Question 1

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

Accepted Answer

A) True 
 B)False

Question 2

Physical counts of inventory:

Accepted Answer

A)   Are not necessary under the perpetual system.
B)   Are necessary to adjust the Inventory account to the actual inventory available.
C)   Must be taken at least once a month.
D)   Requires the use of hand-held portable computers.
E)   Are not necessary under the cost-to benefit constraint.F) A) and D)
G) A) and C)

Question 3

Axme uses a weighted average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $15 per unit.
August 29, 20 units were sold.
August 31, 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?

Accepted Answer

A)   $12.00.
B)   $13.80.
C)   $15.42.
D)   $16.00.
E)   $17.74.F) A) and D)
G) B) and C)

Question 4

A company has the following per unit original costs and replacement costs for its inventory: Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $6.50
Part C: 160 units with a cost of $3, and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company's ending inventory is:

Accepted Answer

A)   $1,180.00.
B)   $1,075.00.
C)   $1,075.00 or $1,112.50, depending upon whether LCM is applied to individual items or the inventory as a whole.
D)   $1,112.50.
E)   $1,180.00 or $1,075.00, depending upon whether LCM is applied to individual items or to the inventory as a wholE.F) None of the above
G) B) and D)

Question 5

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Question 6

Describe the internal controls that must be applied when taking a physical count of inventory.

Accepted Answer

The internal controls should include (1)...

Question 7

The understatement of the ending inventory balance causes:

Accepted Answer

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

Question 8

The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

Accepted Answer

First in, ...

Question 9

The inventory valuation method that tends to smooth out erratic changes in costs is:

Accepted Answer

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

Question 10

A company made the following merchandise purchases and sales during the month of May:  There was no beginning inventory. If the company uses the weighted average inventory valuation method and the perpetual inventory system, what would be the cost of its ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 11

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

Accepted Answer

A) True 
 B)False

Question 12

The conservatism constraint requires that when more than one estimate of the amounts to be received or paid in the future exists and these estimates are about equally likely, then the less optimistic amount is used.

Accepted Answer

A) True 
 B)False

Question 13

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Accepted Answer

A) True 
 B)False

Question 14

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Accepted Answer

A) True 
 B)False

Question 15

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Accepted Answer

A)   $395.
B)   $410.
C)   $450.
D)   $510.
E)   $520.F) C) and E)
G) A) and B)

Question 16

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Accepted Answer

A) True 
 B)False

Question 17

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Accepted Answer

A)   $2,550.
B)   $2,600.
C)   $2,700.
D)   $3,000.
E)   $3,200.F) All of the above
G) None of the above

Question 18

A company made the following merchandise purchases and sales during the current month:  There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 19

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale?

Accepted Answer

A)   $140.
B)   $160.
C)   $210.
D)   $380.
E)   $590.F) A) and E)
G) D) and E)

Question 20

LIFO assumes that inventory costs flow in the order incurred.

Accepted Answer

A) True 
 B)False

Exam 6: Inventories and Cost of Sales

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

Correct Answer
verified

The inventory valuation method that tends to smooth out erratic changes in costs is:

Correct Answer
verified

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the weighted average inventory valuation method and the perpetual inventory system, what would be the cost of its ending inventory?

Correct Answer
verified

Physical counts of inventory:

Correct Answer
verified

The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

Correct Answer
verified
First in, ...
View Answer

Correct Answer
verified

The understatement of the ending inventory balance causes:

Correct Answer
verified

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Correct Answer
verified

LIFO assumes that inventory costs flow in the order incurred.

Correct Answer
verified

Correct Answer
verified

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

Correct Answer
verified

A company made the following merchandise purchases and sales during the current month: There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory?

Correct Answer
verified

Correct Answer
verified

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Correct Answer
verified

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Correct Answer
verified

Correct Answer
verified

The conservatism constraint requires that when more than one estimate of the amounts to be received or paid in the future exists and these estimates are about equally likely, then the less optimistic amount is used.

Correct Answer
verified

Describe the internal controls that must be applied when taking a physical count of inventory.

Correct Answer
verified
The internal controls should include (1)...
View Answer

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Correct Answer
verified

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Correct Answer
verified

Exam 6: Inventories and Cost of Sales

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

Correct AnswerverifiedShow Answer

The inventory valuation method that tends to smooth out erratic changes in costs is:

Correct AnswerverifiedShow Answer

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the weighted average inventory valuation method and the perpetual inventory system, what would be the cost of its ending inventory?

Correct AnswerverifiedShow Answer

Physical counts of inventory:

Correct AnswerverifiedShow Answer

The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

Correct AnswerverifiedFirst in, ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The understatement of the ending inventory balance causes:

Correct AnswerverifiedShow Answer

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

Correct AnswerverifiedShow Answer

LIFO assumes that inventory costs flow in the order incurred.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

Correct AnswerverifiedShow Answer

A company made the following merchandise purchases and sales during the current month: There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

Correct AnswerverifiedShow Answer

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The conservatism constraint requires that when more than one estimate of the amounts to be received or paid in the future exists and these estimates are about equally likely, then the less optimistic amount is used.

Correct AnswerverifiedShow Answer

Describe the internal controls that must be applied when taking a physical count of inventory.

Correct AnswerverifiedThe internal controls should include (1)...View AnswerShow Answer

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Correct AnswerverifiedShow Answer

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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First in, ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The internal controls should include (1)...
View Answer

Correct Answer
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Correct Answer
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