of the above
G) All of the above

Question 6

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

Accepted Answer

A) True 
 B)False

Question 7

Understating ending inventory understates both current and total assets.

Accepted Answer

A) True 
 B)False

Question 8

Bedrock Company reported a December 31 ending inventory balance of $412,000.The following additional information is also available: -The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Bedrock was the consignor.
-The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
Based on this information,the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $412,000
B)  $340,000
C)  $318,000
D)  $362,000
E)  $390,000F) None of the above
G) B) and C)

Question 9

If obsolete or damaged goods can be sold,they will be included in inventory at their original cost.

Accepted Answer

A) True 
 B)False

Question 10

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)  $60,000
B)  $180,000
C)  $30,000
D)  $90,000
E)  $120,000F) B) and E)
G) B) and D)

Question 11

A company had the following purchases and sales during its first year of operations:  On December 31,there were 26 units remaining in ending inventory.
-Using the periodic FIFO inventory costing method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A)  $8,670.
B)  $3,540.
C)  $5,400.
D)  $5,130.
E)  $3,270.F) B) and D)
G) None of the above

Question 12

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

Accepted Answer

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

Question 13

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system.

-Determine the cost assigned to cost of goods sold using FIFO.

Accepted Answer

A)  $2,980
B)  $2,460
C)  $2,850
D)  $2,590
E)  $5,440F) A) and B)
G) A) and C)

Question 14

Starlight Company has inventory of 8 units at a cost of $200 each on October 1.On October 2,it purchased 20 units at $205 each.11 units are sold on October 4.Using the LIFO perpetual inventory method,
-What amount will be reported in cost of goods sold for the 11 units that were sold?

Accepted Answer

A)  $2,239.
B)  $2,255.
C)  $2,200.
D)  $2,228.
E)  $2,215.F) B) and E)
G) None of the above

Question 15

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio,we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Accepted Answer

A) True 
 B)False

Question 16

An overstated beginning inventory will ________ cost of goods sold and ________ net income.

Accepted Answer

overstate; understat...

Question 17

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system.

-Determine the cost assigned to ending inventory using LIFO.

Accepted Answer

A)  $5,440
B)  $2,460
C)  $2,590
D)  $2,980
E)  $2,860F) None of the above
G) D) and E)

Question 18

Match between columns
                        Premises: FIFO method
Days' sales in inventory
Specific identification method
Interim statements
Retail inventory method
Net realizable value
Gross profit method
Inventory turnover
Weighted average inventory method
LIFO method

Accepted Answer

The Answer of A method for estimating an ending inventory is...

Question 19

A company's cost of inventory was $219,500.Due to phenomenal demand the market value of its inventory increased to $221,700.This company should record the inventory at its market value.

Accepted Answer

A) True 
 B)False

Question 20

An understatement of ending inventory will cause:

Accepted Answer

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

Exam 5: Inventories and Cost of Sales

Correct Answer
verified

An overstated beginning inventory will cost of goods sold and net income.

Correct Answer
verified
overstate; understat...
View Answer

A company's current LIFO inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

Correct Answer
verified

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system. -Determine the cost assigned to cost of goods sold using FIFO.

Correct Answer
verified

If obsolete or damaged goods can be sold,they will be included in inventory at their original cost.

Correct Answer
verified

The simple rule for inventory turnover is that a low ratio is preferable.

Correct Answer
verified

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system. -Determine the cost assigned to ending inventory using LIFO.

Correct Answer
verified

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

Correct Answer
verified

Understating ending inventory understates both current and total assets.

Correct Answer
verified

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

Correct Answer
verified
The costs of merchandise inventory inclu...
View Answer

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:

Correct Answer
verified

Match the following terms with the appropriate definition.

A company's cost of inventory was $219,500.Due to phenomenal demand the market value of its inventory increased to $221,700.This company should record the inventory at its market value.

Correct Answer
verified

A company had the following purchases and sales during its first month of operations: Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places,and final answer to the nearest whole dollar.)

Correct Answer
verified

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio,we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Correct Answer
verified

An understatement of ending inventory will cause:

Correct Answer
verified

Correct Answer
verified

Starlight Company has inventory of 8 units at a cost of $200 each on October 1.On October 2,it purchased 20 units at $205 each.11 units are sold on October 4.Using the LIFO perpetual inventory method, -What amount will be reported in cost of goods sold for the 11 units that were sold?

Correct Answer
verified

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

Correct Answer
verified

A company had the following purchases and sales during its first year of operations: On December 31,there were 26 units remaining in ending inventory. -Using the periodic FIFO inventory costing method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Correct Answer
verified

Exam 5: Inventories and Cost of Sales

Correct AnswerverifiedShow Answer

An overstated beginning inventory will ________ cost of goods sold and ________ net income.

Correct Answerverifiedoverstate; understat...View AnswerShow Answer

A company's current LIFO inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

Correct AnswerverifiedShow Answer

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system. -Determine the cost assigned to cost of goods sold using FIFO.

Correct AnswerverifiedShow Answer

If obsolete or damaged goods can be sold,they will be included in inventory at their original cost.

Correct AnswerverifiedShow Answer

The simple rule for inventory turnover is that a low ratio is preferable.

Correct AnswerverifiedShow Answer

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system. -Determine the cost assigned to ending inventory using LIFO.

Correct AnswerverifiedShow Answer

Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

Correct AnswerverifiedShow Answer

Understating ending inventory understates both current and total assets.

Correct AnswerverifiedShow Answer

What specific costs and deductions are used to determine the final cost of merchandise inventory? Identify all costs including the incidental costs.

Correct AnswerverifiedThe costs of merchandise inventory inclu...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

Match the following terms with the appropriate definition.

A company's cost of inventory was $219,500.Due to phenomenal demand the market value of its inventory increased to $221,700.This company should record the inventory at its market value.

Correct AnswerverifiedShow Answer

A company had the following purchases and sales during its first month of operations: Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places,and final answer to the nearest whole dollar.)

Correct AnswerverifiedShow Answer

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio,we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Correct AnswerverifiedShow Answer

An understatement of ending inventory will cause:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Starlight Company has inventory of 8 units at a cost of $200 each on October 1.On October 2,it purchased 20 units at $205 each.11 units are sold on October 4.Using the LIFO perpetual inventory method, -What amount will be reported in cost of goods sold for the 11 units that were sold?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

An overstated beginning inventory will cost of goods sold and net income.

Correct Answer
verified
overstate; understat...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The costs of merchandise inventory inclu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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