Exam 2 - Clicker Questions 2/28/17

Beginning inventory is $30,000. Purchases of inventory during the year are $50,000. Cost of goods sold is $60,000. What is ending inventory? A. $20,000 B. $30,000 C. $10,000 D. $50,000

A. $20,000 Beginning inventory: $30,000 Purchases: 50,000 Cost of goods available for sale: 80,000 Ending Inventory: (60,000) Cost of Goods Sold: $20,000

The cost of unsold inventory at the end of the year is classified as a(n) ______ in the ______. A. Asset; Balance sheet B. Expense; Income statement C. Liability; Balance sheet D. Revenue; Income statement

A. Asset; Balance sheet

The inventory cost flow assumption that generally best matches the physical flow of inventory is: A. FIFO B. LIFO C. Weighted‐average D. Lower of cost or net realizable value

A. FIFO

Cost of goods sold is: A. Reported in the income statement B. Reported in the balance sheet C. A current asset D. The cost of inventory on hand at the end of the period

A. Reported in the income statement

Consider the following year-end information for Knomark Corporation: Cost of goods sold: $420,000 Sales Revenue: 800,000 Nonoperating expenses: 10,000 Operating expenses: 170,000 Income tax expense: 80,000 What amount will Knowmark report for operating income? A. $200,000 B. $210,000 C. $380,000 D. $120,000

B. $210,000 Sales: $800,000 Cost of goods sold: (420,000) Gross Profit = 380,000 Operating expenses: (170,000) Operating income = $210,000

Inventory methods such as LIFO and FIFO deal more with goods flow than with cost flow. A. True B. False

B. False

If a company has ending inventory of $25,000, purchases during the year of $95,000, and beginning inventory of $30,000, cost of goods sold equals $90,000. A. True B. False

B. False Beginning inventory: $30,000 Purchases: 95,000 Cost of goods available for sale: 125,000 Ending Inventory: (25,000) Cost of Goods Sold: $100,000

One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for: A. Current assets B. Inventory C. Selling expenses D. Deferred revenue

B. Inventory Service companies sell a service not a product (inventory)

The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is: A. FIFO B. LIFO C. Weighted‐average D. Specific identification

B. LIFO

Which level of profitability is considered profit from normal operations? A. Gross profit B. Operating income C. Income before taxes D. Net income

B. Operating Income Income before taxes and net income include non-operating items, which are not considered part of normal operations.

The primary distinction between operating activities and non-operating activities in a multiple‐step income statement is whether the activity is: A. A large or small dollar amount B. Part of primary business operations C. Related to current versus long‐term assets D. Reported as a revenue or an expense

B. Part of primary business operations

Inventory does not include: A. Materials used in the production of goods to be sold. B. Assets intended to be sold in the normal course of business. C. Equipment used in the manufacturing of assets for sale. D. Assets currently in production for normal sales.

C. Equipment used in the manufacturing of assets for sale.

Given the information in the table below, what is the company's gross profit? Sales revenue: $350,000 Accounts receivable: $280,000 Ending inventory: $230,000 Cost of goods sold: $180,000 Sales returns: $50,000 Sales discount: $20,000 A. $280,000 B. $170,000 C. $50,000 D. $100,000

D. $100,000 Sales: $350,000 Sales returns: (50,000) Sales discounts: (20,000) Net sales = 280,000 Cost of goods sold: (180,000) Gross profit = $100,000

Costs that are expensed when incurred are called? A. Product costs B. Direct costs C. Inventoriable costs D. Period costs E. Indirect costs

D. Period Costs

Which of the following statements is true? A. Product costs affect only the balance sheet B. Product costs affect only the income statement C. Period costs affect only the balance sheet D. Neither product costs nor period costs affect the Statement of Retained Earnings. This can also be a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation) E. Product costs eventually affect both the balance sheet and the income statement.

E. Product costs eventually affect both the balance sheet and the income statement. Balance sheet - Inventory Income Statement - Cost of goods sold