Chapter 6 MGMT 20010

An inventory error that understates the amount of ending inventory will result in which of the following in the current year? a. Overstated cost of goods sold b. Overstated net income c. Overstated assets d. Overstated gross profit

A

At the end of the year, a company reports the following inventory amounts ($ per unit): Item # of Units Cost NRV A 100 $4 $8 B 150 $8 $6 The year-end adjustment using the lower of cost and net realizable value would include: a. A credit to Inventory for $300 b. A debit to Cost of Goods Sold for $400 c. A debit to Inventory for $500 d. A credit to Cost of Goods Sold for $700

A

Cost of goods sold is: a) Reported in the income statement b) Reported in the balance sheet c) A current asset The cost of inventory on hand at the end of the period

A

Net sales are $100,000 and cost of goods sold is $70,000. Inventory balances for the past two years are $10,000 and $20,000. What is the inventory turnover? a. 4.67 times per year b. 7.0 times per year c. 6.67 times per year d. 3.5 times per year

A

Sergio's Corporation overstated its ending inventory by $20,000 in 2018. What impact will this have on cost of goods sold (CoGS) and gross profit (GP) in 2019? a. Overstated CoGS by $20,000; Understate GP by $20, 000 b. Understate CoGS by $20,000; Overstate GP by $20, 000 c. Understate CoGS by $20,000; Understate GP by $20, 000 d. No misstatement in 2019

A

Sergio's Corporation overstated its ending inventory by $20,000 in 2018. What impact will this have on ending inventory (EI) and retained earnings (RE) in 2018? a. Overstated EI by $20,000; Understate RE by $20, 000 b. Understate EI by $20,000; Overstate RE by $20, 000 c. Overstate EI by $20,000; Overstate RE by $20, 000 d. No misstatement in 2018

A

Which inventory method or cost flow assumption most closely resembles the actual physical flow of goods? a) FIFO b) LIFO c) Weighted-average d) FILO

A

Which of the following transactions would increase the balance of the inventory account for a company using the perpetual inventory system? a. Costs of incoming freight charges on merchandise inventory b. A return of damaged inventory to the vendor c. A purchase discount taken for prompt payment d. Shipping charges for outgoing inventory

A

During a period of rising prices, which inventory cost flow assumption would result in the highest cost of goods sold, and thereby the lowest net income? a) FIFO b) LIFO c) Weighted-average d) FILO

B

Sergio's Corporation overstated its ending inventory by $20,000 in 2018. What impact will this have on cost of goods sold (CoGS) and gross profit (GP) in 2018? a. Overstated CoGS by $20,000; Understate GP by $20, 000 b. Understate CoGS by $20,000; Overstate GP by $20, 000 c. Understate CoGS by $20,000; Understate GP by $20, 000 No misstatement in 2018

B

Which level of profitability is considered profit from normal operations? a) Gross profit b) Operating income c) Income before taxes d) Net income

B

At the beginning of the year, Darwin Incorporated reports inventory of $10,000. During the year, the company purchases additional inventory for $42,000. At the end of the year, the cost of inventory remaining is $15,000. Calculate cost of goods sold for the year. a) $23,000 b) $42,000 c) $37,000 d) $47,000

C

At the beginning of the year, Dani Incorporated reports inventory of $420,000. During the year, the company records cost of goods sold of $1,050,000. At the end of the year, the cost of inventory remaining is $555,000. Calculate purchases for the year. a. $915,000 b. $1,500,000 c. $945,000 d. $1,185,000

D

At the end of the year, a company reports the following inventory amounts ($ per unit): Item # of Units Cost NRV A 100 $4 $8 B 150 $8 $6 The amount to report for ending inventory using the lower of cost and net realizable value is: a. $1,600 b. $1,700 c. $2,000 d. $1,300

D

Sergio's Corporation overstated its ending inventory by $20,000 in 2018. What impact will this have on ending inventory (EI) and retained earnings (RE) in 2019? a. Overstated EI by $20,000; Understate RE by $20, 000 b. Understate EI by $20,000; Overstate RE by $20, 000 c. No misstatement of EI; Overstate RE by $20, 000 d. No misstatement at the end of 2019

D

Which of the following inventory accounts consists of items for which the manufacturing process is complete? a) Raw Materials b) Work-In-Process c) Cost of Goods Sold d) Finished Goods

D