Question 1

A $15,000 overstatement of the 2014 ending inventory was discovered after the financial statements for the year were prepared.How would that inventory error impact the 2014 financial statements?

Accepted Answer

A)  Current assets were overstated and net income was understated.
B)  Current assets were understated and net income was understated.
C)  Current assets were overstated and net income was overstated.
D)  Current assets were understated and net income was overstated.E) All of the above
F) C) and D)

Question 2

For a merchandiser,inventory turnover refers to how many times:

Accepted Answer

A)  during the period the company replaces its raw materials inventory.
B)  the company buys and sells its inventory of goods.
C)  the company produces and delivers its inventory of goods to customers.
D)  the company orders merchandise.E) A) and B)
F) B) and C)

Question 3

Which of the following would not be affected by the choice of an inventory costing method (that is between FIFO,LIFO,weighted average,and specific identification) ?

Accepted Answer

A)  Net sales
B)  Cost of goods sold
C)  Gross profit
D)  Net incomeE) None of the above
F) All of the above

Question 4

The process of buying and selling inventory is known as inventory:

Accepted Answer

A)  circulation.
B)  management.
C)  turnover.
D)  allocation.E) A) and B)
F) A) and C)

Question 5

In a period of rising prices,the inventory costing method that will cause the company to have the lowest cost of goods sold is

Accepted Answer

A)  LIFO.
B)  FIFO.
C)  Weighted average.
D)  Specific identification.E) All of the above
F) A) and D)

Question 6

Lower of cost or market is an application of which accounting principle?

Accepted Answer

A)  Consistency
B)  Conservatism
C)  Matching
D)  Accrual BasisE) A) and B)
F) A) and C)

Question 7

Use the information above to answer the following question.Which of the following statements is true?

Accepted Answer

A)  The sales revenue is $2,500.
B)  The gross profit is $2,500.
C)  The cost of goods sold is $2,500.
D)  The net income is $2,500.E) B) and D)
F) B) and C)

Question 8

If the market value of goods in inventory falls to $26,000 below its cost,the company should:

Accepted Answer

A)  do nothing,because assets are reported at their original purchase price.
B)  credit inventory for $26,000.
C)  debit inventory for $26,000.
D)  use the weighted average cost method since that method provides a more accurate indicator of current value.E) A) and B)
F) A) and D)

Question 9

For a manufacturer,inventory turnover refers to how many times:

Accepted Answer

A)  during the period the company replaces the raw materials inventory.
B)  the company buys and sells its inventory of finished goods.
C)  the company produces its goods and delivers the inventory to customers.
D)  the company orders raw materials.E) A) and B)
F) None of the above

Question 10

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 11

Your company has 100 units in inventory,purchased at $16 per unit,that could be replaced for $14.

Accepted Answer

A)  The company should credit cost of goods sold for $200.
B)  The company should debit cost of goods sold for $1,400.
C)  The company should credit inventory for $200.
D)  The company should debit inventory for $1,400.E) None of the above
F) All of the above

Question 12

Use the following information to determine the amount of purchases for the period.
A.$632,000
B.$453,000
C.$316,000
D.$674,000

Accepted Answer

A.
$632,0...

Question 13

LIFO is preferred when costs are rising because managers will benefit from larger bonuses and better performance reviews.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements regarding inventory costing methods is true?

Accepted Answer

A)  The LIFO method assumes that the costs for the newest goods (the last ones in) are used first and the older costs are left in ending inventory.
B)  During a period of rising prices,LIFO results in a higher income tax expense than does FIFO.
C)  International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO.
D)  In the U.S. ,if a company uses LIFO on the income tax return,it may use a different method for financial reporting.E) B) and C)
F) None of the above

Question 15

One of the most common sources of misstatement in financial statements is the:

Accepted Answer

A)  use of alternating inventory costing methods.
B)  failure to write down inventory when the market value is below cost.
C)  failure to report stock issues appropriately.
D)  incorrectly calculating the inventory turnover ratio.E) C) and D)
F) A) and B)

Question 16

Which of the following accounts would normally have a credit balance?

Accepted Answer

A)  Inventory
B)  Cost of goods sold
C)  Sales
D)  Sales returns & allowancesE) None of the above
F) A) and B)

Question 17

Use the information above to answer the following question.What is the amount of ending inventory?

Accepted Answer

A)  $720,000
B)  $150,000
C)  $70,000
D)  $650,000E) A) and B)
F) A) and C)

Question 18

When LIFO is used with the periodic inventory system,costs are assigned to cost of goods sold using the most recent purchase at the point of each sale,rather than from the most recent purchase as of the end of the period.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements regarding the calculations used for the weighted average inventory costing method is true?

Accepted Answer

A)  Under the weighted average cost method,if the goods in inventory were purchased at three different prices,the three different prices would be added and then divided by three to find the weighted average cost per unit.
B)  When the weighted average inventory costing method is used,ending inventory and cost of goods sold are calculated using different costs per unit.
C)  There is no difference in the calculations under the weighted average method whether a perpetual or periodic inventory system is used.
D)  The weighted-average method will produce an inventory cost which is between the results of FIFO and LIFO inventory costing methods.E) A) and D)
F) A) and C)

Question 20

In a period of rising prices,the inventory costing method that assigns a value to inventory that approximates current cost is

Accepted Answer

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

Exam 7: Inventories and Cost of Goods Sold

Lower of cost or market is an application of which accounting principle?

Correct AnswerverifiedShow Answer

Which of the following statements regarding inventory costing methods is true?

Correct AnswerverifiedShow Answer

The process of buying and selling inventory is known as inventory:

Correct AnswerverifiedShow Answer

When LIFO is used with the periodic inventory system,costs are assigned to cost of goods sold using the most recent purchase at the point of each sale,rather than from the most recent purchase as of the end of the period.

Correct AnswerverifiedShow Answer

Your company has 100 units in inventory,purchased at $16 per unit,that could be replaced for $14.

Correct AnswerverifiedShow Answer

One of the most common sources of misstatement in financial statements is the:

Correct AnswerverifiedShow Answer

For a manufacturer,inventory turnover refers to how many times:

Correct AnswerverifiedShow Answer

LIFO is preferred when costs are rising because managers will benefit from larger bonuses and better performance reviews.

Correct AnswerverifiedShow Answer

In a period of rising prices,the inventory costing method that assigns a value to inventory that approximates current cost is

Correct AnswerverifiedShow Answer

Which of the following accounts would normally have a credit balance?

Correct AnswerverifiedShow Answer

A $15,000 overstatement of the 2014 ending inventory was discovered after the financial statements for the year were prepared.How would that inventory error impact the 2014 financial statements?

Correct AnswerverifiedShow Answer

For a merchandiser,inventory turnover refers to how many times:

Correct AnswerverifiedShow Answer

Use the following information to determine the amount of purchases for the period. A.$632,000 B.$453,000 C.$316,000 D.$674,000

Correct Answerverified A.$632,0...View AnswerShow Answer

Which of the following would not be affected by the choice of an inventory costing method (that is between FIFO,LIFO,weighted average,and specific identification) ?

Correct AnswerverifiedShow Answer

In a period of rising prices,the inventory costing method that will cause the company to have the lowest cost of goods sold is

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the calculations used for the weighted average inventory costing method is true?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the amount of ending inventory?

Correct AnswerverifiedShow Answer

If the market value of goods in inventory falls to $26,000 below its cost,the company should:

Correct AnswerverifiedShow 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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A.
$632,0...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified