Question 1

Generally accepted accounting principles require that the inventory of a company be reported at:

Accepted Answer

A)  Historical cost.
B)  Lower of cost and net realizable value.
C)  Replacement cost.
D)  Purchase price.
E)  Net realizable value.F) C) and E)
G) A) and D)

Question 2

Explain the difference between the retail method and gross profit method for valuing inventory.

Accepted Answer

The retail method is generally used to p...

Question 3

Player Company made the following merchandise purchases during the current year:  There was no beginning inventory, but ending inventory consisted of 400 units. If Player uses the first-in, first-out method and the periodic inventory system, what would be the cost of the ending inventory?

Accepted Answer

The answer of Player Company made the following merchandise purchases...

Question 4

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Accepted Answer

A) True 
 B)False

Question 5

The merchandise turnover ratio is calculated by dividing average merchandise inventory by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 6

Physical counts of inventory:

Accepted Answer

A)  Are necessary to adjust for shrinkage.
B)  Should be taken at least once a month.
C)  Are not necessary under the perpetual system.
D)  Are necessary to adjust for shrinkage and should be taken at least once a month.
E)  Are not necessary under the perpetual system and should be taken at least once a month.F) A) and D)
G) B) and E)

Question 7

Trekking Company's cost of goods sold was $15,550. Its average merchandise inventory was $4,575. Its merchandise turnover was 3.4.

Accepted Answer

A) True 
 B)False

Question 8

The consistency principle:

Accepted Answer

A)  Allows a company to change its cost flow assumption period after period in order to minimize income taxes.
B)  Is also called the matching principle.
C)  Requires a company to use one cost flow assumption exclusively.
D)  Allows a company to change its cost flow assumption period after period in order to maximize net income.
E)  Requires a company to use the same accounting methods period after period.F) All of the above
G) B) and C)

Question 9

When businesses apply the lower of cost and net realizable value rule on an item by item basis, they will report the lowest inventory value possible.

Accepted Answer

A) True 
 B)False

Question 10

Trekking Company reported the following data:  Instructions:(1)Calculate Trekking Company's merchandise turnover for each year to two decimal places.(2)Comment on the company's efficiency in managing its inventory.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (2) Trekking Compan...

Question 11

The three methods of inventory valuation that are most often used in Canada are specific identification, FIFO, and (moving)weighted average.

Accepted Answer

A) True 
 B)False

Question 12

The total dollar value of inventory on hand is determined byestimating the units on hand, (2)multiplying the count by cost per unit, and (3)adding the costs for allproducts.

Accepted Answer

A) True 
 B)False

Question 13

In applying the faithful representation principle, an accountant should choose the most realistic value available, so that the inventory value is not overstated.

Accepted Answer

A) True 
 B)False

Question 14

In applying LCNRV, net realizable value is defined as the sales price less costs incurred to make the sale.

Accepted Answer

A) True 
 B)False

Question 15

The gross profit ratio measures how much of each dollar of gross sales is gross profit.

Accepted Answer

A) True 
 B)False

Question 16

Damaged or obsolete goods:

Accepted Answer

A)  Are included in inventory at net realizable value if that is less than cost.
B)  Are not counted as saleable inventory or are counted at full cost.
C)  Are counted at full cost.
D)  Are not counted as saleable inventory.
E)  Are not counted as saleable inventory and are included in inventory at net realizable value if that is less than cost.F) None of the above
G) C) and D)

Question 17

Use of the FIFO cost flow assumption means that:

Accepted Answer

A)  The periodic costing system is used.
B)  Ending inventory items are the ones most recently purchased.
C)  Goods are removed from inventory at their average cost.
D)  The beginning inventory contains the oldest costs.
E)  All of these are correct answers.F) A) and E)
G) B) and D)

Question 18

All businesses should take an inventory count once each year to identify inventory errors or shortages.

Accepted Answer

A) True 
 B)False

Question 19

The days' sales in inventory ratio is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Question 20

All businesses should take an inventory count once each year to avoid inventory errors or shortages.

Accepted Answer

A) True 
 B)False

Exam 6: Inventory Costing and Valuation

Trekking Company's cost of goods sold was $15,550. Its average merchandise inventory was $4,575. Its merchandise turnover was 3.4.

Correct AnswerverifiedShow Answer

The total dollar value of inventory on hand is determined byestimating the units on hand, (2)multiplying the count by cost per unit, and (3)adding the costs for allproducts.

Correct AnswerverifiedShow Answer

Trekking Company reported the following data: Instructions:(1)Calculate Trekking Company's merchandise turnover for each year to two decimal places.(2)Comment on the company's efficiency in managing its inventory.

Correct Answerverified (2) Trekking Compan...View AnswerShow Answer

All businesses should take an inventory count once each year to identify inventory errors or shortages.

Correct AnswerverifiedShow Answer

In applying LCNRV, net realizable value is defined as the sales price less costs incurred to make the sale.

Correct AnswerverifiedShow Answer

When businesses apply the lower of cost and net realizable value rule on an item by item basis, they will report the lowest inventory value possible.

Correct AnswerverifiedShow Answer

Physical counts of inventory:

Correct AnswerverifiedShow Answer

The merchandise turnover ratio is calculated by dividing average merchandise inventory by cost of goods sold.

Correct AnswerverifiedShow Answer

All businesses should take an inventory count once each year to avoid inventory errors or shortages.

Correct AnswerverifiedShow Answer

Explain the difference between the retail method and gross profit method for valuing inventory.

Correct AnswerverifiedThe retail method is generally used to p...View AnswerShow Answer

The gross profit ratio measures how much of each dollar of gross sales is gross profit.

Correct AnswerverifiedShow Answer

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Correct AnswerverifiedShow Answer

Damaged or obsolete goods:

Correct AnswerverifiedShow Answer

The three methods of inventory valuation that are most often used in Canada are specific identification, FIFO, and (moving)weighted average.

Correct AnswerverifiedShow Answer

The days' sales in inventory ratio is calculated by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Correct AnswerverifiedShow Answer

In applying the faithful representation principle, an accountant should choose the most realistic value available, so that the inventory value is not overstated.

Correct AnswerverifiedShow Answer

The consistency principle:

Correct AnswerverifiedShow Answer

Generally accepted accounting principles require that the inventory of a company be reported at:

Correct AnswerverifiedShow Answer

Player Company made the following merchandise purchases during the current year: There was no beginning inventory, but ending inventory consisted of 400 units. If Player uses the first-in, first-out method and the periodic inventory system, what would be the cost of the ending inventory?

Correct AnswerverifiedShow Answer

Use of the FIFO cost flow assumption means that:

Correct AnswerverifiedShow Answer

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(2) Trekking Compan...
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The retail method is generally used to p...
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