2 - 2 Quiz
Which of the following is a characteristic of a perpetual inventory system? - Inventory records are not kept for every item - Inventory purchases are debited to a Purchases account - Cost of goods sold is determined as the amount of purchases less the change in inventory - Cost of goods sold is recorded with each sale
Cost of goods sold is recorded with each sale
All of the following costs should be charged against revenue in the period in which costs are incurred except for - Costs which will not benefit any future period - Costs of the goods for sale that are sold in a future period - Costs of the accounting department salaries - Manufacturing overhead costs for a product manufactured and sold in the same accounting period
Costs of the goods for sale that are sold in a future period
Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.
False
When a perpetual inventory system is used with the average-cost method, the average inventory cost is recalculated each time a sale is made
False
Which of the following characteristics do intangible assets possess? - Long-lived - Held for resale - Claim to a specific amount of cash in the future - Physical existence
Long-lived
Which of the following is reported in the "Other Expenses and Losses" section of the income statement? - Amortization expense - Research and development expense - Loss on sale of patent - All of these are reported in "Other Expenses and Losses"
Loss on sale of patent
Which of the following is a product cost as it relates to inventory? - Interest costs - Raw materials - Selling costs - Abnormal spoilage
Raw materials
In 2026, Sheridan Company purchased the net assets of Grouper Corporation for $2191200. On the date of the transaction, Grouper had $597600 of liabilities. The fair value of Grouper's assets when acquired were as follows: Current assets : $1075680 Noncurrent assets : $2509920 = $3585600 How should the $796800 difference between the fair value of the net assets acquired ($2988000) and the cost ($2191200) be accounted for by Sheridan? - The current assets should be recorded at $1075680 and the noncurrent assets should be recorded at $1713120 - A deferred credit of $796800 should be set up and then amortized to income over a period not to exceed forty years - The $796800 difference should be credited to retained earnings - The $796800 difference should be recognized as a gain
The $796800 difference should be recognized as a gain
When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold? - Cash (purchase) discounts taken during the period - Trade discounts applicable to purchases during the period - Cost of freight-in for merchandise purchased during the period - Purchase returns and allowances of merchandise during the period
Trade discounts applicable to purchases during the period
Which of the following is not reported under the "Other Expenses and Losses" section of the income statement? - Goodwill impairment losses - Patent impairment losses - Trade name amortization expense - Loss on sale of patent
Trade name amortization expense
LIFO liquidations can occur frequently when using a specific-goods LIFO approach.
True
The cost of acquiring a customer list from another company is recorded as an intangible asset
True
The downside of keeping inventory levels low is that the merchandiser may lose sales to other companies
True
Oriole Corp. uses dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows: Year endedDecember 31 Inventory atEnd-of-year Prices PriceIndex 2024 $ 652000 1.002025 1257000 1.052026 1355250 1.10 What is the 2025 inventory balance using dollar-value LIFO? (Round intermediate calculations and final answer to 0 decimal places, e.g. 10,000.) - $1282000 - $1257000 - $1254400 - $1224400
$1224400
Blossom Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2024. Its inventory at that date was $1101000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Date : Inventory at Current Prices : Current Price Index December 31, 2025 : $1270000 : 105 December 31, 2026 : $1440000 : 123 December 31, 2027 : $1620000 : 128 What is the cost of the ending inventory at December 31, 2027 under dollar-value LIFO? (Round intermediate calculations and final answer to 0 decimal places, e.g. 10,000.) - $1260000 - $1295682 - $1265625 - $1342257
$1295682
Bonita Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2025 was $288000. The balance in the same account at the end of 2026 is $412000. Bonita's Cost of Goods Sold account has a balance of $2190000 from sales transactions recorded during 2026. What amount should Bonita report as Cost of Goods Sold in the 2026 income statement? - $2190000 - $2602000 - $2314000 - $2066000
$2314000
In January 2021, Crane Corporation purchased a patent for a new consumer product for $593500. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. In 2026 the product was determined to be obsolete due to a competitor's new product. What amount should Crane report on the income statement during 2026 related to the patent, assuming straight-line amortization is recorded at the company's December 31 year-end? - $296750 - $613500 - $196750 - $39350
$296750
Coronado Co. records purchases at net amounts. On May 5 Coronado purchased merchandise on account, $76000, terms 2/10, n/30. Coronado returned $5500 of the May 5 purchase and received credit on account. At May 31, the balance had not yet been paid. The amount to be recorded as a purchase return is - $5390 - $5500 - $4950 - $5610
$5390
The general ledger of Oriole Corporation as of December 31, 2025, includes the following accounts: Copyrights : $74000 Deposits with advertising agency (will be used to promote goodwill) : $30000 Discount on bonds payable : $48000 Excess of cost over fair value of identifiable net assets of acquired subsidiary : $524000 Trademarks : $59000 Oriole's balance sheet at December 31, 2025 will report total intangible assets of - $687000 - $613000 - $639000 - $657000
$657000
The following information is available for Cullumber Company's patents: Cost : $4040000 Carrying amount: $2520000 Expected future net cash flows : $2188000 Fair value : $1600000 Cullumber would record a loss on impairment of - $920000 - $1852000 - $332000 - $2520000
$920000 Carrying amount - Fair value
