Online Tutorial Quiz

Please answer all questions

1		The specific identification method of inventory valuation would be more appropriate for a car dealer than for a hardware store.
			A)	True
			B)	False
2		If a retailer purchased 500 units of merchandise inventory at $8 per unit, and 800 units of inventory at $10 per unit, the average cost of the merchandise is $9 per unit.
			A)	True
			B)	False
3		Under the FIFO method of inventory valuation, the assignment of costs to merchandise sold is in the same order in which the merchandise was purchased.
			A)	True
			B)	False
4		The FIFO method of inventory valuation is based on an assumption that the most recent costs incurred should be charged against current-year revenues.
			A)	True
			B)	False
5		The FIFO method of inventory valuation is based on the assumption that costs should be charged against revenues in the same order in which the costs were incurred.
			A)	True
			B)	False
6		LIFO is considered the most conservative inventory pricing method.
			A)	True
			B)	False
7		Under the LIFO method of inventory valuation, the ending merchandise inventory would be valued at the purchase price of the most recent purchases.
			A)	True
			B)	False
8		During extended periods of rising prices, the FIFO method of inventory valuation will yield a higher cost of goods sold and a lower ending merchandise inventory, when compared to the LIFO method of inventory valuation.
			A)	True
			B)	False
9		The accounting principle of consistency prohibits any changes in the method of inventory valuation.
			A)	True
			B)	False
10		JIT means just in time and is an inventory method where the raw materials for production are purchased in smaller quantities after orders have been taken for the manufactured products.
			A)	True
			B)	False
11		Just-in-time inventory requires that a large inventory be maintained to avoid, if possible, any out-of-stock situations.
			A)	True
			B)	False
12		A perpetual inventory should be checked periodically against a physical inventory count.
			A)	True
			B)	False
13		The perpetually maintained inventory total is $50,000 but the physically counted value of the same inventory totals $49,800. The $200 is called a shortage.
			A)	True
			B)	False
14		Shrinkage losses are usually debited to the Inventory account when a perpetual inventory system is used.
			A)	True
			B)	False
15		If one hundred units of merchandise were purchased at $15 per unit and the end-of-period replacement cost of the merchandise is $8 per unit, the merchandise will be reported at $8 per unit.
			A)	True
			B)	False
16		Goods in transit that were purchased under freight terms of FOB Shipping Point should be included in the inventory of the buyer.
			A)	True
			B)	False
17		Goods shipped FOB destination are the property of the seller until the goods are removed from the carrier and placed on the buyer's receiving dock.
			A)	True
			B)	False
18		Goods in transit that were shipped under freight terms of 'FOB Shipping Point' should be included in the seller's inventory.
			A)	True
			B)	False
19		Merchandise shipped FOB destination is actually owned by the seller until the goods reach the receiving dock of the buyer.
			A)	True
			B)	False
20		If the ending inventory of the business is understated, the net income for the period will be understated and the retained earnings for the period will be overstated.
			A)	True
			B)	False
21		If the ending inventory of the business is overstated, the net income for the period will be overstated and the net income for the following period will also be overstated.
			A)	True
			B)	False
22		When the value of ending merchandise inventory is overstated, the net income of the subsequent year will be understated by the amount of the overstatement.
			A)	True
			B)	False
23		Should an error that understates the ending merchandise inventory not be discovered, the Retained Earnings account will be overstated at the end of the subsequent year.
			A)	True
			B)	False
24		When merchandise inventory is destroyed (by fire, theft, or other causes) it is not possible to determine the value of that merchandise inventory.
			A)	True
			B)	False
25		The ratio of goods available for sale at cost to the same goods available for sale at retail prices is called the retail method cost ratio.
			A)	True
			B)	False
26		The gross profit is 45% of net sales. The cost of goods sold then must be 55% of the net sales.
			A)	True
			B)	False
27		If the cost of goods sold increases by 1% during the period, the gross profit and net income will decrease by 1% because of this increase.
			A)	True
			B)	False
28		The average inventory totals $20,000 and the cost of goods sold totals $200,000. The inventory turnover rate is 15.0.
			A)	True
			B)	False
29		If the company averages 85 days to sell a machine, and it averages 45 days to collect the receivable for the machine, the operating cycle is about 40 days.
			A)	True
			B)	False
30		Under which cost flow assumption is the ending inventory composed of the most recently purchased merchandise?
			A)	FIFO
			B)	LIFO
			C)	Average Cost
			D)	Specific Identification
			E)	None of the above
31		Under which cost flow assumption is the ending inventory composed of the earliest purchased merchandise?
			A)	FIFO
			B)	LIFO
			C)	Average Cost
			D)	Specific Identification
			E)	Retail Method

Consider the following activity schedule:
Cost
Date Quantity Per Unit Total Cost
Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00
Mar 4, Purchase 400 19.00 7,600.00
Apr 1, Sold (50)

32		In a perpetual inventory system, what is the average cost per unit after the March 4 purchase?
			A)	$18.00
			B)	$19.00
			C)	$18.80
			D)	$18.20
			E)	$18.50

Cost
Date Quantity Per Unit Total Cost
Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00
Mar 4, Purchase 400 19.00 7,600.00
Apr 1, SOLD 50 UNITS
May 2, Purchase 100 20.00 2,000.00

33		In a perpetual system, what is the average cost per unit after the May 2 purchase?
			A)	$18.00
			B)	$19.02
			C)	$18.80
			D)	$18.20
			E)	$18.00
34		Which journal entry indicates that a perpetual inventory system is being used?
			A)	Accounts Receivable, debit, 500; Sales, credit, 500
			B)	Inventory, debit, 45,000; Income Summary, credit, 45,000
			C)	Cost of Goods Sold, debit, 30,000; Inventory, credit, 30,000
			D)	Income Summary, debit, 24,000; Inventory, credit, 24,000
			E)	Purchases, debit, $34,000; Accounts payable, credit, $34,000

Beginning inventory 10 units @ $10 per unit
First purchase 35 units @ $11 per unit
First sale 20 units
Second purchase 40 units @ $12 per unit
Second sale 35 units
Third purchase 15 units @ $13 per unit

35		What is the value of the ending inventory, using a perpetual inventory system and LIFO cost flow assumption?
			A)	$485
			B)	$555
			C)	$500
			D)	$540
			E)	$520

Beginning inventory 10 units @ $5 per unit
First sale 4 units
First purchase 10 units @ $6 per unit
Second purchase 12 units @ $7 per unit
Second Sale 20 units

36		What is the value of the ending inventory, using a perpetual inventory system and a FIFO cost flow assumption?
			A)	$46
			B)	$56
			C)	$36
			D)	$26
			E)	$84
37		Which principle of accounting requires the use of a single inventory method and also assumes that a change to another inventory method should be made only after careful analysis and evaluation?
			A)	Materiality
			B)	Realism
			C)	Consistency
			D)	Realization
			E)	Full-disclosure
38		An item of inventory with an invoice price of $80, on which 50% is added as markup, has a current replacement cost of $82. Under LCM, which amount should be used to determine the value of this item of inventory?
			A)	$120
			B)	$123
			C)	$ 80
			D)	$ 82
			E)	None of the above

Cost
Date Quantity Per Unit Total Cost
Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 18.25 14,600.00
Nov 3, Purchase 500 20.40 10,200.00
Merchandise Available 1,800 34,200.00

39		Five hundred units are unsold. Using the average cost method under a periodic inventory system, how much is the cost assigned to the ending merchandise inventory?
			A)	$10,200
			B)	$ 9,400
			C)	$ 9,800
			D)	$ 9,500
			E)	$ 9,000

Beginning inventory 10 units @ $10 per unit
First purchase 35 units @ $11 per unit
Second purchase 40 units @ $12 per unit
Third purchase 15 units @ $13 per unit

40		If 83 units are sold, what is the value of the ending inventory under a periodic inventory system and a FIFO cost flow assumption?
			A)	$219
			B)	$905
			C)	$177
			D)	$204
			E)	$200

Cost
Date Quantity Per Unit Cost
Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 20.00 16,000.00
Nov 3, Purchase 500 21.00 10,500.00
Total Cost
Merchandise Available 1,800 units $35,900.00

41		Five hundred and seventy units are unsold. What is the value of the ending inventory under a periodic inventory system and a FIFO cost flow assumption?
			A)	$10,800
			B)	$11,900
			C)	$11,970
			D)	$11,368
			E)	$11,580

Cost
Date Quantity Per Unit Cost
Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 20.00 16,000.00
Nov 3, Purchase 500 21.00 10,500.00
Total Cost
Merchandise Available 1,800 units $35,900.00

42		Five hundred and twenty units are unsold. What is the value of the ending inventory under a periodic inventory system and a LIFO cost flow assumption?
			A)	$10,900
			B)	$11,368
			C)	$ 9,800
			D)	$ 9,360
			E)	None of the above
43		During a period of steadily falling prices, which method of assigning costs to inventory offers the best tax advantage?
			A)	Straight-line
			B)	FIFO
			C)	LIFO
			D)	Weighted-average
			E)	None of the above
44		Inventory at the end of the current period was erroneously understated. Which of the following is true as a result of the understatement not being corrected?
			A)	Net income for the current year is overstated.
			B)	The cost of goods sold for the current year is understated.
			C)	Capital at the end of the current year is overstated.
			D)	Net income at the end of the following year will be overstated.
			E)	Capital at the end of the following year will be overstated.

Consider the following conditions of ending inventory and the stated results:
Ending Cost of
Inventory Goods Sold Net Income
A. Overstated Overstated Overstated
B. Understated Understated Understated
C. Overstated Understated Understated
D. Understated Overstated Understated
E. Understated Overstated Overstated

45		Which condition is true with regard to the ending inventory?
			A)	Condition A
			B)	Condition B
			C)	Condition C
			D)	Condition D
			E)	Condition E

Consider the following conditions of beginning inventory and the stated results:
Beginning Cost of
Inventory Goods Sold Net Income
A. Overstated Overstated Overstated
B. Understated Understated Understated
C. Overstated Overstated Understated
D. Understated Overstated Understated
E. Understated Understated Overstated

46		Which condition is true with regard to the beginning inventory?
			A)	Condition A
			B)	Condition B
			C)	Condition C
			D)	Condition D
			E)	Condition E

Consider the following conditions of beginning inventory and the stated results:
Beginning Cost of
Inventory Goods Sold Net Income
A. Overstated Overstated Overstated
B. Understated Understated Overstated
C. Overstated Understated Understated
D. Understated Overstated Understated
E. Overstated Understated Understated

47		Which condition is true with regard to the beginning inventory?
			A)	Condition A
			B)	Condition B
			C)	Condition C
			D)	Condition D
			E)	Condition E
48		Ending inventory is overstated in Period A. Which of the following occurred as a result of this error?
			A)	Income of Period A is understated.
			B)	Income of Period B is overstated.
			C)	Retained Earnings at the end of Period A is understated.
			D)	Retained Earnings at the end of Period B is overstated.
			E)	Retained Earnings at the end of Period B is correct.
49		Beginning inventory of $40,000 plus purchases of $30,000 equals which of the following?
			A)	Goods available for sale of $10,000
			B)	Cost of goods sold of $10,000
			C)	Net income of $70,000
			D)	Goods available for sale of $70,000
			E)	Gross profit of $70,000
50		Net sales for the business totals $70,000, and goods available for sale totals $50,000. If gross profit for the business runs 40% of net sales, what is the cost of goods sold?
			A)	$30,000
			B)	$32,000
			C)	$42,000
			D)	$28,000
			E)	$ 8,000
51		Every-Day Clothing had a November 1 merchandise inventory balance of $45,000. It made purchases of $80,000 and recorded sales of $130,000, during November. Its estimated gross profit on sales was 25%. On November 30, the store was destroyed by fire. What was the value of the merchandise inventory loss?
			A)	$ 27,500
			B)	$125,000
			C)	$ 97,500
			D)	$ 25,000
			E)	None of the above
52		The goods available for sale, at retail prices, total $200,000. If the cost ratio for the period totals 60%, and the net sales at retail for the period total $120,000, what is the ending inventory at cost?
			A)	$ 48,000
			B)	$ 24,000
			C)	$ 72,000
			D)	$100,000
			E)	None of the above

Cost Retail
Beginning merchandise inventory $ 40,000 $ 60,000
Purchases for November 100,000 150,000
Sales in November 180,000

53		Use the retail method for estimating the value of ending inventory and determine the estimated cost of the ending merchandise inventory.
			A)	$ 30,000
			B)	$180,000
			C)	$ 20,000
			D)	$ 40,000
			E)	$ 36,000
54		Which one of the following is the formula for the inventory turnover rate?
			A)	Net sales divided by cost of goods sold.
			B)	Average inventory divided by 365 days.
			C)	Cost of goods sold divided ending Inventory.
			D)	Average inventory divided by cost of goods sold.
			E)	None of the above
55		With an inventory turnover rate of 10.0, over how many days does the inventory turn over?
			A)	10 days
			B)	20 days
			C)	36.5 days
			D)	365 days
			E)	None of the above