Question 1

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Accepted Answer

A)  Weighted average inventory method.
B)  First-in, first-out method.
C)  Last-in, first-out method.
D)  Specific identification method.
E)  Retail inventory method.F) A) and B)
G) C) and D)

Question 2

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Accepted Answer

A) True 
 B)False

Question 3

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

Accepted Answer

A) True 
 B)False

Question 4

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Accepted Answer

The specific identification method exact...

Question 5

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Accepted Answer

A) True 
 B)False

Question 6

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following prescribes the use of the less optimistic amount when more than one estimate of an amount to be received or paid exists and the estimates are about equally likely?

Accepted Answer

A)  Full disclosure principle.
B)  Consistency concept.
C)  FIFO inventory valuation method.
D)  Conservatism constraint.
E)  Matching principle.F) None of the above
G) C) and E)

Question 8

Explain why the lower of cost or market rule is used to value inventory.

Accepted Answer

The concept of conservatism requires tha...

Question 9

Days' sales in inventory is calculated as:

Accepted Answer

A)  Ending inventory divided by cost of goods sold.
B)  Cost of goods sold divided by ending inventory.
C)  Ending inventory divided by cost of goods sold times 365.
D)  Cost of goods sold divided by ending inventory times 365.
E)  Ending inventory times cost of goods sold.F) C) and D)
G) A) and B)

Question 10

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

What is the effect of an error in the ending inventory balance on the accounts reported in the income statement?

Accepted Answer

An inventory error causes misstatements ...

Question 12

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Accepted Answer

A) True 
 B)False

Question 13

Bedrock Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: • The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Bedrock was the consignor.
• The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.
Based on this information, the correct balance for ending inventory on December 31 is:

Accepted Answer

A)  $412,000
B)  $340,000
C)  $318,000
D)  $362,000
E)  $390,000F) B) and D)
G) All of the above

Question 14

When units are purchased at different costs over time, determining the cost per unit assigned to inventory items is simple.

Accepted Answer

A) True 
 B)False

Question 15

The inventory valuation method that tends to smooth out erratic changes in costs is:

Accepted Answer

A)  FIFO.
B)  Weighted average.
C)  LIFO.
D)  Specific identification.
E)  WIFO.F) B) and D)
G) B) and C)

Exam 5: Inventories and Cost of Sales

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Correct Answer
verified

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

Correct Answer
verified

The inventory valuation method that tends to smooth out erratic changes in costs is:

Correct Answer
verified

Which of the following prescribes the use of the less optimistic amount when more than one estimate of an amount to be received or paid exists and the estimates are about equally likely?

Correct Answer
verified

What is the effect of an error in the ending inventory balance on the accounts reported in the income statement?

Correct Answer
verified
An inventory error causes misstatements ...
View Answer

When units are purchased at different costs over time, determining the cost per unit assigned to inventory items is simple.

Correct Answer
verified

Explain why the lower of cost or market rule is used to value inventory.

Correct Answer
verified
The concept of conservatism requires tha...
View Answer

Days' sales in inventory is calculated as:

Correct Answer
verified

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Correct Answer
verified

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Correct Answer
verified

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

Correct Answer
verified

Correct Answer
verified

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Correct Answer
verified

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Correct Answer
verified
The specific identification method exact...
View Answer

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Correct Answer
verified

Exam 5: Inventories and Cost of Sales

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Correct AnswerverifiedShow Answer

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

Correct AnswerverifiedShow Answer

The inventory valuation method that tends to smooth out erratic changes in costs is:

Correct AnswerverifiedShow Answer

Which of the following prescribes the use of the less optimistic amount when more than one estimate of an amount to be received or paid exists and the estimates are about equally likely?

Correct AnswerverifiedShow Answer

What is the effect of an error in the ending inventory balance on the accounts reported in the income statement?

Correct AnswerverifiedAn inventory error causes misstatements ...View AnswerShow Answer

When units are purchased at different costs over time, determining the cost per unit assigned to inventory items is simple.

Correct AnswerverifiedShow Answer

Explain why the lower of cost or market rule is used to value inventory.

Correct AnswerverifiedThe concept of conservatism requires tha...View AnswerShow Answer

Days' sales in inventory is calculated as:

Correct AnswerverifiedShow Answer

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Correct AnswerverifiedShow Answer

It can be expected that companies selling perishable goods have a higher inventory turnover than companies selling nonperishable goods.

Correct AnswerverifiedShow Answer

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Correct AnswerverifiedShow Answer

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Correct AnswerverifiedThe specific identification method exact...View AnswerShow Answer

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An inventory error causes misstatements ...
View Answer

Correct Answer
verified

Correct Answer
verified
The concept of conservatism requires tha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The specific identification method exact...
View Answer

Correct Answer
verified