Question 1

How is the cost of goods sold calculated under the periodic method?

Accepted Answer

A)  By adding the cost of purchases during the period to the cost of the inventory on hand at the beginning of the period and adding this figure to the cost of the inventory on hand at the end of the period.
B)  By adding the cost of purchases during the period to the cost of the inventory on hand at the end of the period and subtracting the inventory on hand at the beginning of the period.
C)  By subtracting the cost of the inventory on hand at the ending of the period from the cost of goods available for sale.
D)  By carefully matching selling and administrative expenses with the sales to which they are related and then reporting these expenses in the same period the associated revenue is reported.E) None of the above
F) C) and D)

Question 2

Wilder Company reported pretax profit amounts of: 20B,$11,000; and 20C,$15,000.Later it was discovered that the ending inventory for 20B was understated by $2,000 (and not corrected in 20C) .The correct pretax profit for each year was which of the following?

Accepted Answer

A)  Choice A
B)  Choice B
C)  Choice C
D)  Choice DE) A) and B)
F) B) and C)

Question 3

Which one of the following statements concerning the periodic and perpetual inventory systems is true?

Accepted Answer

A)  The periodic system uses a purchases account.
B)  Inventory controls are only needed for the periodic inventory systems.
C)  None of the accounting entries vary between the two systems.
D)  Due to advances in computers,many businesses recently have begun to use the periodic inventory system.E) B) and D)
F) A) and B)

Question 4

A cost flow assumption need not match the physical flow of inventory.

Accepted Answer

A) True 
 B)False

Question 5

Wibber Company prepared income statements that reflected pretax profit of $21,000 for 20A and $30,000 for 20B.An audit has determined that there were two errors in the inventory amounts as follows
The correct pretax profit amount for each year is (show computations assuming the errors were not corrected):
20A: $__________________
20B: $__________________

Accepted Answer

20A: $21,000 - $1,00...

Question 6

A company reports its cost of goods sold as $20.0 billion in 20B.It has $1.8 billion in inventory and reports trade payable sat $1.6 billion in 20B.In 20A,ending inventory was reported at $1.2 billion and trade payables was $1.1 billion.How much cash was paid to suppliers for 20B?

Accepted Answer

A)  $19.5 billion
B)  $19.9 billion
C)  $20.1 billion
D)  $21.2 billionE) A) and C)
F) None of the above

Question 7

Sue Company reported profit in 20A of $27,000 and in 20B of $32,000.Later it was discovered that the ending inventory for 20A was understated by $15,000.Disregard income taxes.The correct amounts of profit for 20A and 20B were which of the following?

Accepted Answer

A)  Choice A
B)  Choice B
C)  Choice C
D)  Choice DE) A) and C)
F) A) and B)

Question 8

Under the periodic inventory system,the balance in the inventory account changes each time a purchase or sale is recorded.

Accepted Answer

A) True 
 B)False

Question 9

An understatement error in the ending inventory causes an overstatement of both profit and current assets in that year.

Accepted Answer

A) True 
 B)False

Question 10

When the weighted-average cost method is used,ending inventory and cost of goods sold are valued at a different cost per unit.

Accepted Answer

A) True 
 B)False

Question 11

If beginning inventory is understated by $1,300 and ending inventory is understated by $700,pretax profit for the period will be which of the following?

Accepted Answer

A)  Understated by $600.
B)  Understated by $2,000.
C)  Overstated by $600.
D)  Overstated by $2,000.E) C) and D)
F) A) and B)

Question 12

On December 15,20A,Toby Company accepted delivery of merchandise which it purchased on credit.As of December 31,20A,the company had neither recorded the transaction nor included the merchandise in its inventory because the seller's invoice had not been received.The effect of this omission on its statement of financial position at December 31,20A,(end of the accounting period) was which of the following?

Accepted Answer

A)  Assets and shareholders' equity were overstated but liabilities were not affected.
B)  Shareholder's equity was the only item affected by the omission.
C)  Assets and liabilities were understated but shareholders' equity was not affected.
D)  Assets and shareholders' equity were understated but liabilities were not affected.E) A) and D)
F) A) and C)

Question 13

Purchases discounts should be recorded as an addition to the cost of purchases in the calculation of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 14

Richardson Ltd.sells many products.Hela is one of its popular items.Below is an analysis of the inventory purchases and sales of Hela for the month of March.Richardson uses the perpetual inventory system.
Requirements:
(a)Using the FIFO cost formula,calculate the amount of the cost of goods sold for March.(Show calculations)
(b)Using the average cost formula,calculate the amount of the ending inventory on March 31.(Show calculations)
  (a)FIFO

Accepted Answer

(b)Average Please note that ro...

Question 15

In order to determine cost of goods sold in a periodic inventory system we

Accepted Answer

A)  subtract ending inventory from beginning inventory.
B)  subtract ending inventory from cost of goods available for sale.
C)  subtract purchases from ending inventory.
D)  add purchases to beginning inventory.E) A) and C)
F) A) and D)

Question 16

The cost of goods sold account is which of the following?

Accepted Answer

A)  an asset
B)  a contra-asset
C)  an extraordinary item
D)  an expenseE) B) and C)
F) All of the above

Question 17

The inventory turnover ratio measures the efficiency of inventory management.

Accepted Answer

A) True 
 B)False

Question 18

FIFO yields the same inventory valuation and cost of goods sold amounts under both the periodic and perpetual inventory systems.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements regarding inventories is correct?

Accepted Answer

A)  FIFO assumes that the costs of the earliest goods acquired are the last to be sold.
B)  It is generally good business management to sell the most recently acquired goods first.
C)  Under FIFO,the ending inventory is based on the latest units purchased.
D)  FIFO seldom coincides with the actual physical flow of inventory.E) A) and B)
F) All of the above

Question 20

A $15,000 overstatement of the 20B ending inventory was discovered after the financial statements for 20B were prepared.What was the effect of the inventory error on the 20B financial statements?

Accepted Answer

A)  Current assets were overstated and profit was understated.
B)  Current assets were understated and profit was understated.
C)  Current assets were understated and profit was overstated.
D)  Current assets were overstated and profit was overstated.E) A) and D)
F) A) and C)

Exam 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources

An understatement error in the ending inventory causes an overstatement of both profit and current assets in that year.

Correct Answer
verified

The cost of goods sold account is which of the following?

Correct Answer
verified

Purchases discounts should be recorded as an addition to the cost of purchases in the calculation of cost of goods sold.

Correct Answer
verified

Which one of the following statements concerning the periodic and perpetual inventory systems is true?

Correct Answer
verified

A company reports its cost of goods sold as $20.0 billion in 20B.It has $1.8 billion in inventory and reports trade payable sat $1.6 billion in 20B.In 20A,ending inventory was reported at $1.2 billion and trade payables was $1.1 billion.How much cash was paid to suppliers for 20B?

Correct Answer
verified

A cost flow assumption need not match the physical flow of inventory.

Correct Answer
verified

A $15,000 overstatement of the 20B ending inventory was discovered after the financial statements for 20B were prepared.What was the effect of the inventory error on the 20B financial statements?

Correct Answer
verified

Correct Answer
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(b)Average Please note that ro...
View Answer

Correct Answer
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20A: $21,000 - $1,00...
View Answer

How is the cost of goods sold calculated under the periodic method?

Correct Answer
verified

Wilder Company reported pretax profit amounts of: 20B,$11,000; and 20C,$15,000.Later it was discovered that the ending inventory for 20B was understated by $2,000 (and not corrected in 20C) .The correct pretax profit for each year was which of the following?

Correct Answer
verified

Which of the following statements regarding inventories is correct?

Correct Answer
verified

In order to determine cost of goods sold in a periodic inventory system we

Correct Answer
verified

The inventory turnover ratio measures the efficiency of inventory management.

Correct Answer
verified

Correct Answer
verified

Under the periodic inventory system,the balance in the inventory account changes each time a purchase or sale is recorded.

Correct Answer
verified

When the weighted-average cost method is used,ending inventory and cost of goods sold are valued at a different cost per unit.

Correct Answer
verified

Sue Company reported profit in 20A of $27,000 and in 20B of $32,000.Later it was discovered that the ending inventory for 20A was understated by $15,000.Disregard income taxes.The correct amounts of profit for 20A and 20B were which of the following?

Correct Answer
verified

If beginning inventory is understated by $1,300 and ending inventory is understated by $700,pretax profit for the period will be which of the following?

Correct Answer
verified

FIFO yields the same inventory valuation and cost of goods sold amounts under both the periodic and perpetual inventory systems.

Correct Answer
verified

Exam 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources

An understatement error in the ending inventory causes an overstatement of both profit and current assets in that year.

Correct AnswerverifiedShow Answer

The cost of goods sold account is which of the following?

Correct AnswerverifiedShow Answer

Purchases discounts should be recorded as an addition to the cost of purchases in the calculation of cost of goods sold.

Correct AnswerverifiedShow Answer

Which one of the following statements concerning the periodic and perpetual inventory systems is true?

Correct AnswerverifiedShow Answer

A company reports its cost of goods sold as $20.0 billion in 20B.It has $1.8 billion in inventory and reports trade payable sat $1.6 billion in 20B.In 20A,ending inventory was reported at $1.2 billion and trade payables was $1.1 billion.How much cash was paid to suppliers for 20B?

Correct AnswerverifiedShow Answer

A cost flow assumption need not match the physical flow of inventory.

Correct AnswerverifiedShow Answer

A $15,000 overstatement of the 20B ending inventory was discovered after the financial statements for 20B were prepared.What was the effect of the inventory error on the 20B financial statements?

Correct AnswerverifiedShow Answer

Correct Answerverified(b)Average Please note that ro...View AnswerShow Answer

Correct Answerverified20A: $21,000 - $1,00...View AnswerShow Answer

How is the cost of goods sold calculated under the periodic method?

Correct AnswerverifiedShow Answer

Wilder Company reported pretax profit amounts of: 20B,$11,000; and 20C,$15,000.Later it was discovered that the ending inventory for 20B was understated by $2,000 (and not corrected in 20C) .The correct pretax profit for each year was which of the following?

Correct AnswerverifiedShow Answer

Which of the following statements regarding inventories is correct?

Correct AnswerverifiedShow Answer

In order to determine cost of goods sold in a periodic inventory system we

Correct AnswerverifiedShow Answer

The inventory turnover ratio measures the efficiency of inventory management.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the periodic inventory system,the balance in the inventory account changes each time a purchase or sale is recorded.

Correct AnswerverifiedShow Answer

When the weighted-average cost method is used,ending inventory and cost of goods sold are valued at a different cost per unit.

Correct AnswerverifiedShow Answer

Sue Company reported profit in 20A of $27,000 and in 20B of $32,000.Later it was discovered that the ending inventory for 20A was understated by $15,000.Disregard income taxes.The correct amounts of profit for 20A and 20B were which of the following?

Correct AnswerverifiedShow Answer

If beginning inventory is understated by $1,300 and ending inventory is understated by $700,pretax profit for the period will be which of the following?

Correct AnswerverifiedShow Answer

FIFO yields the same inventory valuation and cost of goods sold amounts under both the periodic and perpetual inventory systems.

Correct AnswerverifiedShow Answer

Correct Answer
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(b)Average Please note that ro...
View Answer

Correct Answer
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20A: $21,000 - $1,00...
View Answer

Correct Answer
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