Question 1

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Accepted Answer

A) True 
 B)False

Question 2

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows:  Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

Accepted Answer

The answer of During January, a company that uses a...

Question 3

The merchandise turnover ratio:

Accepted Answer

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

Question 4

Goods in transit are included in inventory:

Accepted Answer

A)  When the purchaser is responsible for paying freight charges.
B)  When ownership has passed to the purchaser.
C)  When the purchaser is responsible for paying freight charges and when ownership has passed to the purchaser.
D)  When the supplier pays the freight charges.
E)  At any time in transit.F) C) and D)
G) A) and D)

Question 5

The merchandise turnover ratio:

Accepted Answer

A)  Depends on the type of inventory valuation method.
B)  Measures how quickly a firm sells its merchandise inventory.
C)  Is used to analyze profitability.
D)  Validates the acid-test ratio.
E)  Is used to measure solvency.F) C) and E)
G) A) and D)

Question 6

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

Accepted Answer

A) True 
 B)False

Question 7

The full disclosure principle:

Accepted Answer

A)  Requires that any change in net income due to changes in the inventory cost assumption be disclosed.
B)  Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the type of change.
C)  Does not require a company to use one cost flow assumption exclusively.
D)  Requires that when a change in inventory cost flow assumption is made, the notes to the statements report the justification for the change.
E)  All of these answers are correct.F) B) and C)
G) B) and E)

Question 8

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

Accepted Answer

A) True 
 B)False

Question 9

FreshFoods Co. is a small fruit and vegetable grocer. FreshFoods is concerned that sales have been down over the past three quarters. As the companyaccountant, you decide to perform some analysis to uncover the source of theproblem. You gather the following data from the accounting records by quarter:  Required: Use the information above to draw some conclusions and discuss the financial impact of your analysis to FreshFoods Co. management.

Accepted Answer

The company's invent...

Question 10

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

Accepted Answer

A)  Current replacement cost.
B)  Current sales price.
C)  The inventory as a whole.
D)  Purchase price.
E)  To groups of similar or related items.F) B) and E)
G) D) and E)

Question 11

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 12

For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

Accepted Answer

A)  $6,000.
B)  $7,000.
C)  $8,000.
D)  $16,000.
E)  $10,200.F) B) and C)
G) B) and D)

Question 13

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

Accepted Answer

A) True 
 B)False

Question 14

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 15

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

Accepted Answer

A) True 
 B)False

Question 16

An error in valuing inventory will cause an error in the amount of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 17

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

Accepted Answer

A) True 
 B)False

Question 18

Which ratio measures the portion of net sales that is gross profit?

Accepted Answer

A)  Gross profit ratio.
B)  Net sales ratio.
C)  Gross margin ratio.
D)  Gross margin ratio and gross profit ratio
E)  All of these answers are correctF) All of the above
G) B) and C)

Question 19

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

Accepted Answer

A) True 
 B)False

Question 20

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500million, and average inventory turnover of $2,000 million. The days' sales in inventory is:

Accepted Answer

A)  152.1.
B)  121.7.
C)  876.
D)  30.5.
E)  1,095.F) A) and E)
G) C) and D)

Exam 6: Inventory Costing and Valuation

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Correct Answer
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Correct Answer
verified
The company's invent...
View Answer

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
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The merchandise turnover ratio:

Correct Answer
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For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

Correct Answer
verified

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

Correct Answer
verified

Which ratio measures the portion of net sales that is gross profit?

Correct Answer
verified

An error in valuing inventory will cause an error in the amount of cost of goods sold.

Correct Answer
verified

The merchandise turnover ratio:

Correct Answer
verified

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

Correct Answer
verified

Goods in transit are included in inventory:

Correct Answer
verified

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500million, and average inventory turnover of $2,000 million. The days' sales in inventory is:

Correct Answer
verified

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

Correct Answer
verified

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

Correct Answer
verified

The full disclosure principle:

Correct Answer
verified

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

Correct Answer
verified

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

Correct Answer
verified

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

Correct Answer
verified

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

Correct Answer
verified

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

Correct Answer
verified

Exam 6: Inventory Costing and Valuation

The FIFO method assumes that costs for the most recently purchased items are recovered first.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe company's invent...View AnswerShow Answer

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

The merchandise turnover ratio:

Correct AnswerverifiedShow Answer

For the current month, Brixell Company had net sales of $12,000. Brixell typicallyachieves a gross profit of 15%. Cost of goods sold under the gross profit method would be:

Correct AnswerverifiedShow Answer

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost.

Correct AnswerverifiedShow Answer

Which ratio measures the portion of net sales that is gross profit?

Correct AnswerverifiedShow Answer

An error in valuing inventory will cause an error in the amount of cost of goods sold.

Correct AnswerverifiedShow Answer

The merchandise turnover ratio:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Goods in transit are included in inventory:

Correct AnswerverifiedShow Answer

Toys "R" Ltd. had cost of goods sold of $6,000 million, ending inventory of $2,500million, and average inventory turnover of $2,000 million. The days' sales in inventory is:

Correct AnswerverifiedShow Answer

In the process of adjusting inventory, how can the lower of cost and net realizable value be applied to the ending inventory?

Correct AnswerverifiedShow Answer

The inventory cost flow assumption that assigns the highest cost to cost of goods sold in a period of rising prices is FIFO.

Correct AnswerverifiedShow Answer

The full disclosure principle:

Correct AnswerverifiedShow Answer

Toys "R" had cost of goods sold of $6,900 million. Its ending inventory was $2,000 million. Therefore its days' sales in inventory was 90 days.

Correct AnswerverifiedShow Answer

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period.

Correct AnswerverifiedShow Answer

An advantage of the moving weighted-average method is that it tends to smooth out price changes.

Correct AnswerverifiedShow Answer

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows: Prepare a schedule to show the cost of goods sold and ending inventory using the moving weighted average method of costing rounding calculations to twodecimals.

Correct AnswerverifiedShow Answer

One of the most important decisions in accounting for inventory is determining the per-unit costs assigned to inventory items.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The company's invent...
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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