Wk 2 – Practice: Topic 5: Accounting for Inventory and Cost of Goods Sold Quick Check

A periodic inventory system is most often used when: -Inventory has a small number of items with relatively high value -Inventory has a small number of items with relatively low value -Inventory has a large number of items with relatively low value -Inventory has a large number of items with relatively high value

Inventory has a large number of items with relatively low value

A perpetual inventory system is most often used when: -Inventory has a large number of items with relatively high value -Inventory has a small number of items with relatively low value -Inventory has a small number of items with relatively high value -Inventory has a large number of items with relatively low value

Inventory has a small number of items with relatively high value

If a company sold merchandise for a profit, the accounting equation would show a(n): -Net increase in assets and increase in revenues -Net decrease in assets and increase in revenues -Net increase in assets and decrease in liabilities -Increase in liabilities and increase in revenues

Net increase in assets and increase in revenues

If the ending inventory is overstated, net income for the same period will be: -Cannot be determined from the information given -Unaffected -Understated -Overstated

Overstated

Under which inventory system would a company NOT be able to specifically determine the amount of inventory lost or stolen? -Periodic inventory system -Perpetual inventory system -Both periodic and perpetual inventory systems -Neither periodic nor perpetual inventory systems

Periodic inventory system

If expenses are overstated on the income statement, net income: -Will be overstated -Cannot be determined from the information given -Will be understated -Will be unaffected

Will be understated

The perpetual method of accounting for inventory: -Is not as helpful as a periodic method in providing management with timely reports about inventory quantities and costs -Requires that a physical count of inventory be taken before the cost of goods sold can be determined with any reasonable degree of accuracy -Allows management to better estimate inventory losses from pilferage than does a periodic inventory method -Is likely to be less expensive to maintain than a periodic inventory method

Allows management to better estimate inventory losses from pilferage than does a periodic inventory method

A physical count would be necessary at the end of the accounting period under which inventory system? -Neither periodic nor perpetual inventory systems -Both periodic and perpetual inventory systems -Periodic inventory system -Perpetual inventory system

Both periodic and perpetual inventory systems

With a periodic inventory system, inventory-related data can be used to compute an estimate of what ending inventory should be before an ending inventory count is made. What is the correct calculation of this estimate of ending inventory? -Cost of goods sold plus purchases -Purchases plus beginning inventory -Cost of goods available for sale minus cost of goods sold -Cost of goods available for sale plus purchases -Cost of goods sold minus beginning inventory -Cost of goods sold plus cost of goods available for sale

Cost of goods available for sale minus cost of goods sold

For external reporting purposes, inventory shrinkage is usually combined with which account? -Cost of goods sold -Gross profit -Operating expenses -Merchandise inventory

Cost of goods sold