61)
Merchandise inventory includes:
A)
All goods in transit.
B)
All goods on consignment.
C)
Only damaged goods.
D)
All goods owned by a company and held for sale.
E)
Only non-damaged goods.
62)
Goods in transit are included in a purchaser’s inventory:
A)
At any time during transit.
B)
When the purchaser is responsible for paying freight charges.
C)
When the supplier is responsible for freight charges.
D)
After the half-way point between the buyer and seller.
E)
If the goods are shipped FOB destination.
63)
Consignment goods are:
A)
Always paid for by the consignee when they take possession.
B)
Goods shipped to the consignor who sells the goods for the owner.
C)
Goods shipped by the owner to the consignee who sells the goods for the owner.
D)
Reported in the consignee’s books as inventory.
E)
Not reported in the consignor’s inventory since they do not have possession of the inventory.
64)
Regardless of the inventory costing system used, cost of goods available for sale must be allocated
at the end of the period between
A)
net purchases during the period and ending inventory.
B)
beginning inventory and cost of goods sold.
C)
ending inventory and beginning inventory.
D)
ending inventory and cost of goods sold.
E)
beginning inventory and net purchases during the period.
65)
On December 31 of the current year, Plunkett Company reported an ending inventory balance of
$215,000. The following additional information is also available:
•
Plunkett sold and shipped goods costing $38,000 to Savannah Enterprises on December 28 with
shipping terms of FOB shipping point. The goods were not included in the ending inventory
amount of $215,000.
•
Plunkett purchased goods costing $44,000 on December 29. The goods were shipped FOB
destination and were received by Plunkett on January 2 of the following year. The shipment was a
rush order that was supposed to arrive by December 31. These goods were included in the ending
inventory balance of $215,000.
•
Plunkett’s ending inventory balance of $215,000 included $15,000 of goods being held on
consignment from Carole Company. (Plunkett Company is the consignee.)
•
Plunkett’s ending inventory balance of $215,000 did not include goods costing $95,000 that were
shipped to Plunkett on December 27 with shipping terms of FOB destination and were still in transit
at year-end.
Based on the above information, the amount that Plunkett should report in ending inventory on
December 31 is:
A) $209,000 B) $156,000 C) $200,000 D) $171,000 E) $194,000
66)
Bedrock Company reported a December 31 ending inventory balance of $412,000. The following
additional information is also available:
•
The ending inventory balance of $412,000 included $72,000 of consigned inventory for which
Bedrock was the consignor.
•
The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in
the warehouse and were to be used by the company’s supervisors and managers during the coming
year.
Based on this information, the correct balance for ending inventory on December 31 is:
A) $412,000 B) $318,000 C) $340,000 D) $390,000 E) $362,000
67)
Buffalo Company reported a December 31 ending inventory balance of $412,000. The following
additional information is also available:
•
The ending inventory balance of $412,000 did not include goods costing $48,000 that were
purchased by Buffalo on December 28 and shipped FOB destination on that date. Buffalo did not
receive the goods until January 2 of the following year.
•
The ending inventory balance of $412,000 included damaged goods at their original cost of
$38,000. The net realizable value of the damaged goods was $10,000.
Based on this information, the correct balance for ending inventory on December 31 is:
A) $374,000 B) $422,000 C) $460,000 D) $384,000 E) $438,000
68)
Costs included in the Merchandise Inventory account can include all of the following except:
A)
Damaged inventory that cannot be sold.
B)
Storage.
C)
Invoice price minus any discount.
D)
Insurance.
E)
Transportation-in.
69)
Internal controls that should be applied when a business takes a physical count of inventory should
include all of the following except:
A)
A manager confirms that all inventories are ticketed only once.
B)
Counters of inventory should be those who are responsible for the inventory.
C)
Counters confirm the validity of inventory existence, amounts, and quality.
D)
Prenumbered inventory tickets.
E)
Second counts by a different counter.
70)
Physical counts of inventory:
A)
Are necessary to adjust the Inventory account to the actual inventory available.
B)
Requires the use of hand-held portable computers.
C)
Are not necessary under the cost-to benefit constraint.
D)
Are not necessary under the perpetual system.
E)
Must be taken at least once a month.
71)
During a period of steadily rising costs, the inventory valuation method that yields the highest
reported net income is:
A)
FIFO method.
B)
LIFO method.
C)
Weighted-average method.
D)
Average cost method.
E)
Specific identification method.
72)
The inventory valuation method that tends to smooth out erratic changes in costs is:
A)
LIFO.
B)
WIFO.
C)
FIFO.
D)
Weighted average.
E)
Specific identification.
73)
The inventory valuation method that has the advantages of assigning an amount to inventory on the
balance sheet that approximates its current cost, and also mimics the actual flow of goods for most
businesses is:
A)
Lower of cost or market.
B)
Specific identification.
C)
FIFO.
D)
Weighted average.
E)
LIFO.
74)
The inventory valuation method that results in the lowest taxable income in a period of inflation is:
A)
LIFO method.
B)
FIFO method.
C)
Specific identification method.
D)
Weighted-average cost method.
E)
Gross profit method.
75)
The consistency concept:
A)
Is also called the full disclosure principle.
B)
Is also called the matching principle.
C)
Requires a company to use one method of inventory valuation exclusively.
D)
Prescribes a company use the same accounting method of inventory valuation, an exception
being when a change from one method to another will improve its financial reporting.
E)
Requires that all companies in the same industry use the same accounting methods of
inventory valuation.
76)
The full disclosure principle:
A)
Requires that companies use the same accounting method for inventory valuation period after
period.
B)
Is not subject to the consideration of materiality.
C)
Prescribes that the notes to the financial statements report the change from one inventory
valuation method to another.
D)
Is also called the consistency principle.
E)
Is only applied to retailers and manufacturers.
77)
Companies can and often do use different costing methods for financial reporting and tax reporting.
An exception to this is the:
A)
FIFO inventory valuation method.
B)
Matching principle.
C)
Consistency concept.
D)
LIFO conformity rule.
E)
Full disclosure principle.
78)
Which of the following inventory costing methods will always result in the same values for ending
inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is
used?
A)
FIFO and weighted-average cost
B)
FIFO and LIFO
C)
Specific identification and FIFO
D)
LIFO and weighted-average cost
E)
LIFO and specific identification
79)
If a period-end inventory amount is reported in error, it can cause a misstatement in all of the
following except:
A)
Gross profit.
B)
Cost of goods sold.
C)
Current assets.
D)
Net sales.
E)
Net income.
80)
Since an error in the period-end inventory causes an offsetting error in the next period:
A)
Is immaterial for managerial decision making.
B)
It is said to be self-correcting.
C)
Managers can ignore the error.
D)
If affects only balance sheet accounts.
E)
It affects only income statement accounts.
81)
The understatement of the ending inventory balance causes:
A)
Cost of goods sold to be understated and net income to be understated.
B)
Cost of goods sold to be overstated and net income to be understated.
C)
Cost of goods sold to be overstated and net income to be overstated.
D)
Cost of goods sold to be overstated and net income to be correct.
E)
Cost of goods sold to be understated and net income to be overstated.
82)
The understatement of the beginning inventory balance causes:
A)
Cost of goods sold to be overstated and net income to be correct.
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 understated and net income to be understated.
E)
Cost of goods sold to be overstated and net income to be understated.
83)
Lucia Company reported cost of goods sold for Year 1 and Year 2 as follows:
Year 1
Year 2
Beginning inventory
$120,000
$130,000
Cost of goods purchased
250,000
275,000
Cost of goods available for
sale
370,000
405,000
Ending inventory
130,000
135,000
Cost of goods sold
$240,000
$270,000
Lucia Company made two errors: 1) ending inventory at the end of Year 1 was understated by
$15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000. Given this
information, the correct cost of goods sold figure for Year 2 would be:
A) $291,000 B) $276,000 C) $264,000 D) $249,000 E) $285,000
Sales
$410,000
Cost of goods sold:
Beginning inventory
$132,000
84)
Hull Company reported the following income statement information for the current year:
35
Beginning inventory
$132,000
Cost of goods purchased
273,000
Cost of goods available
for sale
405,000
Ending inventory
144,000
Cost of goods sold
261,000
Gross profit
$149,000
The beginning inventory balance is correct. However, the ending inventory figure was overstated by
$20,000. Given this information, the correct gross profit would be:
A) $149,000. B) $142,000. C) $129,000. D) $112,000. E) $169,000.
85)
An understatement of ending inventory will cause
A)
An overstatement of assets and an understatement of equity on the balance sheet.
B)
An understatement of assets and an overstatement of equity on the balance sheet.
C)
An overstatement of assets and equity on the balance sheet.
D)
An understatement of assets and equity on the balance sheet.
E)
No effect on the balance sheet.
86)
The inventory turnover ratio:
A)
Reveals how many times a company sells its merchandise inventory during a period.
B)
Is used to measure solvency.
C)
Calculation depends on the company’s inventory valuation method.
D)
Is used to analyze profitability.
E)
Reveals how many days a company can sell inventory if no new merchandise is purchased.
87)
Days’ sales in inventory:
A)
Is calculated by dividing cost of goods sold by ending inventory.
B)
Is a substitute for the acid-test ratio.
C)
Focuses on average inventory rather than ending inventory.
D)
Is also called days’ stock on hand.
E)
Is used to measure solvency.
88)
The inventory turnover ratio is calculated as:
A)
Cost of goods sold divided by ending inventory.
B)
Cost of goods sold divided by average merchandise inventory.
C)
Ending inventory divided by cost of goods sold.
D)
Sales divided by cost of goods sold.
E)
Cost of goods sold divided by ending inventory times 365.
89)
Days’ sales in inventory is calculated as:
A)
Ending inventory divided by cost of goods sold.
B)
Ending inventory divided by cost of goods sold times 365.
C)
Ending inventory times cost of goods sold.
D)
Cost of goods sold divided by ending inventory times 365.
E)
Cost of goods sold divided by ending inventory.
90)
Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average
inventory of $1,965 million. Its inventory turnover equals:
A) 0.21. B) 80.9 days. C) 4.51. D) 4.79. E) 76.1 days.
91)
Perfection Company had cost of goods sold of $853,000, ending inventory of $70,500, and average
inventory of $71,600. Its inventory turnover equals:
A) 1.0. B) 6.0. C) 14.0. D) 30.6. E) 11.9.
92)
Beckenworth had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and
average inventory of $1,965 million. Its days’ sales in inventory equals: (Use 365 days a year.)
A) 4.51. B) 0.21. C) 76.1 days. D) 80.9 days. E) 4.79.