Question 1

A company's ability to pay its short-term obligations depends on many factors including how quickly it sells its inventory.

Accepted Answer

A) True 
 B)False

Question 2

What is the inventory turnover ratio (rounded to one decimal place) ?

Accepted Answer

A)   12.5
B)   13.4
C)   14.7
D)   2.2E) A) and C)
F) B) and C)

Question 3

Which of the following would be in the finished goods 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)   Cured cheese that has been sold to retailers.E) None of the above
F) C) and D) C

Question 4

Acme sells 150 units during this quarter. If Acme uses the weighted average method, what is its cost of goods sold for the quarter?

Accepted Answer

A)   $600
B)   $705
C)   $750
D)   $900E) None of the above
F) A) and C) B

Question 5

Which of the following is the equation for cost of goods sold?

Accepted Answer

A)   Beginning inventory + net purchases - Ending inventory
B)   Beginning inventory + net purchases + Ending inventory
C)   Net purchases - Beginning inventory
D)   Ending inventory + net purchases - Beginning inventoryE) A) and D)
F) B) and D)

Question 6

The 2011 records of Thompson Company showed beginning inventory, $6,000; cost of goods sold, $14,000; and ending inventory, $8,000. The cost of purchases for 2006 was:

Accepted Answer

A)   $12,000.
B)   $10,000.
C)   $9,000.
D)   $16,000.E) None of the above
F) C) and D)

Question 7

Inventory levels increase by 10% at your company during the fourth quarter. Based on this increase, which of the following statements is true?

Accepted Answer

A)   This is always good news because inventories are an asset to the company.
B)   This could be good news if the company is ordering more goods because sales appear to be rising.
C)   This could be bad news if the company is ordering more goods because unit costs are falling.
D)   This is always bad news because higher inventories mean higher costs.E) A) and C)
F) None of the above

Question 8

If the company uses the weighted average inventory costing method, what is the cost of its ending inventory?

Accepted Answer

A)   $4,200.
B)   $2,700.
C)   $1,400.
D)   $1,365.E) A) and C)
F) B) and D)

Question 9

During 2010, Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000. If inventory at the beginning of the year was $15,000, the ending inventory balance must have been:

Accepted Answer

A)   $10,000.
B)   $25,000.
C)   $26,000.
D)   $27,000.E) All of the above
F) A) and B)

Question 10

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers. The entry to record this transaction on the retailer's books would include a debit to

Accepted Answer

A)   Accounts receivable
B)   Cost of goods sold
C)   Accounts payable
D)   InventoryE) B) and C)
F) None of the above

Question 11

The inventory turnover ratio is calculated as:

Accepted Answer

A)   Cost of goods sold divided by Sales
B)   Cost of goods sold divided by Average inventory
C)   Ending inventory divided by Cost of goods sold
D)   Average inventory divided by Cost of goods soldE) None of the above
F) A) and B)

Question 12

One of the most common sources of misstatement in financial statements is the:

Accepted Answer

A)   use of alternating inventory costing methods.
B)   failure to appropriately estimate the market value of inventory.
C)   failure to report stock issues appropriately.
D)   incorrectly calculating the inventory turnover ratio.E) B) and D)
F) A) and C)

Question 13

The Acme Corporation buys 300 units of merchandise in January at $5 each. Acme buys 500 units at $4 each in February and 200 units at $6 each in March. Acme sells 150 units during this quarter. Acme uses a periodic inventory system and had no beginning inventory. What is its cost of goods sold for the quarter using the LIFO method?

Accepted Answer

A)   $600
B)   $934
C)   $750
D)   $900E) All of the above
F) A) and D)

Question 14

An understatement of the beginning inventory balance causes:

Accepted Answer

A)   Cost of goods sold to be understated and net income to be understated.
B)   Cost of goods sold to be understated and net income to be overstated.
C)   Cost of goods sold to be overstated and net income to be understated.
D)   Cost of goods sold to be overstated and net income to be correct.E) B) and C)
F) A) and B)

Question 15

A company purchased $6,000 of merchandise. Transportation costs were an additional $100. The company later returned $250 of the merchandise and paid the invoice within the 2% discount period. What is the total amount of cash paid?

Accepted Answer

A)   $5,733
B)   $6,100
C)   $5,735
D)   $5,730E) None of the above
F) B) and C) C

Question 16

Your company had a beginning inventory of $109,500 and purchased $240,720 during the accounting period. Assuming no returns, find the goods available for sale, the cost of goods sold, the inventory turnover ratio, and days to sell for the company if its ending inventory was $94,820.

Accepted Answer

The answer of Your company had a beginning inventory of...

Question 17

If BetterBuy uses the specific identification method, its cost of goods sold will be:

Accepted Answer

A)   $3,000
B)   $2,950
C)   $3,200
D)   $3,033E) A) and B)
F) A) and C)

Question 18

A company using a perpetual inventory system made the following entry:  What does this entry reflect?

Accepted Answer

A)   A purchase of inventory.
B)   A return of inventory.
C)   A sale of inventory.
D)   A payment for inventory previously purchased on credit with the payment made within the discount period.E) A) and B)
F) None of the above

Question 19

An understatement of the ending inventory balance will cause:

Accepted Answer

A)   Cost of goods sold to be overstated and net income to be understated.
B)   Cost of goods sold to be overstated and net income to be overstated.
C)   Cost of goods sold to be understated and net income to be overstated.
D)   Cost of goods sold to be overstated and net income to be correct.E) All of the above
F) A) and B)

Question 20

A company should always keep extra inventory on hand; it could be needed if demand increases and it has to be bought sooner or later so it adds nothing to cost.

Accepted Answer

A) True 
 B)False

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

A company's ability to pay its short-term obligations depends on many factors including how quickly it sells its inventory.

Correct Answer
verified

What is the inventory turnover ratio (rounded to one decimal place) ?

Correct Answer
verified

Which of the following would be in the finished goods inventory of a company making cheese?

Correct Answer
verified
C

Acme sells 150 units during this quarter. If Acme uses the weighted average method, what is its cost of goods sold for the quarter?

Correct Answer
verified
B

Which of the following is the equation for cost of goods sold?

Correct Answer
verified

The 2011 records of Thompson Company showed beginning inventory, $6,000; cost of goods sold, $14,000; and ending inventory, $8,000. The cost of purchases for 2006 was:

Correct Answer
verified

Inventory levels increase by 10% at your company during the fourth quarter. Based on this increase, which of the following statements is true?

Correct Answer
verified

If the company uses the weighted average inventory costing method, what is the cost of its ending inventory?

Correct Answer
verified

During 2010, Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000. If inventory at the beginning of the year was $15,000, the ending inventory balance must have been:

Correct Answer
verified

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers. The entry to record this transaction on the retailer's books would include a debit to

Correct Answer
verified

The inventory turnover ratio is calculated as:

Correct Answer
verified

One of the most common sources of misstatement in financial statements is the:

Correct Answer
verified

Correct Answer
verified

An understatement of the beginning inventory balance causes:

Correct Answer
verified

A company purchased $6,000 of merchandise. Transportation costs were an additional $100. The company later returned $250 of the merchandise and paid the invoice within the 2% discount period. What is the total amount of cash paid?

Correct Answer
verified
C

Your company had a beginning inventory of $109,500 and purchased $240,720 during the accounting period. Assuming no returns, find the goods available for sale, the cost of goods sold, the inventory turnover ratio, and days to sell for the company if its ending inventory was $94,820.

Correct Answer
verified

If BetterBuy uses the specific identification method, its cost of goods sold will be:

Correct Answer
verified

A company using a perpetual inventory system made the following entry: What does this entry reflect?

Correct Answer
verified

An understatement of the ending inventory balance will cause:

Correct Answer
verified

A company should always keep extra inventory on hand; it could be needed if demand increases and it has to be bought sooner or later so it adds nothing to cost.

Correct Answer
verified

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

A company's ability to pay its short-term obligations depends on many factors including how quickly it sells its inventory.

Correct AnswerverifiedShow Answer

What is the inventory turnover ratio (rounded to one decimal place) ?

Correct AnswerverifiedShow Answer

Which of the following would be in the finished goods inventory of a company making cheese?

Correct AnswerverifiedC

Acme sells 150 units during this quarter. If Acme uses the weighted average method, what is its cost of goods sold for the quarter?

Correct AnswerverifiedB

Which of the following is the equation for cost of goods sold?

Correct AnswerverifiedShow Answer

The 2011 records of Thompson Company showed beginning inventory, $6,000; cost of goods sold, $14,000; and ending inventory, $8,000. The cost of purchases for 2006 was:

Correct AnswerverifiedShow Answer

Inventory levels increase by 10% at your company during the fourth quarter. Based on this increase, which of the following statements is true?

Correct AnswerverifiedShow Answer

If the company uses the weighted average inventory costing method, what is the cost of its ending inventory?

Correct AnswerverifiedShow Answer

During 2010, Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000. If inventory at the beginning of the year was $15,000, the ending inventory balance must have been:

Correct AnswerverifiedShow Answer

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers. The entry to record this transaction on the retailer's books would include a debit to

Correct AnswerverifiedShow Answer

The inventory turnover ratio is calculated as:

Correct AnswerverifiedShow Answer

One of the most common sources of misstatement in financial statements is the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An understatement of the beginning inventory balance causes:

Correct AnswerverifiedShow Answer

A company purchased $6,000 of merchandise. Transportation costs were an additional $100. The company later returned $250 of the merchandise and paid the invoice within the 2% discount period. What is the total amount of cash paid?

Correct AnswerverifiedC

Your company had a beginning inventory of $109,500 and purchased $240,720 during the accounting period. Assuming no returns, find the goods available for sale, the cost of goods sold, the inventory turnover ratio, and days to sell for the company if its ending inventory was $94,820.

Correct AnswerverifiedShow Answer

If BetterBuy uses the specific identification method, its cost of goods sold will be:

Correct AnswerverifiedShow Answer

A company using a perpetual inventory system made the following entry: What does this entry reflect?

Correct AnswerverifiedShow Answer

An understatement of the ending inventory balance will cause:

Correct AnswerverifiedShow Answer

A company should always keep extra inventory on hand; it could be needed if demand increases and it has to be bought sooner or later so it adds nothing to cost.

Correct AnswerverifiedShow Answer

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C

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B

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C

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