Chapter 6
77. Days’ sales in inventory estimates the average number of days it takes to:
a.
convert inventory to sales.
b.
convert raw materials to finished inventory.
c.
collect cash from inventory sold.
d.
pay suppliers for inventory purchased.
Multiple Choice
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78. In a period of rising prices, the effect of selecting the FIFO rather than the LIFO method of inventory valuation results
in:
a.
a higher days’ sales in inventory.
b.
a lower return on sales.
c.
a lower days’ sales in inventory.
d.
a higher days’ sales in receivables.
Multiple Choice
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Chapter 6
79. During a period of consistently rising prices, the method of inventory costing that will result in reporting the greatest
cost of merchandise sold is:
a.
FIFO.
b.
average cost.
c.
LIFO.
d.
All methods will generate the same cost of merchandise sold.
c
Challenging
Multiple Choice
False
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80. If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will
yield the highest net income is:
a.
average cost.
b.
LIFO.
c.
FIFO.
d.
All methods will generate the same net income.
c
Challenging
Multiple Choice
False
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Chapter 6
JFND-GO3A-EW4R-KTKD
81. If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will
yield the highest inventory?
a.
Average cost
b.
LIFO
c.
FIFO
d.
All methods will generate the same gross profit.
c
Challenging
Multiple Choice
False
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82. If merchandise inventory is being valued at cost and the price level is steadily falling, which method of costing will
yield the largest gross profit?
a.
Average cost
b.
LIFO
c.
FIFO
d.
All methods will generate the same gross profit.
Challenging
Multiple Choice
False
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Chapter 6
83. Jonas Company’s inventory has the following values:
Cost
$1,000
Estimated selling price
1,500
Selling expenses
600
Under the lower-of-cost-or-market method, Jonas Company’s inventory will be valued at:
a.
$500.
b.
$900.
c.
$1,500.
d.
$1,000.
Easy
False
JFND-GO3A-EW4R-KTJT
84. If the cost of an item of inventory is $70, the current replacement cost is $65, and the sales price is $85, the amount
included in inventory according to the lower-of-cost-or-market method is:
a.
$65.
b.
$70.
c.
$85.
d.
$160.
a
JFND-GO3A-EW4R-KTJ1
Chapter 6
85. If a company has an accounts receivable turnover ratio of 15, the company:
a.
is converting its accounts receivable to cash 15 times per year.
b.
is selling its inventory on 15 days credit terms.
c.
is converting its inventory to accounts receivable in 15 days of production.
d.
collects it receivables 15 times per year.
Multiple Choice
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86. Dana Inc. showed the following data for the year end:
Cash sales
$4,100,000
Credit sales
5,900,000
Accounts receivable, beginning of the year
600,000
Accounts receivable, end of the year
400,000
Calculate Dana Inc.’s days’ sales in receivables. (Round the answer to the nearest whole number.)
Multiple Choice
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Chapter 6
a.
30 days
b.
61 days
c.
12 days
d.
44 days
Multiple Choice
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87. The accounts receivable turnover is computed by dividing:
a.
total assets by average accounts receivable.
b.
net sales by average accounts receivable.
c.
net income by average accounts receivable.
d.
net purchases by average accounts receivable.
Multiple Choice
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Chapter 6
88. SQC Inc. had sales of $3,000,000, cost of merchandise sold of $2,100,000, and average inventory of $140,000. What
is SQC Inc.’s days’ sales in inventory? (Round the answer to the nearest whole number.)
a.
24 days
b.
17 days
c.
15 days
d.
30 days
a
Moderate
False
JFND-GO3A-EW4R-KTJI
89. If net sales is $550,000, beginning inventory is $110,000, and ending inventory is $125,000, how much would be the
accounts receivables turnover?
a.
4.4
b.
5.0
c.
4.7
d.
4.0
c
Easy
False
JFND-GO3A-EW4R-KTJW
Chapter 6
90. If sales is $1,000,000, cost of merchandise sold is $750,000, and average inventory is $220,000, how much would be
inventory turnover?
a.
1.1
b.
3.4
c.
1.3
d.
4.5
Easy
Multiple Choice
False
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91. Classify the following as either Current Assets (CA), Investments (I), or both (CA and I).
(a)
Trade Receivables
(b)
Note Receivable due in 30 days
(c)
Interest Receivable on note due in 30 days
(d)
Note Receivable due in 2 years
(e)
Five-year Note Receivable due in a series of equal annual payments
(a)
(b)
(c)
(d)
(e)
Easy
Subjective Short Answer
False
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Chapter 6
92. Other than accounts receivable and notes receivable, name other receivables that might be included on the balance
sheet.
93.
(a)
If the interest on a note is $1,500, the interest rate is 5%, and the time is 90 days, what is
the principal? (Assume 360 days in a year)
(b)
If the principal of a note is $50,000, the interest is $1,000, and the time is 60 days, what
is the interest rate? (Assume 360 days in a year)
Chapter 6
94. Determine the due date and amount of interest due at maturity on the following notes (Assume 360 days in a year):
Origination Date
Face
Amount
Term
of Note
Interest
Rate
Maturity
Date
Interest
Amount
(a) March 1
$5,000
60 days
9%
_______
_______
(b) May 15
$9,000
120 days
8%
_______
_______
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95. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases:
(a)
Balance of $3,000 in the allowance account just prior to adjustment. Analysis of
accounts receivable indicates doubtful accounts of $25,000.
(b)
Balance of $500 in the allowance account just prior to adjustment. Uncollectibles are
estimated at 2% of sales, which totaled $800,000 for the year.
Chapter 6
96. Jade Inc. recorded the following information pertaining to its inventory for the month of January:
1
Inventory
80 units at $20 each
18
Purchase
150 units at $25 each
Sales
106 units
The business uses the first-in, first-out inventory costing method. Determine the cost of the inventory on hand at the end
of January.
January
31
Balance: 124 units at $25 = $3,100
Moderate
Subjective Short Answer
False
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97. The following units are available for sale during the year:
January 1
Beginning Inventory
10 units at $18 each
April 3
Purchase
30 units at $20 each
August 31
Purchase
28 units at $25 each
September 29
Purchase
17 units at $30 each
December 31
Ending Inventory
21 units
Determine ending inventory cost by (a) FIFO method, (b) LIFO method, and (c) average cost method.
(a)
FIFO: $610
(b)
LIFO: $400
Challenging
Bloom’s: Applying
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Chapter 6
98. Joy Co.’s recorded inventory information for the month of August is as follows:
Beginning Inventory
22 units at $15 each
First Purchase
25 units at $18 each
Second Purchase
21 units at $20 each
Sales
48 units
Determine the total cost of ending inventory according to (a) FIFO method and (b) LIFO method.
(a)
$400 (20 units × $20)
(b)
$300 (22 units × $15)
Challenging
Subjective Short Answer
False
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99.
September 5
Purchase
65 units at $6 each
September 13
Purchase
55 units at $8 each
September 29
Purchase
44 units at $10 each
September 30
Ending Inventory
70 units
Subjective Short Answer
False
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Chapter 6
Determine ending inventory cost by (a) FIFO method, (b) LIFO method, and (c) average cost method.
(a)
FIFO: $648
(b)
LIFO: $430
(c)
Average cost: $542 (rounded)
Challenging
Subjective Short Answer
False
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100. Beginning inventory, purchases, and sales for Product XCX are as follows:
Oct. 1
Beginning Inventory
24 units
at
$12 each
Oct. 17
Purchase
10 units
at
$15 each
Oct. 30
Sale
25 units
Assuming a periodic inventory system and the first-in, first-out method, determine (a) the cost of the merchandise sold
and (b) the inventory on October 31.
9 units at $15 = $135
Moderate
Subjective Short Answer
False
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Chapter 6
101. Beginning inventory, purchases, and sales for Product XCX are as follows:
Oct. 1
Beginning Inventory
24 units
at
$12 each
Oct. 17
Purchase
10 units
at
$14 each
Oct. 30
Sale
52 units
Assuming a periodic inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for
the October 30 sale and (b) the inventory on October 31.
Moderate
Subjective Short Answer
False
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JFND-GO3A-EW4R-KTTI
102. The units of Product YY2 available for sale during the year were as follows:
Apr. 1
Inventory
16 units
at
$30 each
Jun. 16
Purchase
30 units
at
$33 each
Sep. 28
Purchase
45 units
at
$37 each
There are 17 units of the product in the physical ending inventory at March 31. The periodic inventory system is used.
Determine the ending inventory cost by (a) FIFO, (b) LIFO, and (c) average cost methods.
FIFO:
17 units at $37.00 =
Chapter 6
103. The units of Product YY2 available for sale during the year were as follows:
Apr 1
Inventory
16 units
at
$30 each
Jun 16
Purchase
30 units
at
$33 each
Sep 28
Purchase
45 units
at
$37 each
There are 15 units of the product in the physical inventory at March 31. The periodic inventory system is used. Determine
the difference in gross profit between the LIFO and FIFO inventory cost systems.
FIFO Cost of Merchandise Sold =
Difference
Challenging
Subjective Short Answer
False
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LIFO:
16 units at $30.00 =
1 unit at $33.00 =
Total
Average cost:
17 units at $34.45 =
Moderate
Subjective Short Answer
False
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Chapter 6
104. Using the lower-of-cost-or-market method of inventory valuation, what should the total inventory value be for the
following items:
Item
Inventory
Quantity
Unit cost
price
Unit market
price
Total cost
price
Total market
price
A
200
$5
$4.50
$1,000
$900
B
100
4
5.00
400
500
C
50
7
6.50
350
325
A
50
Moderate
Subjective Short Answer
False
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105. On the basis of the following data related to current assets for Mission Co. at December 2016, prepare a partial
balance sheet in good form.
Cash and cash equivalents
$100,000
Notes receivable
50,000
Accounts receivable
290,000
Allowance for doubtful accounts
20,000
Interest receivable
750
Merchandise inventory at lower-of-cost-(first-in, first-out method) or-market
120,000
Chapter 6
106. Prepare the Current Assets section of a balance sheet using some or all of the following accounts:
Cash
Property, Plant, and Equipment
Accounts Receivable
Notes Receivable—90-day note
Merchandise Inventory
Allowance for Doubtful Accounts
Interest Receivable
Prepaid Advertising
Sales Returns and Allowances
Chapter 6
107. Indicate the section of the balance sheet (current assets, fixed assets, investments, current liabilities, long-term
liabilities, stockholders’ equity) in which each of the following is reported:
(a)
Note receivable due in 3 years
(b)
Note receivable due in 90 days
(c)
Allowance for doubtful accounts
(a)
Investments
(b)
Current assets
(c)
Current assets
Easy
Subjective Short Answer
False
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Easy
Subjective Short Answer
False
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