CHAPTER 14, ANSWERS TO SHORT-ANSWER QUESTIONS, QA TEMPLATES: Answers
will vary.
1. Identify and explain the three-step process for tracking inventory.
Tracking inventory is a three-step process:
2. Explain how Sage 50 uses a perpetual inventory system.
3. Define the term merchandise inventory.
4. Explain the terms Average Cost, LIFO and FIFO.
The average cost method is the default that is used for inventory items sold. The formula
5. What do Invoice Nos. 106, 107, and 108 show? Identify to whom the merchandise was sold,
what was purchased, and the amount of the invoice.
6. What are the journal entries for the following transactions when a perpetual inventory
system is used: Purchased four pairs of curtains from Ronny Becker Fabrics at $30 each?
Sold four pair of curtains to Peter Martin for $400?
Which one of Shannon’s Service Merchandise inventory items shows the highest gross profit
percentage? Why?
ANSWER:
True/False
[QUESTION]
1. Sage 50 uses a periodic inventory system.
[QUESTION]
2. In a perpetual inventory system, a merchandising business continuously updates inventory each time
an item is purchased or sold.
3. The FIFO inventory method assumes that the goods received last are sold first.
4. The LIFO inventory method assumes that the goods received last are sold first.
5. The average cost method of inventory is also known as weighted average method.
6. After you post either purchases or sales, Sage 50 automatically updates the cost and quantity of each
inventory item.
7. Sage 50 includes only the average cost inventory method.
8. Accountants recommend that you select LIFO when you desire to charge the most recent inventory
costs against revenue.
9. Inventory tracking is a two-step process: Enter item information and enter inventory adjustments.
[QUESTION]
10. Inventory items are set up on the Vendors & Purchases Navigation Center.
11. There are nine types of inventory items: stock item, master stock item; non-stock item, description
only, service, labor, assembly, activity item and charge item.
12. The default inventory costing method used by Sage 50 is the:
a. Average
b. Straight-Line
c. LIFO
d. FIFO
e. Double-declining
13. The LIFO (last in, first out) method of inventory assumes:
a. The lowest amount of net loss
b. The highest amount of net income
c. Cost of sales is based on current replacement
d. Beginning inventory is sold first
e. Overall Average cost
14. Accountants recommend that you use FIFO when you desire to:
a. Charge the most recent inventory costs against revenue
b. Charge costs against revenue in the order in which costs are incurred
c. Get the lowest net income
d. Get the highest net income
e. Obtain the highest gross profit percentage
15. You need to restore the following file to start Chapter 14:
a. Exercise 13-1.ptb
b. Exercise 13-2.ptb
c. Chapter 13.ptb
d. Chapter 14.ptb
e. Exercise 12.ptb
[QUESTION]
16. On the Navigation Bar, make the following selections to display the Inventory Item Defaults window:
a. Maintain > Setup Checklist
b. Inventory & Services Navigation Center > Inventory Items > Set Up Inventory Defaults
c. Inventory & Services Navigation Center > Inventory Items > New Inventory Item
d. Inventory & Services Navigation Center > Company Services > Set Up Company Service Defaults
e. Vendor & Purchases Navigation Center > Enter Bill > edit and review invoices
17. On the Navigation Bar, make the following selections to enter inventory item maintenance
information:
a. Inventory & Services Navigation Center > Inventory Item > View and Edit Inventory items > record
inventory information
b. Vendors & Purchases Navigation Center > Purchase Orders > New Purchase Orders > record inventory
information
c. Inventory & Services Navigation Center > Inventory Items > New Inventory Item > record inventory
information
d. Maintain > Defaults > Inventory Items > record inventory information
e. Vendor & Purchases > select Pay Bills > New Bill
18. The Inventory Profitability Report shows the following:
a. Gross profit percentage
b. Reorder amount
c. Net income
d. Net loss
e. All the assets purchased by the company
19. All goods owned by the business and held for sale are called:
a. Quantities
b. Assets
c. Liabilities
d. Merchandise inventory
e. Fixed assets
20. This inventory method yields the lowest amount of net income in periods of rising cost:
a. FIFO
b. Average
c. LIFO
d. Double-declining balance
e. Straight-line