Acctg 326 Ch 8

Which inventory costing method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale? Multiple choice question. Specific identification LIFO Average cost FIFO

Average cost

In a periodic inventory system, purchase returns are closed to what account at the end of the reporting period? Multiple choice question. Inventory Cost of goods sold Returns expense Purchase expense

Cost of goods sold

Which of the following would be included in the journal entry needed to adjust a LIFO reserve for an increase in the difference between LIFO and FIFO inventory balances? Multiple choice question. Credit to Inventory Debit Cost of goods sold Credit Cost of goods sold Debit to LIFO reserve

Debit Cost of goods sold

Which of the following would be included in the journal entry needed to adjust a LIFO reserve for an increase in the difference between LIFO and FIO inventory balances? Multiple choice question. Debit Cost of goods sold Credit Cost of goods sold Debit to LIFO reserve Credit to Inventory

Debit Cost of goods sold

True or false: Goods shipped f.o.b. destination are included in the purchaser's inventory while the goods are in transit. True false question. True False

False

Which of the following is a correct interpretation of the information provided by the gross profit margin? Multiple choice question. It indicates the percentage of each sales dollar available to cover other expenses. It indicates the percentage of each sales dollar available as income. It indicates the percentage of each sales dollar available to cover the cost of sales.

It indicates the percentage of each sales dollar available to cover other expenses.

A(n) _____ inventory pool groups items based on physical similarities. Multiple choice question. LIFO LCM FIFO

LIFO

If a company uses LIFO to measure its taxable income, the IRS requires that LIFO also be used to measure income reported to investors and creditors.This is know as the Multiple choice question. LIFO observance rule. LIFO conformity rule. Inventory choice rule. Inventory costing rule.

LIFO conformity rule.

Where can freight-out charges be found? (Select all that apply.) Multiple select question. Cost of inventory Selling expenses Cost of goods sold

Selling expenses Cost of goods sold

The average cost method assumes that cost of goods sold consists of Multiple choice question. the most recently purchased units. a mixture of all the goods available for sale. the oldest units in inventory.

a mixture of all the goods available for sale.

The dollar-value LIFO method extends the concept of inventory pools by allowing companies to Multiple choice question. combine a large variety of goods in one pool. combine all goods in one single inventory pool. avoid all inventory liquidations.

combine a large variety of goods in one pool.

A LIFO liquidation occurs when inventory quantities ______. Multiple choice question. increase decrease stay the same Correct Answer

decrease

When prices increase, the ______ inventory method tends to decrease a company's tax liability during a particular fiscal period relative to other inventory methods. (Enter one word per blank) Multiple choice question. average cost first-in, first-out last-in, first-out

last-in, first-out

When prices increase, the ______ inventory method provides the best matching of revenue and expenses. Multiple choice question. LIFO weighted average FIFO

lifo

Use of LIFO inventory pools reduces the chance of unintentional LIFO layer _______

liquidation

Finished goods is a type of inventory found on a _____ company's balance sheet. Multiple choice question. wholesale retail merchandising manufacturing

manufacturing

Companies closely monitor inventories to maintain a sufficient ________ of inventory to meet customer demand, while also controlling the ______ of carrying inventory. Multiple choice question. quantity; cost cost; quantity quality; demand order; production

quantity; cost

The dollar-value LIFO (DVL) method (Select all that apply.) Multiple select question. reduces the risk of liquidation of layers. simplifies recordkeeping. increases the risk of liquidation of layers. prevents liquidation of layers.

reduces the risk of liquidation of layers. simplifies recordkeeping.

In a period of rising prices, LIFO produces a higher cost of goods sold, lower net income and therefore, lower__________ liability. (Enter only one word.)

tax

A DVL pool is made up of items Multiple choice question. that are likely to have similar cost change pressures. that have similar physical characteristics. from different purchases within the same year.

that are likely to have similar cost change pressures.

True or false: Dollar-value LIFO allows a company to combine a large variety of goods into one pool. True false question. True False

true Reason: DVL extends the concept of inventory pools and allows various goods to be combined into one pool.

When a company utilizes a periodic inventory system, a physical count is necessary to determine cost of goods sold because Multiple choice question. cost of goods sold is not determined at the time of sale. cost of goods sold may have been calculated incorrectly at time of sale. cost of goods sold is automatically recorded at time of sale.

cost of goods sold is not determined at the time of sale.

Items a company intends to sell in the normal course of business, has in production for future sale, or uses currently in production, are all examples of what? Multiple choice question. Investments Raw materials Inventory Work in process

Inventory

Which of the following is a correct interpretation of the information provided by the gross profit margin? Multiple choice question. It indicates the percentage of each sales dollar available to cover the cost of sales. It indicates the percentage of each sales dollar available to cover other expenses. It indicates the percentage of each sales dollar available as income.

It indicates the percentage of each sales dollar available to cover other expenses.

combine a large variety of goods in one pool.

combine a large variety of goods in one pool.

Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016? Multiple choice question. $755,000 $758,200 $722,200 $815,400

$758,200 Reason: $815,400/1.08 = $755,000 giving 2 layers of $715,000 and $40,000. $715,000 x 1.0 = $715,000 $40,000 x 1.08 = $43,200 $715,000 + $43,200 = $758,200

Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016? Multiple choice question. $758,200 $722,200 $755,000 $815,400

$758,200 Reason: $815,400/1.08 = $755,000 giving 2 layers of $715,000 and $40,000. $715,000 x 1.0 = $715,000 $40,000 x 1.08 = $43,200 $715,000 + $43,200 = $758,200

Doris recently started her position at Monro Company. The company uses the dollar-value LIFO inventory method. On her first day at work, Doris was asked to calculate the cost index for a new inventory layer. The company's records reveal that the cost in terms of the base year was $50,000 and the cost in terms of the layer year was $100,000. What is the cost index for the new layer? Multiple choice question. 1 2 0.50

2

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory? Multiple choice question. FIFO LIFO Weighted-average

LIFO

If a company uses _____ to measure taxable income, they must use the same method for external financial reporting. Multiple choice question. FIFO Average cost LIFO

LIFO

When prices increase, the ______ inventory method provides the best matching of revenue and expenses. Multiple choice question. weighted average FIFO LIFO

LIFO

Assuming that prices rise over time, which inventory cost flow assumption will result in the highest cost of goods sold? Multiple choice question. FIFO LIFO Weighted-average

eason: In a period of rising prices, LIFO results in goods with the highest cost being sold first resulting in higher cost of goods sold. LIFO

Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased 1,200 units, pretax income would have been Multiple choice question. $1,000 higher. $2,000 lower. $1,000 lower. $2,000 higher.

$2,000 lower. Reason: Currently cost of goods sold is computed using the 1,000 units at $20 plus 200 units at $10 so the units from beginning inventory are liquidated. If they had purchased at least 1,200 units, cost of goods sold would have been higher resulting in lower pretax income.

Multiple Choice Question Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased 1,200 units, pretax income would have been Multiple choice question. $1,000 higher. $2,000 lower. $2,000 higher. $1,000 lower.

$2,000 lower. Reason: Currently cost of goods sold is computed using the 1,000 units at $20 plus 200 units at $10 so the units from beginning inventory are liquidated. If they had purchased at least 1,200 units, cost of goods sold would have been higher resulting in lower pretax income.

Question Mode Multiple Choice Question Turn Company utilizes the LIFO inventory method to calculate taxable income. Which method is available to Turn for financial reporting purposes? Multiple choice question. LIFO, FIFO or weighted-average LIFO only weighted-average FIFO only

LIFO only

The inventory turnover ratio shows Multiple choice question. the percentage of total assets that is made up of inventory how many times the average inventory balance is sold during the current reporting period. how many times the company purchases inventory during the current reporting period. the percentage of sales that is made up of inventory

how many times the average inventory balance is sold during the current reporting period.

Which of the following are disadvantages of unit LIFO? (Select all that apply.) Multiple select question. Inventory pools are costly to implement Possibility of LIFO liquidation Disallowed by U.S. GAAP Significant recordkeeping costs

Possibility of LIFO liquidation Significant recordkeeping costs

A slowing turnover ratio combined with higher than normal inventory levels may indicate which of the following? (Select all that apply.) Multiple select question. Potential for increased production Potential for decreased production Potential for increased net income Potential for inventory becoming obsolete

Potential for decreased production Potential for inventory becoming obsolete

A _____ inventory system recognizes cost of goods sold each time a sale occurs; a _____ inventory system decreases inventory each time a sale occurs. Multiple choice question. periodic; periodic perpetual; periodic perpetual; perpetual periodic; perpetual

perpetual; perpetual

High recordkeeping costs and possible LIFO liquidation are disadvantages of Multiple choice question. dollar value LIFO. LIFO inventory pools. unit LIFO.

unit LIFO.

Where can freight-out charges be found? (Select all that apply.) Multiple select question. Cost of goods sold Selling expenses Cost of inventory

Cost of goods sold Selling expenses

Rudy Company reports gross sales revenue of $5.2 million, net sales revenue of $5 million, and cost of goods sold of $3 million. Its inventory balance was $250,000 at the beginning of the accounting period and $300,000 at the end of the accounting period. The company's inventory turnover ratio is closest to Multiple choice question. 18 11 10 12

11 Reason: $3 million/($250,000+$300,000/2)=10.9 rounded to 11

Parker Company reports gross sales revenue of $7.5 million, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Its inventory balance was $150,000 at the beginning of the accounting period and $200,000 at the end of the accounting period. The company's inventory turnover ratio is closest to Multiple choice question. 20 11 10 23

20 Reason: $3.5 million/($150,000+$200,000/2)

f goods are shipped f.o.b. destination, the ____________usually is responsible for shipping.

Blank 1: seller or supplier

The cost of goods sold equation assumes that all inventory not on hand at the end of the period was sold and does not account for damaged or stolen merchandise. This is a disadvantage in which type of inventory system? Multiple choice question. Both periodic and perpetual Periodic Perpetual

Periodic

The cost of goods sold equation assumes that all inventory not on hand at the end of the period was sold and does not account for damaged or stolen merchandise. This is a disadvantage in which type of inventory system? Multiple choice question. Periodic Perpetual Both periodic and perpetual

Periodic

True or false: A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count. True false question. True False

Reason: A periodic inventory system does not track inventory changes and a physical count is necessary. False

Which of the following situations would result in a LIFO liquidation for a company that has 200 units in beginning inventory and sales of 1,000 units? Multiple choice question. The company purchases 1,100 units during the year. The company purchases 1,000 units during the year. The company purchases 950 units during the year.

The company purchases 950 units during the year.

Which of the following is not a characteristic of an asset classified as inventory? Multiple choice question. The item will be used to manufacture a product that will be held for resale. The item is held for resale. The item is currently in production for future resale. The item is currently used as part of the company's day-to-day operations.

The item is currently used as part of the company's day-to-day operations.

When merchandise is shipped f.o.b. destination, who includes the inventory on their balance sheet when the goods are with the common carrier? Multiple choice question. The purchaser The seller Both the seller and purchaser

The seller

Which of the following represent a reason why managers closely monitor inventory levels? (Select all that apply.) Multiple select question. To ensure that sufficient units are available. To ensure that layers are not liquidated under the FIFO method. To minimize costs of ordering and carrying inventory.

To ensure that sufficient units are available. To minimize costs of ordering and carrying inventory.

Question Mode Multiple Select Question Select all that apply Which factors may influence a company's choice of inventory cost flow assumption? (Select all that apply.) Multiple select question. actual physical flow of inventory demand for its products tax implications of choice financial statement effect

actual physical flow of inventory tax implications of choice financial statement effect

A just-in-time (JIT) inventory system (Select all that apply.) Multiple select question. allows companies to maintain relatively low inventory balances. reduces the need for coordination with suppliers. assists managers with inventory management. tends to increase storage costs.

allows companies to maintain relatively low inventory balances. assists managers with inventory management.

Inventory cost flow assumptions can be used to assign dollar amounts to (Select all that apply.) Multiple select question. sales revenue. ending inventory. purchases. goods sold.

ending inventory. goods sold.

True or false: The LIFO method of inventory valuation is permitted under U.S. GAAP and IFRS. True false question. True False

false Reason: IFRS prohibits the use of LIFO under IAS No. 2.

A LIFO inventory pool consists of inventory grouped according to _____. Multiple choice question. unit size purchase price physical similarities flow of goods

physical similarities

The cost of components purchased from another manufacturer that will become part of the finished product are recognized in the __________ ___________account.

raw material

A significant disadvantage of the periodic inventory system is that it assumes that quantities not on hand at the end of the period were ______. Multiple choice question. damaged stolen sold returned

sold

A significant disadvantage of the periodic inventory system is that it assumes that quantities not on hand at the end of the period were ______. Multiple choice question. stolen sold damaged returned

sold

Generally, product costs are expensed when the related products are Multiple choice question. finished ordered by a customer purchased sold

sold

Adams Corp., a merchandising company, has 30,000 units in its inventory on December 31. Just before closing for the day, the company ships 2,000 units to a customer. The company also receives a notice from its supplier that an order of 10,000 units has been shipped. The terms for the sale and the purchase were f.o.b. shipping point. How many units of merchandise should be included in Adam's ending inventory? Multiple choice question. 28,000 units 38,000 units 40,000 units 42,000 units 30,000 units

38,000 units Reason: 30,000 - 2,000 + 10,000

The terms 5/15, n/45 mean what? Multiple choice question. A 5% purchase discount if payment is made between 16 and 45 days. A 5% purchase discount if payment is made within 15 days. A 15% purchase discount if payment is made within 5 days.

A 5% purchase discount if payment is made within 15 days.

Within LIFO inventory pools, all purchases during the period are considered to be made at the same_________ and the same____________

Blank 1: time Blank 2: cost or price

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory? Multiple choice question. FIFO Weighted-average LIFO

LIFO Reason: In a period of rising prices, LIFO results in goods with the highest cost being sold first resulting in lower ending inventory.

Arranging for another company to sell a company's products is referred to as a(n) _________

consignment

The _____ ratio indicates the percentage of each sales dollar available to cover expenses other than cost of goods sold and then to provide a profit. Multiple choice question. cost of goods sold inventory turnover gross profit net profit

gross profit

A LIFO inventory pool consists of inventory grouped according to _____. Multiple choice question. purchase price physical similarities unit size flow of goods

physical similarities

Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016? Multiple choice question. $722,200 $815,400 $758,200 $755,000

$758,200 Reason: $815,400/1.08 = $755,000 giving 2 layers of $715,000 and $40,000. $715,000 x 1.0 = $715,000 $40,000 x 1.08 = $43,200 $715,000 + $43,200 = $758,200

Chase Company reports gross sales revenue of $7.5 million, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Rounding to the nearest percent, the company's gross profit ratio would be Multiple choice question. 47%. 57%. 50%. 53%.

57 percent

Advantages of using LIFO inventory pools include which of the following? (Select all that apply.) Multiple select question. Simplify recordkeeping Account for each type of inventory separately Reduce the risk of LIFO layer liquidations

Simplify recordkeeping Reduce the risk of LIFO layer liquidations

Which of the following situations would result in a LIFO liquidation for a company that has 200 units in beginning inventory and sales of 1,000 units? Multiple choice question. The company purchases 950 units during the year. The company purchases 1,100 units during the year. The company purchases 1,000 units during the year.

The company purchases 950 units during the year.

What of the following could motivate a company that uses LIFO for external reporting to use another method for internal recordkeeping? (Select all that apply.) Multiple select question. The high recordkeeping cost of LIFO. The difficulty in determining LIFO costs. Contractual agreements such as bonus contracts.

The high recordkeeping cost of LIFO. Contractual agreements such as bonus contracts.

Within LIFO inventory pools, all purchases during the period are considered to be made (Select all that apply.) Multiple select question. at the same cost. at the same time. at the beginning of the period. at the end of the period.

at the same cost. at the same time.

The inventory turnover ratio is computed as _____ divided by average inventory. Multiple choice question. gross profit cost of goods sold net sales total revenue

cost of goods sold

In a LIFO inventory system, inventory amounts shown in the balance sheet may be distorted because they may represent Multiple choice question. costs incurred several years earlier. costs incurred in the most recent accounting periods. costs that have not yet been incurred.

costs incurred several years earlier.

Smith Corporation began Year 1 with a difference of $50,000 between inventory valued internally using FIFO and inventory valued using LIFO. At the end of Year 1, this difference increased to $75,000. The journal entry to record this increase would include a Multiple choice question. credit to LIFO reserve for $75,000. debit to LIFO reserve for $25,000. credit to LIFO reserve for $25,000. debit to LIFO reserve for $75,000.

credit to LIFO reserve for $25,000.

Which of the following inventory cost flow assumptions is prohibited under International Financial Reporting Standards? Multiple choice question. weighted-average first in, first out last in, first out

last in, first out

The layer year cost index is calculated by dividing the cost in ______ year by the cost in ______ year. Multiple choice question. layer; base base; layer last; first first; last

layer; base

Analyzing changes in the inventory _______ ratio can provide information about the quality of current period earnings

turnover

The _____ ratio indicates the percentage of each sales dollar available to cover expenses other than cost of goods sold and then to provide a profit. Multiple choice question. net profit inventory turnover gross profit cost of goods sold

gross profit

The gross profit ratio is computed as _____ divided by net sales. Multiple choice question. cost of goods sold revenue gross profit net income

gross profit

Steiner Company's average days in inventory has decreased during 2016 as compared to the prior year. From this information, we can conclude that Steiner (Select all that apply.) Multiple select question. is selling its inventory faster. has a lower inventory turnover ratio. is selling its inventory slower. has a higher inventory turnover ratio.

is selling its inventory faster. has a higher inventory turnover ratio.

Purchase returns by the buyer lead to a reduction in Multiple choice question. cost of goods sold. net purchases. sales revenue.

net purchases.

A(n) _________inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise. (Enter only one word.)

perpetual

The seller views returns as a reduction of net _____; the buyer views returns as a reduction of net _____. Multiple choice question. sales; sales sales; purchases purchases; purchases purchases; sales

sales; purchases

In a consignment, a company arranges for another company to Multiple choice question. ship its products. buy its products. sell its products.

sell its products.

LIFO inventory pools Multiple choice question. result in lower cost of goods sold. simplify recordkeeping. prevent liquidation of layers.

simplify recordkeeping.

Gerhard Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, COGS would have been Multiple choice question. $2,000 higher. $1,000 higher. $2,000 lower. $1,000 lower.

$2,000 higher.

Palmer Company's beginning inventory consists of 1,000 units at $1.00 per unit. During the year, the company purchases 5,000 units costing a total of $5,800. At the end of the accounting period, Palmer still has 1,000 units on hand. If Palmer uses the weighted average cost method, its cost of goods sold (rounded to the nearest dollar) will be Multiple choice question. $6,000. $5,800. $5,667. $1,000. $1,133.

$5,667. Reason: 5,000 x [(1,000 + 5,800)/6,000] = $5,667

Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's pretax income for the 2016 fiscal year would have been Multiple choice question. $150,000 lower if it had used FIFO. $50,000 lower if it had used FIFO. $50,000 higher if it had used FIFO. $150,000 higher if it had used FIFO.

$50,000 higher if it had used FIFO.

Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the periodic LIFO method, ending inventory will be Multiple choice question. $652 $600 $660 $615

$615 Reason: ($3,300/1,000) x 50 units + $450

In a periodic inventory system, purchase returns are closed to what account at the end of the reporting period? Multiple choice question. Inventory Returns expense Cost of goods sold Purchase expense

Cost of goods sold

What is the first step in measuring inventory and cost of goods sold? Multiple choice question. Determining the sale price of goods. Determining the cost of goods. Determining the physical quantities of goods.

Determining the physical quantities of goods.

In a perpetual inventory system, freight costs on purchases are Multiple choice question. recorded in a separate Freight-in account. added to the inventory account. expensed during the period incurred.

added to the inventory account.

The dollar-value LIFO (DVL) inventory method Multiple choice question. allows a broader range of goods to be included in pools. requires pooled inventory to have similar physical characteristics. complicates recordkeeping procedures.

allows a broader range of goods to be included in pools.

In a periodic inventory system, purchase returns Multiple choice question. are recorded as an expense. are recorded in a separate contra purchases account. directly reduce the Inventory account balance.

are recorded in a separate contra purchases account.

The dollar-value LIFO method extends the concept of inventory pools by allowing companies to Multiple choice question. combine all goods in one single inventory pool. avoid all inventory liquidations. combine a large variety of goods in one pool.

combine a large variety of goods in one pool.

In a periodic inventory system, the inventory account during the accounting period reflects Multiple choice question. cost of goods currently available for sale. cost of ending inventory. cost of beginning inventory.

cost of beginning inventory.

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the periodic LIFO method, cost of goods sold will be Multiple choice question. $1,744. $1,760. $1,980.

$1,760. Reason: (($1,980/900) x 800) = $1,760

On January 1, Carmen Company has 100 units costing $100 in beginning inventory. On January 2, Carmen purchases an additional 400 units for $1.50 per unit, and sells 300 units. On January 3, the company purchases an 200 additional units for $1.60 per unit. On January 4, Carmen sells 100 additional units. If Carmen utilizes a perpetual LIFO system, per unit cost of goods sold associated with the January 4 sale will be Multiple choice question. $1.60. $1.50. $1.00. $1.55.

$1.60. Reason: These will come from the most recent purchase on 1/3 at $1.60 per unit

Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, cost of goods sold will be Multiple choice question. $3,135. $3,090. $3,098. $2,640.

$3,090. Reason: 950 units have been sold. 150 units from beginning inventory at $450 plus 800 units from the units purchased. ($3,300/1000) = $3.30 x 800 = $2640 + 450 = $3090

Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the periodic LIFO method, cost of goods sold will be Multiple choice question. $3,135 $3,098 $2,640 $660

$3,135 Reason: 1150 total units - 200 units = 950 units sold x ($3,300/1,000) = $3135

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the periodic LIFO method, ending inventory will be Multiple choice question. $436. $420. $440.

$420. Reason: (($1,980/900) x 100) +$200 = $420

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be Multiple choice question. $636. $620. $600. $640.

$640. Reason: $2,880/900 x 200 = $640

Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1,000 units for a total cost of $3,300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, ending inventory will be Multiple choice question. $660. $3,090. $615. $652.

$660. Reason: 200 units remain. ($3,300/1000) = $3.30 x 200 = $660

Smith Company purchases merchandise for $10,000. The payment terms are stated as 2/10, n/30. If the company utilizes the net method to record purchases, the merchandise will be recorded at what amount? Multiple choice question. $9,800. $10,200. $10,000.

$9,800. Reason: $10,000 x 2% = 200 discount

Multiple Choice Question On December 31, Salz Company sells 1,000 units of merchandise to Weiner Corp. and 2,000 units to Torr Corp. Shipping terms are f.o.b. destination for the 1,000-unit sale and f.o.b. shipping point for the 2,000-unit sale and the goods have shipped. If Salz still has 10,000 physical units in its inventory after these sales, how many units should Salz include in its ending inventory on December 31? Multiple choice question. 12,000 units 11,000 units 13,000 units 10,000 units

11,000 units Reason: The 10,000 units in ending inventory plus the 1,000 units shipped f.o.b. destination are included in Salz's inventory

What is required at the end of a reporting period in a periodic inventory system? Multiple choice question. A physical count of the period's ending inventory so an adjustment can be made. A report showing the merchandise inventory tracking throughout the period so an adjustment can be made. Nothing is required as the inventory account is continuously adjusted throughout the period.

A physical count of the period's ending inventory so an adjustment can be made.

Which of the following companies would be most likely to utilize the specific identification method? Multiple choice question. Carmen Company produces its products in 100,000-unit batches. Barny Company purchases and sells a large quantity of interchangeable units. Adams Company produces one-of-a-kind products.

Adams Company produces one-of-a-kind products.

Cost flow _________are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory. (Enter only one word.)

Blank 1: assumptions or assumption

The __________method of recording purchase discounts, subtracts the discount from total purchases to determine net purchases.

Blank 1: gross

The cost of freight-in paid by the purchaser is most commonly included in the cost of _______

Blank 1: inventory

If a company has a policy of not including shipping charges in cost of goods sold, which of the following must occur? Multiple choice question. The income statement classification of freight-out charges must be disclosed, but the amount of freight-out charges is not necessary. Both the amount of freight-out charges incurred during the period and the income statement classification of charges must be disclosed. The amount of freight-out charges must be disclosed, but the income statement classification is not necessary.

Both the amount of freight-out charges incurred during the period and the income statement classification of charges must be disclosed.

Suppose that Michale Company operates in an environment of rising prices and utilizes the periodic inventory system. If the company were to use the LIFO inventory method, its cost of goods would be $500,000; if it were to use the FIFO method, its cost of goods sold would be $400,000. Based on this information, which of the following predictions would be correct with respect to the weighted-average cost method? Multiple choice question. Cost of goods sold would be lower than $400,000. Cost of goods sold would be between $400,000 and $500,000. Cost of goods sold would be higher than $500,000.

Cost of goods sold would be between $400,000 and $500,000.

Assuming that prices increase, which of the following inventory methods results in lower costs of goods sold? Multiple choice question. FIFO weighted-average LIFO

FIFO

Which inventory costing method assumes that items in ending inventory are the most recently acquired? Multiple choice question. LIFO FIFO Average cost

FIFO

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold? Multiple choice question. FIFO Weighted-average LIFO

FIFO Reason: In a period of rising prices, FIFO results in goods with the lowest cost beings old first resulting in the lowest cost of goods sold

Many companies maintain their internal records using _____ or the average cost method, but use ______ for external reporting and income tax purposes. Multiple choice question. LIFO; average cost LIFO; FIFO FIFO; average cost FIFO; LIFO

FIFO; LIFO

Once products are completely manufactured, the related costs are transferred to ______ ________

Finished goods

Which of the following are included in inventory? (Select all that apply.) Multiple select question. Assets used in daily operations of the company. Goods that manufacturers produce for sale. Assets a retail company acquires for resale.

Goods that manufacturers produce for sale. Assets a retail company acquires for resale.

Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what? Multiple choice question. The total units of goods in ending inventory. How units of goods and their associated costs flow through the system. The per unit cost of each item in ending inventory.

How units of goods and their associated costs flow through the system.

Where must a company indicate the inventory costing method(s) used? Multiple choice question. In the Management Discussion and Analysis In a disclosure note Next to the inventory amount on the balance shee

In a disclosure note

The cost of freight-in paid by the purchaser is commonly included in which of the following? Multiple choice question. Inventory costAdministrative expense Shipping cost Freight expense

Inventory cost

The goods a wholesale company purchases in finished form are referred to as what? Multiple choice question. Merchandise inventory Finished goods Manufactured inventory

Merchandise inventory

Green Corp. uses a periodic inventory system. Cost of beginning inventory is $1,000. During the year, Green purchases inventory costing $11,000. Based on a physical count, Green determines that inventory costing $1,800 is still on hand. Green Corporation's cost of goods sold will be Multiple choice question. $11,000. $9,200. $12,000. $10,200.

Reason: $1,000 + 11,000 - 1,800 = $10,200 $10,200.

Donald Company purchases and sells inventory f.o.b. destination. On December 31, the company sells 10,000 units and receives notice that 40,000 units have been shipped by its supplier. Which units should be included in Donald Company's ending inventory? Multiple choice question. the 40,000 units purchased neither the units sold, nor purchased all the units the 10,000 units sold

Reason: Only the 10,000 units are included as they have not reached their destination the 10,000 units sold

On January 1, Gerhard Company has 100 units in beginning inventory. On January 3, the company purchases 500 units; on February 23, 800 units; and on March 19, 1,000 units. If the company sells 100 units on January 4, which units would be assumed to have been sold in a periodic FIFO system? Multiple choice question. The units purchased on March 19. The units purchased on January 3. The units in beginning inventory.

The units in beginning inventory.

In a periodic inventory system, purchase returns Multiple choice question. are recorded in a separate contra purchases account. directly reduce the Inventory account balance. are recorded as an expense.

are recorded in a separate contra purchases account.

Determining ownership of goods that are in transit at the end of the accounting period is important to Multiple choice question. determine an accurate arrival time. determine who must pay shipping. assure proper inventory cutoff.

assure proper inventory cutoff.

A periodic inventory system allocates cost of goods available for sale _____; a perpetual inventory system allocates cost of goods available for sale _____. Multiple choice question. each time goods are sold; at the end of the period each time goods are sold; each time goods are sold at the end of the period; at the end of the period at the end of the period; each time goods are sold

at the end of the period; each time goods are sold

The measurement of inventory and cost of goods sold starts with determining the physical quantities of goods in which of the following systems? Multiple choice question. the perpetual inventory system only both the periodic and perpetual inventory system the periodic inventory system only

both the periodic and perpetual inventory system

A periodic inventory system (Select all that apply.) Multiple select question. does not continuously track the cost of merchandise sold. continuously tracks the cost of merchandise sold. does not continuously track the quantity of merchandise. continuously tracks the quantity of merchandise.

does not continuously track the cost of merchandise sold. does not continuously track the quantity of merchandise.

Ownership of inventory at the end of the accounting period is determined for (Select all that apply.) Multiple select question. unfulfilled purchase orders. unfulfilled sales orders. goods shipped by suppliers. goods shipped to customers.

goods shipped by suppliers. goods shipped to customers.

The _____ inventory method assumes that the units in ending inventory were the items acquired first. Multiple choice question. last-in, first-out weighted average first-in, first-out

last-in, first-out

If goods are shipped f.o.b. shipping point, at time of shipment Multiple choice question. the buyer has already paid for the goods. legal title passes to the buyer. the seller still has title of the goods.

legal title passes to the buyer.

In a periodic inventory system, the inventory account is _____ and cost of goods sold is recorded _____. Multiple choice question. not adjusted as purchases and sales are made; at the end of the reporting period not adjusted as purchases and sales are made; as sales are made adjusted as purchases and sales are made; as sales are made adjusted as purchases and sales are made; at the end of the reporting period

not adjusted as purchases and sales are made; at the end of the reporting period

A physical count of inventory is necessary in a(n) ________inventory system to determine cost of goods sold. (Enter only one word.) Listen to the complete question

periodic

Which inventory system allocates cost of goods available for sale only at the end of each reporting period? Multiple choice question. both periodic and perpetual periodic inventory system perpetual inventory system

periodic inventory system

Under the _________ inventory system, purchase discounts are treated as a reduction in the inventory account.

perpetual

In a _____ system, each time inventory is purchased or sold the layers are adjusted. Multiple choice question. first-out, first-in perpetual LIFO first-in, first-out periodic LIFO

perpetual LIFO

Those costs that are included in inventory are referred to as _______costs

product

Multiple Choice Question The seller views returns as a reduction of net _____; the buyer views returns as a reduction of net _____. Multiple choice question. sales; sales purchases; sales sales; purchases purchases; purchases

sales; purchases

What method of inventory valuation matches each unit on hand at the end of the period with its actual cost? Multiple choice question. specific identification average cost first-in, first-out last-in, first-out

specific identification

aryl Corp. purchases 10,000 units of inventory on account for $50,000. Two days after receiving the inventory, Daryl discovers that 1,000 units are defective and returns the defective units to the vendor. The company utilizes a perpetual inventory system. As a result of this return, (Select all that apply.) Multiple select question. the accounts payable balance decreases. the accounts receivable balance decreases. the inventory balance decreases.

the accounts payable balance decreases. the inventory balance decreases.

The cost of inventory includes (Select all that apply.) Multiple select question. the cost to store the inventory once it arrives at desired location the cost to bring inventory to its desired location expenditures to acquire the inventory

the cost to bring inventory to its desired location expenditures to acquire the inventory

The LIFO inventory method assumes that the units that remain in ending inventory are Multiple choice question. the most recent units purchased. the oldest units in inventory. an average of all units.

the oldest units in inventory.

Weighted-average unit cost is determined by dividing cost of goods available for sale by Multiple choice question. quantity in ending inventory. total quantity available for sale. quantity most recently purchased. quantity in beginning inventory.

total quantity available for sale.

A perpetual inventory system is designed to Multiple choice question. determine quantities of inventory sold through a physical inventory count. track inventory quantities from acquisition to sale. ensure inventory is accurately counted on a regular basis.

track inventory quantities from acquisition to sale.

True or false: A perpetual inventory system allows management to determine the amount of goods that should be on hand without having to take a physical count. True false question. True False

true Reason: A perpetual inventory system records all changes in inventory as they occur so management is able to determine the amount of goods on hand.

When a company determines the quantity of inventory items, it must consider (Select all that apply.) Multiple select question. units on consignment. units in transit. purchase orders placed, but not yet shipped. units it currently possesses.

units on consignment. units in transit. units it currently possesses.

A company is most likely to utilize the specific identification method if its inventory consists of (Select all that apply.) Multiple select question. mass-produced products. very expensive products. unique products.

very expensive products. unique products.

Which of the following cost flow assumptions currently are acceptable under U.S. GAAP? (Select all that apply.) Multiple select question. weighted average first-in, first-out next-in, first-out last-in, first-out

weighted average first-in, first-out last-in, first-out

In a perpetual inventory system the inventory account is adjusted (Select all that apply.) Multiple select question. when temporary accounts are closed. when inventory is purchased. when inventory is sold.

when inventory is purchased. when inventory is sold.

Which of the following accounts would be found on the balance sheet of a manufacturing company? Multiple choice question. merchandise inventory cost of goods sold work in process

work in process