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| 1 | |
Which of the following is not a financial asset? |
| | A) | Marketable securities |
| | B) | Receivables |
| | C) | Inventory |
| | D) | Short-term investments |
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| 2 | |
When using the perpetual inventory system, each time a sale is recorded, which of the following occurs? |
| | A) | Inventory account is increased |
| | B) | Inventory account is decreased |
| | C) | Cost of Goods Sold account is decreased |
| | D) | Cost of goods available for sale decreases |
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| 3 | |
Consider the following inventory activity:
| 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 | |
Five units of the beginning inventory, 10 units of the first purchase, 15 units of the second purchase, and 15 units of the third purchase were not sold. What is the value of the ending inventory using the specific identification method? |
| | A) | $475 |
| | B) | $515 |
| | C) | $465 |
| | D) | $535 |
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| 4 | |
Consider the following inventory activity:
| Beginning inventory | 10 units @ $10 per unit | | | First purchase | 35 units @ $11 per unit | | | First sale | | 20 units | | Second purchase | 40 units @ $13 per unit | | | Second sale | | 35 units | | Third purchase | 15 units @ $14 per unit | |
Five units of the beginning inventory, 10 units of the first purchase, 15 units of the second purchase, and 15 units of the third purchase were not sold. What is the value of the ending inventory using the specific identification method? |
| | A) | $475 |
| | B) | $515 |
| | C) | $565 |
| | D) | $535 |
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| 5 | |
Consider the following inventory activity:
| Date | | Units | Unit Cost | Unit Selling Price | | May 1 | Balance | 10 | $10 | $15 | | May 5 | Purchase | 10 | $12 | $16 | | May 10 | Sale | (15) | | | | May 15 | Purchase | 8 | $12 | $17 | | May 20 | Purchase | 16 | $14 | $21 | | May 25 | Purchase | 10 | $13 | $20 | | May 28 | Sale | (30) | | | | May 31 | Balance | 9 | | |
The 9 units of ending inventory are identified with the purchase of May 20. Using the specific identification method, calculate the value of the ending inventory and the cost of goods sold. |
| | A) | $126 and $430, respectively |
| | B) | $126 and $530, respectively |
| | C) | $126 and $544, respectively |
| | D) | $56 and $474, respectively |
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| 6 | |
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 |
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| 7 | |
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 |
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| 8 | |
Consider the following inventory activity schedule:
| Date | Quantity | Per Unit Cost | Total Cost | | January 1, Beginning Balance | 100 | $18.00 | $1,800.00 | | March 4, Purchase | 400 | 19.00 | 7,600.00 |
On April 1, 50 units were sold. Use a perpetual inventory system and calculate the average unit cost after the March 4 purchase. |
| | A) | $18.00 |
| | B) | $19.00 |
| | C) | $18.80 |
| | D) | $18.20 |
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| 9 | |
Consider the following inventory activity:
| Beginning balance | 10 units @ $5 per unit | | | First sale I added "r" | | 4 units | | First purchase | 10 units @ $6 per unit | | | Second purchase | 12 units @ $7 per unit | | | Second sale | | 20 units |
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 |
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| 10 | |
Consider the following inventory activity:
| Beginning balance | 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 | |
What is the value of the ending inventory using a perpetual inventory system with the FIFO cost flow assumption? |
| | A) | $485 |
| | B) | $495 |
| | C) | $520 |
| | D) | $555 |
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| 11 | |
Consider the following inventory activity:
| Beginning balance | 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 | |
What is the value of the ending inventory using a perpetual inventory system with the LIFO cost flow assumption? |
| | A) | $520 |
| | B) | $555 |
| | C) | $485 |
| | D) | $540 |
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| 12 | |
Consider the following inventory activity:
| Beginning balance | 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 |
What is the total value of the ending inventory using a perpetual inventory system with the LIFO cost flow assumption? |
| | A) | $485 |
| | B) | $555 |
| | C) | $355 |
| | D) | $325 |
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| 13 | |
Which inventory method provides the most realistic measure of net income? |
| | A) | FIFO |
| | B) | LIFO |
| | C) | Average cost |
| | D) | Specific identification |
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| 14 | |
During periods of inflation, the inventory method that produces the greatest income tax benefits is which of the following? |
| | A) | FIFO method |
| | B) | LIFO method |
| | C) | Average cost method |
| | D) | Specific identification method |
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| 15 | |
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) | Average cost |
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| 16 | |
Which cost flow assumption most closely matches the actual physical flow of inventory in most retailing businesses? |
| | A) | FIFO |
| | B) | LIFO |
| | C) | Average cost |
| | D) | Specific identification |
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| 17 | |
Which inventory method results in an unrealistic balance sheet valuation of merchandise inventory? |
| | A) | FIFO |
| | B) | LIFO |
| | C) | Average cost |
| | D) | None of the above |
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| 18 | |
Which accounting principle or concept 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 |
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| 19 | |
An item of inventory with an invoice cost of $80, on which 50% is added as markup, has a current replacement cost of $82. Apply the lower-of-cost-or market rule and determine the value to apply to this item of inventory. |
| | A) | $120 |
| | B) | $123 |
| | C) | $ 80 |
| | D) | $ 82 |
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| 20 | |
Consider the following:
| Inventory Items | FIFO Cost | Market Value | | Small Widgets | $1,400 | $1,500 | | Large Widgets | 2,400 | 2,250 | | Total Widgets | $3,800 | $3,750 | | Small Gadgets | $3,400 | $3,300 | | Large Gadgets | 1,800 | 2,000 | | Total Gadgets | $5,200 | $5,300 | | Total Inventory | $9,000 | $9,050 |
Using the LCM rules on the basis of inventory category, the write-down of inventory would be |
| | A) | $50 |
| | B) | $250 |
| | C) | $150 |
| | D) | $200 |
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| 21 | |
Consider the following:
| Inventory Items | FIFO Cost | Market Value | | Small Widgets | $1,400 | $1,500 | | Large Widgets | 2,400 | 2,150 | | Total Widgets | $3,800 | $3,650 | | Small Gadgets | $3,400 | $3,300 | | Large Gadgets | 1,800 | 2,000 | | Total Gadgets | $5,200 | $5,300 | | Total Inventory | $9,000 | $8,950 |
Using the LCM rules on the basis of individual items, the write-down of inventory would be |
| | A) | $50 |
| | B) | $150 |
| | C) | $100 |
| | D) | $350 |
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| 22 | |
Which of the following refers to the proper cutoff of transactions? |
| | A) | The year-ending date is consistently the same date. |
| | B) | Transactions occurring near the end of the year are reported in the right accounting period. |
| | C) | The last transaction of the year is included in the current year financial statements. |
| | D) | The physical count of inventory takes place on the last day of the current accounting period. |
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| 23 | |
Under which condition should merchandise inventory be included in the ending balance of merchandise inventory? |
| | A) | It has been shipped FOB destination and has not yet arrived |
| | B) | It has been shipped FOB destination or FOB shipping point |
| | C) | It has been shipped FOB shipping point and has not yet arrived |
| | D) | The invoice has been paid |
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| 24 | |
Which of the following is truewith regard to the freight term of FOB shipping point? |
| | A) | Buyer takes title of the inventory at the destination |
| | B) | Seller transfers title to the buyer at destination |
| | C) | Buyer takes title of the inventory at origin of shipping |
| | D) | Seller pays the freight costs |
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| 25 | |
Under the periodic inventory system, where are the costs associated with inventory loss reported? |
| | A) | In the ending balance of the Merchandise Inventory account. |
| | B) | In the beginning balance of the Merchandise Inventory account of the subsequent accounting period. |
| | C) | In an appropriately titled operating expense account. |
| | D) | In the cost of goods sold calculation for the income statement. |
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| 26 | |
Consider the following inventory activity:
| Date | | Units | Unit Cost | Unit Selling Price | | May 1 | Balance | 15 | $10 | $15 | | May 5 | Purchase | 10 | $12 | $16 | | May 10 | Sale | (15) | | | | May 15 | Purchase | 8 | $12 | $17 | | May 20 | Purchase | 16 | $14 | $21 | | May 25 | Purchase | 10 | $13 | $20 | | May 28 | Sale | (30) | | | | May 31 | Balance | 14 | | |
The 14 units of ending inventory are identified with the purchase of May 20. Assume a periodic inventory systemand use the specific identification method to calculate the value of the ending inventory and the cost of goods sold. |
| | A) | $290 and $430, respectively |
| | B) | $190 and $530, respectively |
| | C) | $196 and $524, respectively |
| | D) | $196 and $474, respectively |
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| 27 | |
Consider the following inventory activity:
| 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 | |
Five units of the beginning inventory, 10 units of the first purchase, 15 units of the second purchase, and 15 units of the third purchase were not sold. Calculate the cost of goods sold using specific identification. |
| | A) | $1,060 |
| | B) | $625 |
| | C) | $960 |
| | D) | $535 |
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| 28 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 100 | $18.00 | $1,800 | | Mar 4 | Purchase | 400 | 19.00 | 7,600 | | May 8 | Purchase | 800 | 18.25 | 14,600 | | Nov 3 | Purchase | 500 | 20.40 | 10,200 | | | 1,800 | | $34,200 |
Five hundred units are unsold. Using the average cost method under a periodic inventory system, what is the cost assigned to the ending merchandise inventory? |
| | A) | $10,200 |
| | B) | $ 9,400 |
| | C) | $ 9,800 |
| | D) | $ 9,500 |
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| 29 | |
Consider the following inventory activity:
| Beginning balance | 10 units @ $10 per unit | $100 | | First purchase | 35 units @ $11 per unit | 385 | | Second purchase | 40 units @ $12 per unit | 480 | | Third purchase | 15 units @ $13 per unit | 195 |
If 83 units were 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 |
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| 30 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 100 | $18.00 | $1,800 | | Mar 4 | Purchase | 400 | 19.00 | 7,600 | | May 8 | Purchase | 800 | 20.00 | 16,000 | | Nov 3 | Purchase | 500 | 21.00 | 10,500 | | | 1,800 | | $35,900 |
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 |
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| 31 | |
Which of the following statements is true? |
| | A) | Calculations under the FIFO cost flow assumption are the same for the periodic inventory system and the perpetual inventory. |
| | B) | Calculations under the FIFO cost flow assumption are the same as under the LIFO cost flow assumption when both are used under a perpetual inventory system. |
| | C) | Calculations under the FIFO cost flow assumption are the same as under the LIFO cost flow assumption when both are used under a periodic inventory system. |
| | D) | The FIFO cost flow assumption can only be used with a periodic inventory system. |
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| 32 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 100 | $18.00 | $1,800 | | Mar 4 | Purchase | 400 | 19.00 | 7,600 | | May 8 | Purchase | 800 | 18.25 | 14,600 | | Nov 3 | Purchase | 500 | 20.60 | 10,300 | | | 1,800 | | $34,300 |
Five hundred and twenty units are unsold. Assume a periodic inventory system and a LIFO cost flow assumption, calculate the value of the ending inventory. |
| | A) | $10,900 |
| | B) | $11,368 |
| | C) | $ 9,765 |
| | D) | $ 9,360 |
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| 33 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 100 | $18.00 | $1,800 | | Mar 4 | Purchase | 400 | 19.00 | 7,600 | | May 8 | Purchase | 800 | 18.25 | 14,600 | | Nov 3 | Purchase | 500 | 20.40 | 10,200 | | | 1,800 | | $34,200 |
Five hundred units are unsold. Using a periodic inventory systemand the average-cost methodof inventory valuation, what is the cost assigned to the ending merchandise inventory? |
| | A) | $10,200 |
| | B) | $ 9,400 |
| | C) | $ 9,500 |
| | D) | $10,500 |
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| 34 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 10 | $10.00 | $100 | | Mar 4 | Purchase | 10 | 12.00 | 120 | | May 8 | Purchase | 5 | 10.00 | 50 | | Nov 3 | Purchase | 20 | 13.00 | 260 | | | 45 | | $530 |
Twenty-two units are unsold. Using the LIFO cost flow assumption and a periodic inventory system, what is the cost assigned to the ending merchandise inventory? |
| | A) | $270 |
| | B) | $330 |
| | C) | $240 |
| | D) | $386 |
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| 35 | |
Consider the following inventory activity:
| Date | | Quantity | Cost/Unit | Total Cost | | Jan. 1 | Balance | 100 | $18.00 | $1,800 | | Mar 4 | Purchase | 400 | 19.00 | 7,600 | | May 8 | Purchase | 800 | 20.00 | 16,000 | | Nov 3 | Purchase | 500 | 21.00 | 10,500 | | | 1,800 | | $35,900 |
Five hundred and eighty units are unsold. Using the LIFO cost flow assumption and a periodic inventory system, what is the cost assigned to the ending merchandise inventory? |
| | A) | $10,800 |
| | B) | $11,800 |
| | C) | $11,970 |
| | D) | $11,000 |
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| 36 | |
Which of the following is one of the weaknesses of the periodic inventory system? |
| | A) | It fails to specifically account for loss of inventory due to theft or obsolescence |
| | B) | It cannot be used by merchants that sell high value per unit items |
| | C) | Unlike the perpetual inventory system, a physical inventory is required |
| | D) | It is not possible to calculate the cost of goods sold |
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| 37 | |
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 |
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| 38 | |
Consider the following
| Ending Inventory | Cost of Goods Sold | Net Income | | A | Overstated | Understated | Overstated | | B | Understated | Understated | Understated | | C | Overstated | Understated | Understated | | D | Understated | Understated | Overstated |
Which of the following is true about the effects on the cost of goods sold and net income when the specified error (understated or overstated) in the ending inventory occurs? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 39 | |
Consider the following
| Ending Inventory | Cost of Goods Sold | Net Income | | A | Overstated | Overstated | Overstated | | B | Understated | Understated | Understated | | C | Overstated | Understated | Understated | | D | Understated | Overstated | Understated |
Which condition is true with regard to errors in the ending inventory? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 40 | |
Consider the following:
| Beginning Inventory | Cost of Goods Sold | Net Income | | A | Overstated | Overstated | Overstated | | B | Understated | Understated | Understated | | C | Overstated | Overstated | Understated | | D | Understated | Overstated | Understated |
Which of the following is true about the effects on the cost of goods sold and net income when the specified error (understated or overstated) in the beginning inventory occurs? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 41 | |
Consider the following:
| Beginning Inventory | Cost of Goods Sold | Net Income | | A | Understated | Understated | Understated | | B | Understated | Understated | Overstated | | C | Overstated | Overstated | Understated | | D | Understated | Overstated | Understated |
Which of the following is true about the effects on the cost of goods sold and net income when the specified error (understated or overstated) in the beginning inventory occurs? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 42 | |
Consider the following:
| Ending Inventory | Cost of Goods Sold | Net Income | | A | Overstated | Overstated | Overstated | | B | Understated | Understated | Understated | | C | Overstated | Understated | Understated | | D | Understated | Overstated | Understated |
Which of the following is true about the effects on the cost of goods sold and net income when the specified error (understated or overstated) in the ending inventory occurs? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 43 | |
Which of the following applies to errors in either beginning or ending merchandise inventory? |
| | A) | Errors in ending inventory cause income to be misstated in the same amount and same direction. |
| | B) | Errors in beginning inventory cause income to be misstated in the same amount and same direction. |
| | C) | Errors in ending inventory cause income to be misstated in the same amount but opposite direction. |
| | D) | Errors in beginning inventory cause income to be misstated but do not effect the cost of goods sold. |
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| 44 | |
Ending inventory is overstated in Period A. As a result of this error, which of the following is not correct? |
| | 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 correct. |
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| 45 | |
Beginning inventory of $40,000 plus purchases of $30,000 equals which of the following? |
| | A) | Cost of goods available for sale of $10,000 |
| | B) | Cost of goods sold of $10,000 |
| | C) | Net income of $70,000 |
| | D) | Cost of goods available for sale of $70,000 |
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| 46 | |
Net sales for the business totals $70,000, and goods available for sale totals $50,000. Gross profit for the business runs 40% of net sales. Calculate the cost of goods sold. |
| | A) | $30,000 |
| | B) | $32,000 |
| | C) | $42,000 |
| | D) | $28,000 |
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| 47 | |
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. Use the gross profit methodand calculate the value of the merchandise inventory loss. |
| | A) | $ 27,500 |
| | B) | $125,000 |
| | C) | $ 97,500 |
| | D) | $ 25,000 |
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| 48 | |
Consider the following balances:
| Sales revenue | $900,000 | | Beginning merchandise inventory | $130,000 | | Net purchases | $655,000 | | Gross profit rate | 35.0% |
Based on a physical count and valuation of the ending merchandise inventory, there is $195,500 of inventory on hand. Use the gross profit method and calculate the estimated cost of the shrinkage loss due to theft, breakage, and obsolescence. |
| | A) | $10,500 |
| | B) | $3,650 |
| | C) | $4,500 |
| | D) | $9,250 |
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| 49 | |
Consider the following balances:
| Sales revenue | $800,000 | | Beginning merchandise inventory | $130,000 | | Net purchases | $500,000 | | Cost ratio | 60.0% |
The balances above existed the day before an earthquake destroyed the inventory on hand. Use the gross profit method and calculate the estimated cost of the inventory loss. |
| | A) | $150,000 |
| | B) | $630,000 |
| | C) | $500,000 |
| | D) | $370,000 |
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| 50 | |
The goods available for sale, at retail prices, total $200,000. The cost ratio for the period is 60% and the net sales at retail for the period total $120,000. Use the retail method of estimating inventory and calculate the estimated cost of the ending inventory. |
| | A) | $ 48,000 |
| | B) | $ 24,000 |
| | C) | $ 72,000 |
| | D) | $100,000 |
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| 51 | |
Consider the following information:
| Cost | Retail | | Beginning merchandise inventory | $40,000 | $60,000 | | Purchases for November | 100,000 | 150,000 | | Sales in November | | 180,000 |
Use the retail method for estimating the value of ending inventory and calculate the estimated cost of the ending inventory. |
| | A) | $ 30,000 |
| | B) | $180,000 |
| | C) | $ 20,000 |
| | D) | $ 40,000 |
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| 52 | |
Which one of the following is the formula for theinventory turnover rate? |
| | A) | Net sales/Cost of goods sold |
| | B) | Cost of goods sold/Average inventory |
| | C) | Cost of goods sold/Ending Inventory |
| | D) | Average inventory/Cost of goods sold |
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| 53 | |
The inventory turnover rate of 10.0. What is the number of days to sell inventory? |
| | A) | 10 days |
| | B) | 20 days |
| | C) | 36.5 days |
| | D) | 365 days |
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