Question 1

Generally accepted accounting principles (GAAP)  require that the inventory be reported at:

Accepted Answer

A)   market Value
B)   historical Cost
C)   lower of cost or market
D)   retail valueE) A) and C)
F) None of the above

Question 2

Last year bell-bottom jeans were fashionable and this year bootcut jeans are. A retail company's inventory has 375 bell-bottom jeans that cost $17 each and could be replaced for $15. The inventory also includes 1,000 bootcut jeans that cost $16 each and could be replaced for $19. Explain why this situation requires an adjustment to the accounting records, prepare the journal entry that would be used to make the adjustment, and show the effects of the adjustment on the accounting equation.

Accepted Answer

The company needs to make a lo...

Question 3

The lower the inventory turnover ratio, the more efficiently the company manages its inventory, all other things equal.

Accepted Answer

A) True 
 B)False

Question 4

How long on average does it take to sell something from inventory after it is purchased?

Accepted Answer

A)   12.5 days
B)   24.8 days
C)   29.2 days
D)   165.9 daysE) None of the above
F) B) and D)

Question 5

What is the amount of cost of goods available for sale?

Accepted Answer

A)   $11,250
B)   $17,500
C)   $5,000
D)   $13,750E) A) and C)
F) All of the above

Question 6

LIFO is preferred when costs are rising and managers have incentives to report higher income because of bonus plans and job security.

Accepted Answer

A) True 
 B)False

Question 7

The assignment of costs to cost of goods sold and to inventory using the weighted average method usually yields different results depending on whether a perpetual or a periodic system was used.

Accepted Answer

A) True 
 B)False

Question 8

Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold. Given the following information, what would be reported as the cost of goods sold (COGS)  and ending inventory balances for the period?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) None of the above
F) A) and B)

Question 9

In a period of rising prices, the inventory costing method that will cause the company to have the lowest income taxes is

Accepted Answer

A)   LIFO.
B)   FIFO.
C)   Weighted average.
D)   Specific identification.E) A) and C)
F) None of the above

Question 10

Which of the following will occur when inventory costs are decreasing?

Accepted Answer

A)   FIFO will result in a lower net income but a higher ending inventory then will LIFO.
B)   FIFO will result in a higher net income but a lower ending inventory then will LIFO.
C)   FIFO will result in a lower net income and a lower ending inventory then will LIFO.
D)   FIFO will result in a higher net income and a higher ending inventory then will LIFO.E) None of the above
F) A) and B)

Question 11

For a manufacturer, inventory turnover refers to how many times:

Accepted Answer

A)   during the period the company replaces the raw materials inventory.
B)   the company buys and sells its inventory of goods.
C)   the company produces and delivers its inventory of goods to customers.
D)   the company orders raw materials.E) C) and D)
F) A) and D)

Question 12

In a period of rising prices, the inventory costing method that will cause the company to have the lowest cost of goods sold is

Accepted Answer

A)   LIFO.
B)   FIFO.
C)   Weighted average.
D)   Specific identification.E) None of the above
F) B) and D)

Question 13

The inventory costing method that results in the lowest taxable income in a period of inflation is the LIFO
method.

Accepted Answer

A) True 
 B)False

Question 14

An increasing inventory turnover ratio indicates:

Accepted Answer

A)   longer time span between the ordering and receiving of inventory.
B)   shorter time span between the ordering and receiving of inventory.
C)   shorter time span between the purchase and sale of inventory.
D)   longer time span between the purchase and sale of inventory.E) All of the above
F) A) and B)

Question 15

If the company uses the LIFO method, what is the cost of its ending inventory?

Accepted Answer

A)   $24
B)   $42
C)   $58
D)   $76E) C) and D)
F) A) and D)

Question 16

Which of the following would be in the raw materials inventory of a company making cheese?

Accepted Answer

A)   Milk and cream used to make the cheese.
B)   Cheese that has been made but is curing before being ready to sell.
C)   Cured cheese that is waiting to be shipped to retailers.
D)   Partially processed cheese.E) B) and D)
F) None of the above

Question 17

Which of the following statements is true?

Accepted Answer

A)   The sales revenue is $1,000.
B)   The gross profit is $1,000.
C)   The cost of goods sold is $1,000.
D)   The net income is $1,000.E) A) and D)
F) C) and D)

Question 18

A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because:

Accepted Answer

A)   goods are not selling as fast as they were in the past.
B)   the company is expecting to sell more in the future.
C)   goods are selling, but it is taking longer to collect payment.
D)   goods cannot be shipped fast enough.E) C) and D)
F) A) and D)

Question 19

Use the following information to determine the amount of purchases for the period.

Accepted Answer

A)   $632,000
B)   $453,000
C)   $316,000
D)   $674,000E) A) and C)
F) B) and D)

Question 20

Specific identification is the best inventory costing method because it is least open to manipulation by unscrupulous managers.

Accepted Answer

A) True 
 B)False

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

LIFO is preferred when costs are rising and managers have incentives to report higher income because of bonus plans and job security.

Correct Answer
verified

A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because:

Correct Answer
verified

If the company uses the LIFO method, what is the cost of its ending inventory?

Correct Answer
verified

How long on average does it take to sell something from inventory after it is purchased?

Correct Answer
verified

Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold. Given the following information, what would be reported as the cost of goods sold (COGS) and ending inventory balances for the period?

Correct Answer
verified

The lower the inventory turnover ratio, the more efficiently the company manages its inventory, all other things equal.

Correct Answer
verified

Correct Answer
verified
The company needs to make a lo...
View Answer

The assignment of costs to cost of goods sold and to inventory using the weighted average method usually yields different results depending on whether a perpetual or a periodic system was used.

Correct Answer
verified

Which of the following will occur when inventory costs are decreasing?

Correct Answer
verified

For a manufacturer, inventory turnover refers to how many times:

Correct Answer
verified

An increasing inventory turnover ratio indicates:

Correct Answer
verified

What is the amount of cost of goods available for sale?

Correct Answer
verified

In a period of rising prices, the inventory costing method that will cause the company to have the lowest cost of goods sold is

Correct Answer
verified

In a period of rising prices, the inventory costing method that will cause the company to have the lowest income taxes is

Correct Answer
verified

Use the following information to determine the amount of purchases for the period.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Which of the following would be in the raw materials inventory of a company making cheese?

Correct Answer
verified

The inventory costing method that results in the lowest taxable income in a period of inflation is the LIFO method.

Correct Answer
verified

Generally accepted accounting principles (GAAP) require that the inventory be reported at:

Correct Answer
verified

Specific identification is the best inventory costing method because it is least open to manipulation by unscrupulous managers.

Correct Answer
verified

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

LIFO is preferred when costs are rising and managers have incentives to report higher income because of bonus plans and job security.

Correct AnswerverifiedShow Answer

A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because:

Correct AnswerverifiedShow Answer

If the company uses the LIFO method, what is the cost of its ending inventory?

Correct AnswerverifiedShow Answer

How long on average does it take to sell something from inventory after it is purchased?

Correct AnswerverifiedShow Answer

Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold. Given the following information, what would be reported as the cost of goods sold (COGS) and ending inventory balances for the period?

Correct AnswerverifiedShow Answer

The lower the inventory turnover ratio, the more efficiently the company manages its inventory, all other things equal.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe company needs to make a lo...View AnswerShow Answer

The assignment of costs to cost of goods sold and to inventory using the weighted average method usually yields different results depending on whether a perpetual or a periodic system was used.

Correct AnswerverifiedShow Answer

Which of the following will occur when inventory costs are decreasing?

Correct AnswerverifiedShow Answer

For a manufacturer, inventory turnover refers to how many times:

Correct AnswerverifiedShow Answer

An increasing inventory turnover ratio indicates:

Correct AnswerverifiedShow Answer

What is the amount of cost of goods available for sale?

Correct AnswerverifiedShow Answer

In a period of rising prices, the inventory costing method that will cause the company to have the lowest cost of goods sold is

Correct AnswerverifiedShow Answer

In a period of rising prices, the inventory costing method that will cause the company to have the lowest income taxes is

Correct AnswerverifiedShow Answer

Use the following information to determine the amount of purchases for the period.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following would be in the raw materials inventory of a company making cheese?

Correct AnswerverifiedShow Answer

The inventory costing method that results in the lowest taxable income in a period of inflation is the LIFO method.

Correct AnswerverifiedShow Answer

Generally accepted accounting principles (GAAP) require that the inventory be reported at:

Correct AnswerverifiedShow Answer

Specific identification is the best inventory costing method because it is least open to manipulation by unscrupulous managers.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The company needs to make a lo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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