Question 1

Which of the following would not be a component of the year-end inventory balance?

Accepted Answer

A)  Freight-in costs.
B)  Inventory inspection costs.
C)  Inventory preparation costs.
D)  Inventory-related selling costs.

Question 2

Hopkins Company reported the following information related to inventory and sales:  Sales-8,000 units at $35 per unit.
Required:
Compute the following amounts assuming a periodic inventory system:

Accepted Answer

The answer of Hopkins Company reported the following information related...

Question 3

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016:  Required:
Calculate each of the following: 
A.Cost of goods available for sale
B.Cost of goods sold
C.Gross profit

Accepted Answer

A. Cost of goods available for sale, $85...

Question 4

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Accepted Answer

The answer of For each independent situation given below, determine...

Question 5

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Accepted Answer

A)  2016 net income would be overstated.
B)  2016 net income would be understated.
C)  2016 ending retained earnings would be understated.
D)  2016 cost of goods sold would be overstateD.The overstatement of the ending inventory causes cost of goods sold to be understated and net income to be overstated.

Question 6

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

Accepted Answer

A)  Net income is correct.
B)  Stockholders' equity is understated.
C)  Net income is overstated.
D)  Current assets are understateD.The 2016 purchases are understated, which causes cost of goods sold to be understated and net income to be overstated in 2016.

Question 7

Carrie Company sold merchandise with an invoice price of $1,000 to Underwood, Inc., with terms of 2/10, n/30. Which of the following is the correct entry to record the payment by Underwood Inc., within the 10 days if the company uses the periodic inventory system and the gross method to record purchases?

Accepted Answer

A)   
B)   
C)   
D)

Question 8

Direct material costs are a component of the cost of the work-in process inventory.

Accepted Answer

A) True 
 B)False

Question 9

LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is incorrect?

Accepted Answer

A)  Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold.
B)  Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory.
C)  Cost of goods available for sale will always be equal to or greater than cost of goods sold.
D)  Ending inventory is greater than beginning inventory when purchases are less than cost of goods solD.Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold.

Question 11

Of the following, which is not a control for safeguarding inventories?

Accepted Answer

A)  Storing inventory in a locked warehouse.
B)  Having only a person responsible for receiving inventory purchases also be responsible for shipping inventory sales.
C)  Limiting inventory access to authorized employees.
D)  Separating inventory accounting from inventory handling duties.

Question 12

The inventory records of Martin Corporation reflected the following information for the month of August:  Required: 
A.Determine the amount of the ending inventory and cost of goods sold under each of the following methods assuming the periodic inventory system.  
B.Why would cash flow considerations relate to the choice of an inventory method?

Accepted Answer

A. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> B. Cash flow considerations would re...

Question 13

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value)  valuation method for inventory?

Accepted Answer

A)  The journal entry to write-down inventory decreases gross profit.
B)  The journal entry to write-down inventory decreases current assets.
C)  The journal entry to write-down inventory does not affect pretax income.
D)  The journal entry to write-down inventory increases cost of goods solD.The journal entry increases cost of goods sold and therefore decreases gross profit and pretax income.The journal entry also decreases inventory.

Question 15

Which of the following statements is correct?

Accepted Answer

A)  Cost of goods available for sale is allocated between costs of goods sold and inventory at year-end.
B)  A purchase of inventory on credit increases both cost of goods available for sale and cost of goods sold.
C)  Purchases of inventory during a period less that period's cost of goods sold equals ending inventory regardless of the beginning inventory amount.
D)  Cost of goods available for sale equals ending inventory plus purchases.

Question 16

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Accepted Answer

A)  $385,000.
B)  $355,000.
C)  $345,000.
D)  $145,000.

Question 17

RJ Corporation has provided the following information about one of its inventory items:  During the year, RJ sold 3,000 units. What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

Accepted Answer

A)  $11,680,000.
B)  $11,590,000.
C)  $11,480,000.
D)  $11,550,000.

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Correct Answer
verified

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

Correct Answer
verified

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Correct Answer
verified

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

Correct Answer
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Which of the following statements is incorrect?

Correct Answer
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McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016: Required: Calculate each of the following: A.Cost of goods available for sale B.Cost of goods sold C.Gross profit

Correct Answer
verified
A. Cost of goods available for sale, $85...
View Answer

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Correct Answer
verified

Correct Answer
verified
A. B. Cash flow considerations would re...
View Answer

Correct Answer
verified

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Correct Answer
verified

Of the following, which is not a control for safeguarding inventories?

Correct Answer
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Hopkins Company reported the following information related to inventory and sales: Sales-8,000 units at $35 per unit. Required: Compute the following amounts assuming a periodic inventory system:

Correct Answer
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Which of the following would not be a component of the year-end inventory balance?

Correct Answer
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Direct material costs are a component of the cost of the work-in process inventory.

Correct Answer
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LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Correct Answer
verified

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value) valuation method for inventory?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

For each independent situation given below, determine the effect on pretax income for each. Enter "O" to indicate pretax income is overstated, "U" to indicate pretax income is understated, or "NA" to indicate that pretax income is not affected.

Correct AnswerverifiedShow Answer

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

Correct AnswerverifiedShow Answer

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2016 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

Correct AnswerverifiedShow Answer

Atomic Company did not record a December 2016 purchase of inventory on credit until January 2017. Assume that the December 31, 2016 ending inventory was correctly determined. What is the effect of this error on the financial statements for the year ended December 31, 2016?

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

McMillan Company uses the periodic inventory system. It has compiled the following information in order to prepare the financial statements at December 31, 2016: Required: Calculate each of the following: A.Cost of goods available for sale B.Cost of goods sold C.Gross profit

Correct AnswerverifiedA. Cost of goods available for sale, $85...View AnswerShow Answer

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. B. Cash flow considerations would re...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Correct AnswerverifiedShow Answer

Of the following, which is not a control for safeguarding inventories?

Correct AnswerverifiedShow Answer

Hopkins Company reported the following information related to inventory and sales: Sales-8,000 units at $35 per unit. Required: Compute the following amounts assuming a periodic inventory system:

Correct AnswerverifiedShow Answer

Which of the following would not be a component of the year-end inventory balance?

Correct AnswerverifiedShow Answer

Direct material costs are a component of the cost of the work-in process inventory.

Correct AnswerverifiedShow Answer

LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

Correct AnswerverifiedShow Answer

Which of the following statements does not accurately describe the lower of cost or market (LCM or net realizable value) valuation method for inventory?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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A. Cost of goods available for sale, $85...
View Answer

Correct Answer
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A. B. Cash flow considerations would re...
View Answer

Correct Answer
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