Question 1

Payment for the acquisition of inventories is shown on the statement of cash flows as

Accepted Answer

A)  An operating activity
B)  An investing activity
C)  A financing activity
D)  Either an operating activity or a financing activityE) None of the above
F) A) and D)

Question 2

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Accepted Answer

A) True 
 B)False

Question 3

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Accepted Answer

A)  As a direct reduction to the Purchases account
B)  In contra accounts to the Purchases account
C)  As operating expenses
D)  As miscellaneous expensesE) B) and D)
F) B) and C)

Question 4

The cost of goods purchased is equal to net purchases plus .

Accepted Answer

freight-in...

Question 5

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

Accepted Answer

A) True 
 B)False

Question 6

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 7

Eversoll Inc.uses the periodic inventory system.  If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

Accepted Answer

A)  $2,263.00
B)  $2.373.00
C)  $2,945.00
D)  $3,626.50E) All of the above
F) B) and C)

Question 8

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

Accepted Answer

A) True 
 B)False

Question 9

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Accepted Answer

A)  Raw materials inventory
B)  Work in process inventory
C)  Finished goods inventory
D)  Merchandise inventoryE) A) and C)
F) B) and C)

Question 10

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Accepted Answer

A)  an overstatement of inventory on the year-end balance sheet.
B)  an understatement of gross profit in the following year.
C)  an overstatement of retained earnings at the end of the year.
D)  an overstatement of cost of goods sold for the current year.E) C) and D)
F) None of the above

Question 11

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Accepted Answer

A) True 
 B)False

Question 12

The lower of cost or market LCM) rule violates the historical cost principle.

Accepted Answer

A) True 
 B)False

Question 13

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Accepted Answer

A)  There would be no tax savings.
B)  $ 800
C)  $ 1,200
D)  $ 2,000E) B) and C)
F) B) and D)

Question 14

Eversoll Inc.uses the periodic inventory system.  If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Accepted Answer

A)  $1,354.00
B)  $1,366.50
C)  $1,590.42
D)  $1,594.00E) B) and D)
F) B) and C)

Question 15

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Accepted Answer

A)  $12,670
B)  $9,070
C)  $8,420
D)  $17,230E) None of the above
F) All of the above

Question 16

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Accepted Answer

A)  Purchase Returns
B)  Accounts Receivable
C)  Sales Returns
D)  Sales RevenueE) B) and D)
F) All of the above

Question 17

Transportation-in is

Accepted Answer

A)  an operating expense.
B)  part of purchases.
C)  added to transportation-out as part of the calculation of cost of goods sold.
D)  part of cost of goods purchased.E) All of the above
F) A) and B)

Question 18

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Accepted Answer

A) True 
 B)False

Question 19

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

Accepted Answer

A)  The company will report sales of $1,200,000.
B)  The gross margin will be $1,200,000.
C)  The company's average inventory is $18,750.
D)  It sells its inventory 1,200 times per year.E) A) and B)
F) B) and D)

Exam 5: Inventories and Cost of Goods Sold

The cost of goods purchased is equal to net purchases plus .

Correct Answer
verified
freight-in...
View Answer

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Correct Answer
verified

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Correct Answer
verified

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Correct Answer
verified

Eversoll Inc.uses the periodic inventory system. If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Correct Answer
verified

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

Correct Answer
verified

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

Correct Answer
verified

Payment for the acquisition of inventories is shown on the statement of cash flows as

Correct Answer
verified

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

Correct Answer
verified

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Correct Answer
verified

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Correct Answer
verified

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Correct Answer
verified

The lower of cost or market LCM) rule violates the historical cost principle.

Correct Answer
verified

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

Correct Answer
verified

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Correct Answer
verified

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Correct Answer
verified

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

Correct Answer
verified

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Correct Answer
verified

Transportation-in is

Correct Answer
verified

Exam 5: Inventories and Cost of Goods Sold

The cost of goods purchased is equal to net purchases plus .

Correct Answerverifiedfreight-in...View AnswerShow Answer

Net purchases equals purchases less purchase returns, allowances, and discounts plus transportation-in.

Correct AnswerverifiedShow Answer

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Correct AnswerverifiedShow Answer

A customer returned damaged goods for credit.Which of the seller's accounts decreases?

Correct AnswerverifiedShow Answer

Eversoll Inc.uses the periodic inventory system. If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

Correct AnswerverifiedShow Answer

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

Correct AnswerverifiedShow Answer

Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then

Correct AnswerverifiedShow Answer

Payment for the acquisition of inventories is shown on the statement of cash flows as

Correct AnswerverifiedShow Answer

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

Correct AnswerverifiedShow Answer

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.The cost of merchandise purchased is equal to

Correct AnswerverifiedShow Answer

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

Correct AnswerverifiedShow Answer

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

Correct AnswerverifiedShow Answer

The lower of cost or market LCM) rule violates the historical cost principle.

Correct AnswerverifiedShow Answer

Eversoll Inc.uses the periodic inventory system. If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Eversoll's cost of goods sold for June under the specific identification method would be

Correct AnswerverifiedShow Answer

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

Correct AnswerverifiedShow Answer

According to the IRS's LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.

Correct AnswerverifiedShow Answer

On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.

Correct AnswerverifiedShow Answer

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

Correct AnswerverifiedShow Answer

Transportation-in is

Correct AnswerverifiedShow Answer

Correct Answer
verified
freight-in...
View Answer

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