Question 1

FIFO tends to decrease cost of goods sold when:

Accepted Answer

A)   costs are constant
B)   costs are decreasing
C)   costs are increasing
D)   FIFO will always yield the lowest possible taxesE) All of the above
F) B) and C)

Question 2

Data for Flat Panel Ltd. for the year ended December 31, 2013, are as follows:  Inventory turnover for 2013 is:

Accepted Answer

A)   2.40
B)   2.25
C)   1.07
D)   3.47E) B) and D)
F) B) and C)

Question 3

Overstating ending inventory in the current period will understate the following year's net income.

Accepted Answer

A) True 
 B)False

Question 4

Victory Stables had sales and cost of sales of $600,000 and $450,000 respectively in 2014. The company had shareholders equity of $750,000 and its assets were $1,125,000. Calculate the company's gross margin and gross profit percentage for 2014.

Accepted Answer

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Question 5

FIFO uses "old" inventory costs against revenue.

Accepted Answer

A) True 
 B)False

Question 6

Given the following data, what is cost of goods sold as determined under the FIFO method?

Accepted Answer

A)   $6,400
B)   $5,250
C)   $4,600
D)   $7,000E) A) and B)
F) B) and C)

Question 7

A purchase allowance is a decrease in the cost of purchases because the purchaser returned goods to the supplier.

Accepted Answer

A) True 
 B)False

Question 8

King Size International buys beds from a manufacturer for sale overseas. A shipment of beds to King Size was received slightly damaged. The manufacturer agreed to take an extra 10% off of its invoice price to King Size if it will keep and sell the beds to its customers. In this situation, King Size has received a:

Accepted Answer

A)   purchase return
B)   purchase discount
C)   purchase allowance
D)   sales allowanceE) All of the above
F) B) and C)

Question 9

Technological advances in computers and inventory tracking have:

Accepted Answer

A)   made perpetual inventory records less expensive to maintain
B)   completely eliminated the need to physically count inventory
C)   made journal entries unnecessary for inventory purchases
D)   made perpetual inventory records more expensive to maintainE) C) and D)
F) B) and D)

Question 10

Inventory errors counter balance in two consecutive periods.

Accepted Answer

A) True 
 B)False

Question 11

FIFO tends to increase cost of goods sold when:

Accepted Answer

A)   costs are increasing
B)   costs are declining
C)   costs are constant
D)   FIFO will always yield the lowest possible cost of goods soldE) All of the above
F) A) and C)

Question 12

Sales Company Ltd. paid $10 wholesale for one unit of inventory for resale in the retail market. The same inventory can now be purchased for $9. The retail sales price of the inventory is $13, however, it normally costs $2 to sell each unit. Using the lower-of-cost-and-net-realizable-value rule the inventory would be reported on Sales Company Ltd.'s balance sheet at:

Accepted Answer

A)   $9
B)   $10
C)   $11
D)   $13E) A) and B)
F) B) and C)

Question 13

In a merchandising business, gross margin is equal to sales revenue minus:

Accepted Answer

A)   the sum of cost of goods sold, operating expenses, and prepaid expenses
B)   the sum of cost of goods sold and operating expenses
C)   cost of goods sold
D)   the sum of cost of goods sold and sales commissionsE) C) and D)
F) All of the above

Question 14

Which of the following would not be included in the Inventory account on a merchandising company's balance sheet?

Accepted Answer

A)   customs duties
B)   sales taxes received
C)   shipping costs from the manufacturer to the merchandising company
D)   insurance on the merchandise while in transit from the manufacturerE) All of the above
F) None of the above

Question 15

In 2013, Norwood Limited had sales and cost of sales of $250,000 and $62,500 respectively. The company had shareholders equity of $100,000 and its assets were $125,000. The company's gross margin for 2013 was:

Accepted Answer

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Question 16

Average inventory is equal to:

Accepted Answer

A)   beginning inventory plus cost of goods sold divided by two
B)   beginning inventory plus ending inventory divided by two
C)   cost of goods sold plus purchases divided by two
D)   ending inventory plus cost of goods sold divided by twoE) C) and D)
F) B) and C)

Question 17

Understating ending inventory in the current period will understate cost of goods sold in the following period.

Accepted Answer

A) True 
 B)False

Question 18

The gross margin rate is equal to:

Accepted Answer

A)   net sales revenue minus cost of goods sold
B)   gross margin divided by net sales revenue
C)   net sales revenue minus gross margin on sales
D)   cost of goods sold divided by net sales revenueE) B) and D)
F) None of the above

Question 19

Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit?

Accepted Answer

A)   Credit Sales and debit Accounts Receivable
B)   Debit Cost of Goods Sold and credit Purchases
C)   Debit Cost of Goods Sold and credit Inventory
D)   Debit Inventory and credit Cost of Goods SoldE) A) and B)
F) A) and D)

Question 20

If year-end inventory is reduced from cost to a lower net realizable value, which of the following accurately depicts the results?

Accepted Answer

A)   Year-end inventory is reduced and cost of goods sold is reduced by the same amount.
B)   Cost of goods sold is reduced and beginning inventory of the next period is reduced by the same amount.
C)   The capital account balance is increased and beginning inventory of the next period is reduced by the same amount.
D)   Cost of goods sold is increased and beginning inventory of the next period is decreased by the same amount.E) C) and D)
F) B) and C)

Exam 6: Inventory and Cost of Goods Sold

Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit?

Correct Answer
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Correct Answer
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Average inventory is equal to:

Correct Answer
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Correct Answer
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Data for Flat Panel Ltd. for the year ended December 31, 2013, are as follows: Inventory turnover for 2013 is:

Correct Answer
verified

Understating ending inventory in the current period will understate cost of goods sold in the following period.

Correct Answer
verified

Which of the following would not be included in the Inventory account on a merchandising company's balance sheet?

Correct Answer
verified

FIFO tends to decrease cost of goods sold when:

Correct Answer
verified

Victory Stables had sales and cost of sales of $600,000 and $450,000 respectively in 2014. The company had shareholders equity of $750,000 and its assets were $1,125,000. Calculate the company's gross margin and gross profit percentage for 2014.

Correct Answer
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_TB4002_00_TB4002_00 Gross Pro...
View Answer

Overstating ending inventory in the current period will understate the following year's net income.

Correct Answer
verified

A purchase allowance is a decrease in the cost of purchases because the purchaser returned goods to the supplier.

Correct Answer
verified

FIFO tends to increase cost of goods sold when:

Correct Answer
verified

Inventory errors counter balance in two consecutive periods.

Correct Answer
verified

In 2013, Norwood Limited had sales and cost of sales of $250,000 and $62,500 respectively. The company had shareholders equity of $100,000 and its assets were $125,000. The company's gross margin for 2013 was:

Correct Answer
verified
_TB4002_00...
View Answer

Technological advances in computers and inventory tracking have:

Correct Answer
verified

FIFO uses "old" inventory costs against revenue.

Correct Answer
verified

The gross margin rate is equal to:

Correct Answer
verified

Given the following data, what is cost of goods sold as determined under the FIFO method?

Correct Answer
verified

If year-end inventory is reduced from cost to a lower net realizable value, which of the following accurately depicts the results?

Correct Answer
verified

In a merchandising business, gross margin is equal to sales revenue minus:

Correct Answer
verified

Exam 6: Inventory and Cost of Goods Sold

Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Average inventory is equal to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Data for Flat Panel Ltd. for the year ended December 31, 2013, are as follows: Inventory turnover for 2013 is:

Correct AnswerverifiedShow Answer

Understating ending inventory in the current period will understate cost of goods sold in the following period.

Correct AnswerverifiedShow Answer

Which of the following would not be included in the Inventory account on a merchandising company's balance sheet?

Correct AnswerverifiedShow Answer

FIFO tends to decrease cost of goods sold when:

Correct AnswerverifiedShow Answer

Victory Stables had sales and cost of sales of $600,000 and $450,000 respectively in 2014. The company had shareholders equity of $750,000 and its assets were $1,125,000. Calculate the company's gross margin and gross profit percentage for 2014.

Correct Answerverified_TB4002_00_TB4002_00 Gross Pro...View AnswerShow Answer

Overstating ending inventory in the current period will understate the following year's net income.

Correct AnswerverifiedShow Answer

A purchase allowance is a decrease in the cost of purchases because the purchaser returned goods to the supplier.

Correct AnswerverifiedShow Answer

FIFO tends to increase cost of goods sold when:

Correct AnswerverifiedShow Answer

Inventory errors counter balance in two consecutive periods.

Correct AnswerverifiedShow Answer

In 2013, Norwood Limited had sales and cost of sales of $250,000 and $62,500 respectively. The company had shareholders equity of $100,000 and its assets were $125,000. The company's gross margin for 2013 was:

Correct Answerverified_TB4002_00...View AnswerShow Answer

Technological advances in computers and inventory tracking have:

Correct AnswerverifiedShow Answer

FIFO uses "old" inventory costs against revenue.

Correct AnswerverifiedShow Answer

The gross margin rate is equal to:

Correct AnswerverifiedShow Answer

Given the following data, what is cost of goods sold as determined under the FIFO method?

Correct AnswerverifiedShow Answer

If year-end inventory is reduced from cost to a lower net realizable value, which of the following accurately depicts the results?

Correct AnswerverifiedShow Answer

In a merchandising business, gross margin is equal to sales revenue minus:

Correct AnswerverifiedShow Answer

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