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# Accounting Final Ch. 7 TestBank

Updated: Aug 14, 2022

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the customer's ledger creditor's ledger inventory ledger purchase ledger

inventory ledger

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using first-in, last-out last-in, first-out first-in, first-out average cost

first in, first out

The two most widely used methods for determining the cost of inventory are FIFO and LIFO FIFO and average LIFO and average gross profit and average

FIFO and LIFO

Cost flow is in the order in which costs were incurred when using average cost last-in, first-out first-in, first-out weighted average

first in, first out

The inventory costing method that reports the most current prices in ending inventory is FIFO Specific identification LIFO Average cost

FIFO

Which of the following companies would be more likely to use the specific identification inventory costing method? Gordon's Jewelers Lowe's Best Buy Wal-Mart

Gordon's Jewelers

Under the _________ inventory method, accounting records maintain a continuously updated inventory value. retail periodic physical perpetual

perpetual

The inventory data for an item for November are: Nov. 1 Inventory 20 units at \$19 4 Sold 10 units 10 Purchased 30 units at \$20 17 Sold 20 units 30 Purchased 10 units at \$21

Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO? \$610 \$600 \$590 \$580

\$590

Use the following information to answer the following questions. The Boxwood Company sells blankets for \$60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Product Z Units Cost May 3 Purchase 5 \$20 May 10 Sale 3 May 17 Purchase 10 \$24 May 20 Sale 6 May 23 Sale 3 May 30 Purchase 10 \$30 Assuming that the company uses the perpetual inventory system, determine the ending inventory for the month of May using the LIFO inventory cost method. \$324 \$372 \$320 \$364

\$364

The following units of an inventory item were available for sale during the year: Beginning inventory 10 units at \$55 First purchase 25 units at \$60 Second purchase 30 units at \$65 Third purchase 15 units at \$70

The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using LIFO is: \$1,250 \$1,350 \$1,375 \$1,150

\$1150

The following units of an inventory item were available for sale during the year: Beginning inventory 10 units at \$55 First purchase 25 units at \$60 Second purchase 30 units at \$65 Third purchase 15 units at \$70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using average cost is: \$1,353 \$1,263 \$1,375 \$1,150

\$1263

The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at \$30 First purchase 25 units at \$32 Second purchase 30 units at \$34 Third purchase 10 units at \$35 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method? \$655 \$620 \$690 \$659

\$620

The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at \$30 First purchase 25 units at \$32 Second purchase 30 units at \$34 Third purchase 10 units at \$35 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the FIFO method? \$655 \$620 \$690 \$659

\$690

The following lots of a particular commodity were available for sale during the year: Beginning inventory 5 units at \$61 First purchase 15 units at \$63 Second purchase 10 units at \$74 Third purchase 10 units at \$77 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of good sold for the year according to the average cost method? \$1,380 \$1,375 \$1,510 \$1,250

\$1380

The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at \$60 First purchase 25 units at \$65 Second purchase 30 units at \$68 Third purchase 15 units at \$75 The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the FIFO method? \$1,685 \$1,575 \$1,805 \$3,585

\$1805

The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at \$60 First purchase 25 units at \$65 Second purchase 30 units at \$68 Third purchase 15 units at \$75 The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the average cost method? \$1,685 \$1,575 \$1,805 \$3,705

\$1685

During times of rising prices, which of the following is not an accurate statement? a. Average costing will yield results that are between those of FIFO and LIFO. b. LIFO will result in a higher cost of goods sold than FIFO. c. FIFO will result in a higher net income than LIFO. d. LIFO will result in higher income taxes than FIFO.

LIFO will result in higher income taxes than FIFO

If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity? Understated Overstated Correctly Stated None of the above

Understated

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 periodic LIFO FIFO average

FIFO

During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory. average method LIFO method FIFO method can not tell without more information

FIFO method

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? a. net income is understated b. net income is overstated c. cost of merchandise sold is understated d. merchandise inventory reported on the balance sheet is overstated

net income is understated

Which of the following measures the length of time it takes to acquire, sell and replace inventory? a. inventory turnover b. number of days' sales in inventory c. retail method of inventory costing d. gross profit method of inventory costing

number of days' sales in inventory

On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method? Cost Retail May 1 Merchandise Inventory \$125,000 \$166,667 May 1-31 Purchases (net) 235,000 313,333 May 1-31 Sales (net) 230,000 \$250,000 \$360,000 \$172,500 \$187,500

187,500

Garrison Company uses the retail method of inventory costing. They started the year with an inventory that had a retail cost of \$45,000. During the year they purchased an inventory with a retail cost of \$300,000. After performing a physical inventory, they calculated their inventory cost at retail to be \$80,000. The mark up is 100% of cost. Determine the ending inventory at its estimated cost. \$160,000 \$80,000 \$40,000 \$45,000

\$40,000

If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. Item Inventory Quantity Unit Cost Price Unit Market Price Product C 420 \$6 \$5 Product D 370 12 14 \$6,960 \$7,700 \$6,540 \$7,280

\$6540

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