Question 1

The assignment of costs to cost of goods sold and inventory using (moving)weighted average usually gives different results depending on whether a perpetual or periodic system is used.

Accepted Answer

A) True 
 B)False

Question 2

Describe the accounting aspects of a periodic inventory system.

Accepted Answer

Each purchase of merchandise is debited ...

Question 3

Isaiah's Gear had the following ending inventory costs:  Calculate the lower of cost and net realizable value (LCNRV)on an item by item basis.

Accepted Answer

The answer of Isaiah's Gear had the following ending inventory...

Question 4

What types of costs are assigned to merchandise inventory?

Accepted Answer

Costs of merchandise inventory...

Question 5

The principle of faithful representation requires that information be complete,neutral and free from error so that assets and income are not overstated and liabilities and expenses are not understated.

Accepted Answer

A) True 
 B)False

Question 6

When businesses apply the lower of cost and net realizable value rule on an item by item basis,they will report the lowest inventory value possible.

Accepted Answer

A) True 
 B)False

Question 7

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Accepted Answer

A) True 
 B)False

Question 8

Because an inventory error causes an offsetting error in the next period:

Accepted Answer

A)   Managers can ignore the error.
B)   It is sometimes said to be self-correcting.
C)   It affects only income statement accounts.
D)   If affects only balance sheet accounts.
E)   Managers can ignore the error and it is sometimes said to be self-correcting.F) A) and B)
G) B) and E)

Question 9

In applying LCNRV,net realizable value is defined as the sales price less costs incurred to make the sale.

Accepted Answer

A) True 
 B)False

Question 10

The necessary financial statement disclosure is accomplished if the amount presented is properly calculated.

Accepted Answer

A) True 
 B)False

Question 11

Physical counts of inventory:

Accepted Answer

A)   Are not necessary under the perpetual system.
B)   Are necessary to adjust for shrinkage.
C)   Should be taken at least once a month.
D)   Are necessary to adjust for shrinkage and should be taken at least once a month.
E)   Are not necessary under the perpetual system and should be taken at least once a month.F) All of the above
G) A) and B)

Question 12

A major goal in accounting for inventory is __________________ relevant costs with revenues.

Accepted Answer

The answer of A major goal in accounting for inventory...

Question 13

The total dollar value of inventory on hand is determined by: (1)estimating the units on hand,(2)multiplying the count by cost per unit,and (3)adding the costs for all products.

Accepted Answer

A) True 
 B)False

Question 14

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Accepted Answer

A) True 
 B)False

Question 15

Patel Packing had the following information for its inventory: Beginning inventory: cost $107,000; retail $130,000
Net purchases: cost $58,000; retail $120,000
Sales at retail: $145,000
What is the estimated cost of the ending inventory?

Accepted Answer

A)   $44,188.
B)   $57,102.
C)   $57,750.
D)   $69,300.
E)   $105,000.F) B) and C)
G) None of the above

Question 16

The three methods of inventory valuation that are most often used in Canada are specific identification,FIFO,and (moving)weighted average.

Accepted Answer

A) True 
 B)False

Question 17

Goods in transit are included in inventory:

Accepted Answer

A)   At any time in transit.
B)   When the purchaser is responsible for paying freight charges.
C)   When the supplier pays the freight charges.
D)   When ownership has passed to the purchaser.
E)   When the purchaser is responsible for paying freight charges and when ownership has passed to the purchaser.F) A) and B)
G) All of the above

Question 18

Apply the retail method to the following information and calculate the cost of the ending inventory:

Accepted Answer

The answer of Apply the retail method to the following...

Question 19

Most businesses apply the lower of cost and net realizable value rule to groups of similar or related items.

Accepted Answer

A) True 
 B)False

Question 20

Costs included in the value of inventory are:

Accepted Answer

A)   Purchase price less discounts.
B)   Transportation-in.
C)   Storage.
D)   Insurance.
E)   All of these answers are correct.F) C) and E)
G) C) and D)

Exam 6: Merchandise Inventory and Cost of Sales

When businesses apply the lower of cost and net realizable value rule on an item by item basis,they will report the lowest inventory value possible.

Correct AnswerverifiedShow Answer

A major goal in accounting for inventory is __________________ relevant costs with revenues.

Correct AnswerverifiedShow Answer

Physical counts of inventory:

Correct AnswerverifiedShow Answer

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Correct AnswerverifiedShow Answer

Apply the retail method to the following information and calculate the cost of the ending inventory:

Correct AnswerverifiedShow Answer

Isaiah's Gear had the following ending inventory costs: Calculate the lower of cost and net realizable value (LCNRV)on an item by item basis.

Correct AnswerverifiedShow Answer

What types of costs are assigned to merchandise inventory?

Correct AnswerverifiedCosts of merchandise inventory...View AnswerShow Answer

The necessary financial statement disclosure is accomplished if the amount presented is properly calculated.

Correct AnswerverifiedShow Answer

The principle of faithful representation requires that information be complete,neutral and free from error so that assets and income are not overstated and liabilities and expenses are not understated.

Correct AnswerverifiedShow Answer

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Correct AnswerverifiedShow Answer

Patel Packing had the following information for its inventory: Beginning inventory: cost $107,000; retail $130,000 Net purchases: cost $58,000; retail $120,000 Sales at retail: $145,000 What is the estimated cost of the ending inventory?

Correct AnswerverifiedShow Answer

The three methods of inventory valuation that are most often used in Canada are specific identification,FIFO,and (moving)weighted average.

Correct AnswerverifiedShow Answer

Goods in transit are included in inventory:

Correct AnswerverifiedShow Answer

Describe the accounting aspects of a periodic inventory system.

Correct AnswerverifiedEach purchase of merchandise is debited ...View AnswerShow Answer

Costs included in the value of inventory are:

Correct AnswerverifiedShow Answer

In applying LCNRV,net realizable value is defined as the sales price less costs incurred to make the sale.

Correct AnswerverifiedShow Answer

The total dollar value of inventory on hand is determined by: (1)estimating the units on hand,(2)multiplying the count by cost per unit,and (3)adding the costs for all products.

Correct AnswerverifiedShow Answer

Because an inventory error causes an offsetting error in the next period:

Correct AnswerverifiedShow Answer

Most businesses apply the lower of cost and net realizable value rule to groups of similar or related items.

Correct AnswerverifiedShow Answer

The assignment of costs to cost of goods sold and inventory using (moving)weighted average usually gives different results depending on whether a perpetual or periodic system is used.

Correct AnswerverifiedShow Answer

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Costs of merchandise inventory...
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Each purchase of merchandise is debited ...
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