Question 1

If a company uses the LIFO cost flow method,it is not required by generally accepted accounting principles to apply the lower-of-cost-or-market rule.

Accepted Answer

A) True 
 B)False

Question 2

If prices are rising,which inventory cost flow method will produce the lowest amount of cost of goods sold?

Accepted Answer

A)  LIFO
B)  FIFO
C)  Weighted average
D)  LIFO,FIFO,and the weighted-average inventory cost flow methods will all produce equal amounts of cost of goods sold.E) A) and B)
F) A) and C)

Question 3

Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?

Accepted Answer

A)  There are few if any procedures that can check for fraud in these accounts.
B)  There are no adequate methods of record keeping for inventory.
C)  These accounts are more significant than most other accounts.
D)  Cost of goods sold and Inventory accounts are not attractive targets of fraud.E) B) and C)
F) B) and D)

Question 4

A loss resulting from application of the lower-of-cost-or-market rule is included in cost of goods sold if the loss is material in amount.

Accepted Answer

A) True 
 B)False

Question 5

Blake Company purchased two identical inventory items.The item purchased first cost $16.00,and the item purchased second cost $18.00.Blake sold one of the items for $24.00.Which of the following statements is true?

Accepted Answer

A)  Ending inventory will be lower if Blake uses the weighted-average rather than the FIFO inventory cost flow method.
B)  Cost of goods sold will be higher if Blake uses the FIFO rather than the weighted-average inventory cost flow method.
C)  The dollar amount assigned to ending inventory will be the same no matter which inventory cost flow method is used.
D)  Gross margin will be higher if Blake uses LIFO rather than the FIFO inventory cost flow method.E) B) and D)
F) B) and C)

Question 6

If a company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate,its write-down of inventory is likely to be greater than if it applies the rule to individual items of inventory.

Accepted Answer

A) True 
 B)False

Question 7

The lower-of-cost-or-market rule can be applied to which of the following?

Accepted Answer

A)  Major classes or categories of inventory
B)  The entire stock of inventory in the aggregate
C)  Each individual inventory item
D)  All of these answer choices are correct.E) A) and B)
F) All of the above

Question 8

How is inventory turnover calculated?

Accepted Answer

A)  Cost of goods sold divided by inventory
B)  Sales divided by inventory
C)  Beginning inventory divided by the ending inventory
D)  Inventory divided by cost of goods soldE) B) and D)
F) All of the above

Question 9

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?

Accepted Answer

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

Question 10

Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following information:
 
-Assuming Chase uses a FIFO cost flow method,what is the ending inventory on January 31?

Accepted Answer

A)  $345
B)  $340
C)  $330
D)  $1,020E) A) and D)
F) All of the above

Question 11

Landis Company is preparing its financial statements.Gross margin is normally 40% of sales.Information taken from the company's records revealed sales of $25,000;beginning inventory of $2,500 and purchases of $17,500.What is the estimated amount of ending inventory at the end of the period?

Accepted Answer

A)  $15,000
B)  $5,000
C)  $8,000
D)  $10,000E) A) and D)
F) C) and D)

Question 12

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows:
  Glasgow sold 220 units after purchase 3 for $17.00 each.
-What is Glasgow's ending inventory under LIFO?

Accepted Answer

A)  $2,730
B)  $2,460
C)  $2,220
D)  $1,950E) All of the above
F) A) and D)

Question 13

In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 14

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is immaterial,which of the following journal entries would be recorded?

Accepted Answer

A)   
B)   
C)   
D)   E) B) and C)
F) All of the above

Question 15

At the end of the Year 2 accounting period,DeYoung Company determined that the market value of its inventory was $79,800.The historical cost of this inventory was $81,400.DeFazio uses the perpetual inventory method.Assuming the amount is material,how will the entry necessary to reduce the inventory to the lower of cost or market affect the elements of the company's financial statements?

Accepted Answer

A)  Decrease total assets and gross margin
B)  Decrease total assets and net income
C)  Increase total assets and net income
D)  Decrease total assets,gross margin,and net incomeE) None of the above
F) A) and B)

Question 16

-What is the average number of days to sell inventory for Company Y?

Accepted Answer

A)  15.3
B)  24.8
C)  23.9
D)  25.6E) None of the above
F) A) and B)

Question 17

Which of the following businesses is most likely to use a specific identification cost flow method?

Accepted Answer

A)  Car dealership
B)  Grocery store
C)  Hardware store
D)  Roofing companyE) A) and D)
F) C) and D)

Question 18

Singleton Company's perpetual inventory records included the following information:
 
-If Singleton uses the weighted-average cost flow method,its average cost per unit would be $8.00.

Accepted Answer

A) True 
 B)False

Question 19

Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method.On January 1,Year 2,Stubbs purchased 400 units of inventory that cost $8.00 each.On January 10,Year 2,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 700 units of inventory for $16.00 each,what is the amount of gross margin reported on the income statement?

Accepted Answer

A)  $5,180
B)  $5,250
C)  $5,000
D)  $6,020E) A) and D)
F) A) and C)

Question 20

Hoover Company purchased two identical inventory items.The item purchased first cost $33.00.The item purchased second cost $35.00.Then Hoover sold one of the inventory items for $62.00.Based on this information,which of the following statements is true?

Accepted Answer

A)  The ending inventory is $35.00 if Hoover uses the LIFO cost flow method.
B)  The gross margin is $28.00 if Hoover uses the weighted-average cost flow method.
C)  The cost of goods sold is $35.00 if Hoover uses the FIFO cost flow method.
D)  The cost of goods sold is $33.00 if Hoover uses the LIFO cost flow method.E) None of the above
F) B) and C)

Exam 5: Accounting for Inventories

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is immaterial,which of the following journal entries would be recorded?

Correct Answer
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Which of the following businesses is most likely to use a specific identification cost flow method?

Correct Answer
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How is inventory turnover calculated?

Correct Answer
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If prices are rising,which inventory cost flow method will produce the lowest amount of cost of goods sold?

Correct Answer
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Landis Company is preparing its financial statements.Gross margin is normally 40% of sales.Information taken from the company's records revealed sales of $25,000;beginning inventory of $2,500 and purchases of $17,500.What is the estimated amount of ending inventory at the end of the period?

Correct Answer
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How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?

Correct Answer
verified

Blake Company purchased two identical inventory items.The item purchased first cost $16.00,and the item purchased second cost $18.00.Blake sold one of the items for $24.00.Which of the following statements is true?

Correct Answer
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Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?

Correct Answer
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-What is the average number of days to sell inventory for Company Y?

Correct Answer
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Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following information: -Assuming Chase uses a FIFO cost flow method,what is the ending inventory on January 31?

Correct Answer
verified

Singleton Company's perpetual inventory records included the following information: -If Singleton uses the weighted-average cost flow method,its average cost per unit would be $8.00.

Correct Answer
verified

Correct Answer
verified

Hoover Company purchased two identical inventory items.The item purchased first cost $33.00.The item purchased second cost $35.00.Then Hoover sold one of the inventory items for $62.00.Based on this information,which of the following statements is true?

Correct Answer
verified

If a company uses the LIFO cost flow method,it is not required by generally accepted accounting principles to apply the lower-of-cost-or-market rule.

Correct Answer
verified

The lower-of-cost-or-market rule can be applied to which of the following?

Correct Answer
verified

If a company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate,its write-down of inventory is likely to be greater than if it applies the rule to individual items of inventory.

Correct Answer
verified

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows: Glasgow sold 220 units after purchase 3 for $17.00 each. -What is Glasgow's ending inventory under LIFO?

Correct Answer
verified

In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.

Correct Answer
verified

Correct Answer
verified

A loss resulting from application of the lower-of-cost-or-market rule is included in cost of goods sold if the loss is material in amount.

Correct Answer
verified

Exam 5: Accounting for Inventories

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is immaterial,which of the following journal entries would be recorded?

Correct AnswerverifiedShow Answer

Which of the following businesses is most likely to use a specific identification cost flow method?

Correct AnswerverifiedShow Answer

How is inventory turnover calculated?

Correct AnswerverifiedShow Answer

If prices are rising,which inventory cost flow method will produce the lowest amount of cost of goods sold?

Correct AnswerverifiedShow Answer

Landis Company is preparing its financial statements.Gross margin is normally 40% of sales.Information taken from the company's records revealed sales of $25,000;beginning inventory of $2,500 and purchases of $17,500.What is the estimated amount of ending inventory at the end of the period?

Correct AnswerverifiedShow Answer

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?

Correct AnswerverifiedShow Answer

Blake Company purchased two identical inventory items.The item purchased first cost $16.00,and the item purchased second cost $18.00.Blake sold one of the items for $24.00.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?

Correct AnswerverifiedShow Answer

-What is the average number of days to sell inventory for Company Y?

Correct AnswerverifiedShow Answer

Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following information: -Assuming Chase uses a FIFO cost flow method,what is the ending inventory on January 31?

Correct AnswerverifiedShow Answer

Singleton Company's perpetual inventory records included the following information: -If Singleton uses the weighted-average cost flow method,its average cost per unit would be $8.00.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Hoover Company purchased two identical inventory items.The item purchased first cost $33.00.The item purchased second cost $35.00.Then Hoover sold one of the inventory items for $62.00.Based on this information,which of the following statements is true?

Correct AnswerverifiedShow Answer

If a company uses the LIFO cost flow method,it is not required by generally accepted accounting principles to apply the lower-of-cost-or-market rule.

Correct AnswerverifiedShow Answer

The lower-of-cost-or-market rule can be applied to which of the following?

Correct AnswerverifiedShow Answer

If a company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate,its write-down of inventory is likely to be greater than if it applies the rule to individual items of inventory.

Correct AnswerverifiedShow Answer

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows: Glasgow sold 220 units after purchase 3 for $17.00 each. -What is Glasgow's ending inventory under LIFO?

Correct AnswerverifiedShow Answer

In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A loss resulting from application of the lower-of-cost-or-market rule is included in cost of goods sold if the loss is material in amount.

Correct AnswerverifiedShow Answer

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