Question 1

Fast Auto Parts is an auto parts wholesaler that stocks several major brand names for Complete Auto Parts stores across the country. Complete Auto Parts does not assume responsibility for parts until they are sold to the customer. Identify the consignor and the consignee. Which company should include any unsold goods as part of its inventory?

Accepted Answer

Fast Auto Parts is the consign...

Question 2

Merchandise inventory includes:

Accepted Answer

A)   All goods owned by a company and held for sale.
B)   All goods in transit.
C)   All goods on consignment.
D)   Only damaged goods.
E)   Only non-damaged goods.F) A) and D)
G) B) and E) A

Question 3

On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available: Beginning inventory, July 1: $4,000
Net sales: $40,000
Net purchases: $41,000
The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

Accepted Answer

A)   $4,000.
B)   $5,000.
C)   $21,000.
D)   $25,000.
E)   $34,000.F) All of the above
G) C) and D)

Question 4

Describe the internal controls that must be applied when taking a physical count of inventory.

Accepted Answer

The internal controls should include (1)...

Question 5

A company reported the current month purchase and sales data for its only product and uses the perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold using FIFO.

Accepted Answer

The answer of A company reported the current month purchase...

Question 6

An overstatement of ending inventory will cause

Accepted Answer

A)   An overstatement of assets and equity on the balance sheet.
B)   An understatement of assets and equity on the balance sheet.
C)   An overstatement of assets and an understatement of equity on the balance sheet.
D)   An understatement of assets and an overstatement of equity on the balance sheet.
E)   No effect on the balance sheet.F) B) and C)
G) A) and C)

Question 7

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Accepted Answer

A) True 
 B)False

Question 8

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Accepted Answer

The answer of An advantage of the _________________ method of...

Question 9

Axme Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.
What was the amount of the cost of goods sold for this sale?

Accepted Answer

A)   $148.00.
B)   $150.50.
C)   $158.40.
D)   $210.00.
E)   $330.00.F) A) and E)
G) A) and D)

Question 10

Match each of the following terms a through j with the appropriate definition.

Accepted Answer

The answer of Match each of the following terms a...

Question 11

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Accepted Answer

A)   LIFO method.
B)   FIFO method.
C)   Weighted-average cost method.
D)   Specific identification method.
E)   Gross profit method.F) B) and D)
G) A) and B)

Question 12

Jackson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

Accepted Answer

A)   $60,000
B)   $180,000
C)   $30,000
D)   $90,000
E)   Impossible to determine from the information provided.F) A) and B)
G) None of the above

Question 13

Axme uses a weighted average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $15 per unit.
August 29, 20 units were sold.
August 31, 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?

Accepted Answer

A)   $12.00.
B)   $13.80.
C)   $15.42.
D)   $16.00.
E)   $17.74.F) A) and D)
G) A) and C)

Question 14

The FIFO inventory method assumes that costs for the earliest units purchased are the first to be charged to the cost of goods sold.

Accepted Answer

A) True 
 B)False  True

Question 15

LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Accepted Answer

A) True 
 B)False

Question 16

The inventory turnover ratio:

Accepted Answer

A)   Is used to analyze profitability.
B)   Is used to measure solvency.
C)   Reveals how many times a company turns over (sells)  its merchandise inventory.
D)   Validates the acid-test ratio.
E)   Calculation depends on the company's inventory valuation method.F) None of the above
G) A) and C)

Question 17

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Accepted Answer

A)   $395.
B)   $410.
C)   $450.
D)   $510.
E)   $520.F) D) and E)
G) A) and B)

Question 18

Errors in the period-end inventory balance only affect the current period's records and financial statements.

Accepted Answer

A) True 
 B)False

Question 19

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to the ending inventory using FIFO.

Accepted Answer

A)   $2,260
B)   $3,180
C)   $1,860
D)   $3,580
E)   $2,100F) A) and E)
G) A) and D)

Question 20

Goods on consignment are goods that are shipped by the owner, called the ______________, to another party called the _____________________.

Accepted Answer

Consignor;...

Exam 6: Inventories and Cost of Sales

Correct Answer
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Fast Auto Parts is the consign...
View Answer

Merchandise inventory includes:

Correct Answer
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A

Correct Answer
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Describe the internal controls that must be applied when taking a physical count of inventory.

Correct Answer
verified
The internal controls should include (1)...
View Answer

A company reported the current month purchase and sales data for its only product and uses the perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold using FIFO.

Correct Answer
verified

An overstatement of ending inventory will cause

Correct Answer
verified

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Correct Answer
verified

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Correct Answer
verified

Axme Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale?

Correct Answer
verified

Match each of the following terms a through j with the appropriate definition.

Correct Answer
verified
11eaaaf8_6e1d_329a_812b_fff2d88aa0b4_TB6309_00

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Correct Answer
verified

Jackson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

Correct Answer
verified

Correct Answer
verified

The FIFO inventory method assumes that costs for the earliest units purchased are the first to be charged to the cost of goods sold.

Correct Answer
verified
True

LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Correct Answer
verified

The inventory turnover ratio:

Correct Answer
verified

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Correct Answer
verified

Errors in the period-end inventory balance only affect the current period's records and financial statements.

Correct Answer
verified

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to the ending inventory using FIFO.

Correct Answer
verified

Goods on consignment are goods that are shipped by the owner, called the , to another party called the _______.

Correct Answer
verified
Consignor;...
View Answer

Exam 6: Inventories and Cost of Sales

Correct AnswerverifiedFast Auto Parts is the consign...View AnswerShow Answer

Merchandise inventory includes:

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Describe the internal controls that must be applied when taking a physical count of inventory.

Correct AnswerverifiedThe internal controls should include (1)...View AnswerShow Answer

A company reported the current month purchase and sales data for its only product and uses the perpetual inventory system. Determine the cost assigned to ending inventory and cost of goods sold using FIFO.

Correct AnswerverifiedShow Answer

An overstatement of ending inventory will cause

Correct AnswerverifiedShow Answer

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Correct AnswerverifiedShow Answer

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Correct AnswerverifiedShow Answer

Axme Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale?

Correct AnswerverifiedShow Answer

Match each of the following terms a through j with the appropriate definition.

Correct Answerverified11eaaaf8_6e1d_329a_812b_fff2d88aa0b4_TB6309_00

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Correct AnswerverifiedShow Answer

Jackson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The FIFO inventory method assumes that costs for the earliest units purchased are the first to be charged to the cost of goods sold.

Correct AnswerverifiedTrue

LIFO is preferred when purchase costs are rising and managers have incentives to report higher income for reasons such as bonus plans, job security, and reputation.

Correct AnswerverifiedShow Answer

The inventory turnover ratio:

Correct AnswerverifiedShow Answer

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Correct AnswerverifiedShow Answer

Errors in the period-end inventory balance only affect the current period's records and financial statements.

Correct AnswerverifiedShow Answer

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to the ending inventory using FIFO.

Correct AnswerverifiedShow Answer

Goods on consignment are goods that are shipped by the owner, called the ______________, to another party called the _____________________.

Correct AnswerverifiedConsignor;...View AnswerShow Answer

Correct Answer
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Fast Auto Parts is the consign...
View Answer

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The internal controls should include (1)...
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11eaaaf8_6e1d_329a_812b_fff2d88aa0b4_TB6309_00

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Goods on consignment are goods that are shipped by the owner, called the , to another party called the _______.

Correct Answer
verified
Consignor;...
View Answer