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15 Jul 2018

1. What is the differencebetween inventory and cost of goods sold? Cost of goods sold andsales revenue?

2. Is gross profit an account?

3. ComstockCompany counted their inventory at the end of the year and had 220units. Included in that amount were 20 units Comstock held onconsignment from Davidson Inc. Comstock purchased 50 units ofinventory on December 27, FOB shipping point. How many units ofinventory should Comstock report on its year-end balancesheet?

4. Assume Comstock wasunable to count its ending inventory because it was destroyed in afire. Use the gross profit method to estimate the ending inventory.The gross profit rate is 52%.

Beginninginventory

Endinginventory

Netpurchases

Net sales

$ 10,000

?

110,000

175,000

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15 Jul 2018

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1. To determine the value of a LIFO layer,using dollar-value LIFO retail: (Points : 1)

Divide the LIFO layer bythe layer year price index and multiply by the layer yearcost-to-retail percentage.
Multiply the LIFO layerby the base year price index and the current year cost-to-retailpercentage.
Multiply the LIFO layerby the layer year price index and by the layer year cost-to-retailpercentage.
Divide the LIFO layer bythe layer year cost-to-retail percentage and multiply by the layeryear price index.

Question 2.2. To determine if an increase inthe dollar value of inventory is due to increased quantities, usingdollar-value LIFO retail: (Points : 1)

Compare beginning andending inventory amounts at current year prices.
Compare beginning andending inventory amounts after adjusting both amounts to theaverage price level for the year.
Inflate beginninginventory amount to end of year prices and compare to endinginventory amount.
Deflate the endinginventory amount to beginning of year prices and compare to thebeginning inventory amount.

Question 3.3. So. California Inc., through nofault of its own, lost an entire plant due to an earthquake on May1, 2006. In preparing their insurance claim on the inventory loss,they developed the following data: Inventory January 1, 2006,$300,000; sales and purchases from January 1, 2006, to May 1, 2006,$1,300,000 and $875,000, respectively. So. California consistentlyreports a 40% gross profit. The estimated inventory on May 1, 2006,is: (Points : 1)

$302,500.
$360,000.
$395,000.
$455,000.

Question 4.4. Using the dollar-value LIFOretail method for inventory,: (Points : 1)

Is the same asdollar-value LIFO, except that the inventory is measured at retail,rather than at cost.
Combines retail LIFOaccounting with dollar-value LIFO accounting
Allows companies toreport inventory on the balance sheet at retail prices.
All of the above arecorrect.

Question 5.5. Under the gross method, purchasediscounts taken are: (Points : 1)

Deducted from interestexpense.
Added to netpurchases.
Added to interestincome.
Deducted frompurchases.

Question 6.6. The inventory method that willalways produce the same amount for cost of goods sold in a periodicinventory system as in a perpetual inventory system would be:(Points : 1)

FIFO.
LIFO.
Weighted average.
None of the above.

Question 7.7. Cost of goods sold is given by:(Points : 1)

Beginning inventory - netpurchases + ending inventory.
Beginning inventory +accounts payable - net purchases.
Net purchases + endinginventory - beginning inventory.
Net Purchases + beginninginventory - ending inventory.

Question 8.8. An argument against the use ofLCM is its lack of: (Points : 1)

Relevance.
Reliability.
Consistency.
Objectivity.

Question 9.9. The primary reason for thepopularity of LIFO is that it gives: (Points : 1)

Better matching ofphysical flow and cost flow.
A deferral of incometax.
Simplifiedrecordkeeping.
A permanent reduction ofincome taxes.

Question 10.10. Inventory does not include:(Points : 1)

Materials used in theproduction of goods to be sold.
Assets intended to besold in the normal course of business.
Equipment used in themanufacturing of assets for sale.
Assets currently inproduction for normal sales.

1. How should the balances of Progress Billings and Constructionin Progress be shown at reporting dates prior to completion of along-term contract

a. Progress billings as income, construciton in progress asinventory

b. Net , as income from construction if credit balance, and lossfrom construction if debit balance

c. Progress Billings as deferred income, Construction inProgress as a current asset

d. Net, as a current asset if debit balance and currentliability if credit balance

3. the competed-contract method of accounting for long-termconstruction-type contracts is preferable when

a. a contractor is involved in numerous projects

b. the contracts are of a relatively long duration

c. estimates of costs to complete and extent of progress towardcompletion are reasonably dependable

d. there are inherent uncertainties in the contract beyondnormal business risks

4. C & J Construction has consistently used the percentageof completion method of recognizing income. Last year C & Jstarted work on a $4,500,000 constuction contract, which wascompleted this year, the accounting records desclosed the followingdata for the last year

Progress billings - $1,650,000

Costs incurred - 1,350,000

Collections - 1,050,000

Estimated cost to complete - 2,700,000

How much income should C & J have recognized on thiscontract last year?

a. 105,000

b. 150,000

c. 300,000

d. 350,000

6. The use of the gross profit assumes

a. the amount of gross profit is the same as in prior years

b. sales and cost of goods sold have not changed from previousyears

c. inventory values have not increased from previous years

d. the relationship between selling price and cost of goods soldis similar to prior years

7. the gross profit method of inventory valuation is not validwhen

a. there is substantial increase in the quantity of inventoryduring the year

b. there is substantial increase in the cost of inventory duringthe year

c. the gross margin percentage changes significantly during theyear

d. all ending inventory is destroyed by dire before it can becounted

8. When the current year's ending inventory amount isoverstated,

a. the current year's cost of goods sold is overstated

b. the current year's total assets are understated

c. the current year's net income is overstated

d. the next year's income is overstated

9. If the ending inventory balance is understated, net income ofthe same period

a. will be overstated

b. will be understated

c. will be unaffected

d. cannot be determined from the above information

10. An overstatement of ending inventory in Period 1 wouldresult in income of Period 2 being

a. overstated

b. understated

c. correctly stated

d. the answer cannot be determined from the informationgiven

11. what is the maximum amount at which inventory can be valuedwhen the goods have experienced a permanent decline in value

a. historical cost

b. sales price

c. net realizable value

d. net realizable value reduced by a normal profit margin

12. Net realizable value can be defined as

a. selling price

b. selling price less costs to complete and sell

c. selling price plus costs to complete and sell

d. acquisition cost plus costs to complete and sell

13. Miller company needs an estimate of its ending inventorybalance. The following information is available

Cost Retail

sales revenue - 180,000

beginning inventory - 35,000 62,000

net purchases - 100,000 135,000

gross margin percentage - 30%

Given this information, when using the gross margin estimationmethod, ending inventory is approx

a. 1,000

b. 9,000

c. 19,000

d. 11,650

14. Which of the following would not be reported asinventory?

a. land acquired for resale by a real estate firm

b. stocks and bonds held for resale by a brokerage firm

c. partially completed goods held by a manufacturing company

d. machinery acquired by a manufacturing company for use in theproduction process

15. Cost of goods sold is equal to

a. the cost of inventory on hand at the end of a period plus netpurchases minus the cost of inventory on hand at the beginning

b. the cost of inventory on hand at the beginning of a periodminus net purchases plus the cost of inventory on hand at the endof a period

c. the cost of inventory on hand at the beginning of a periodplus net sales minus the cost of inventory on hand at the end of aperiod

d. the cost of inventory on hand at the beginning of a periodplus net purchases minus the cost of inventory on hand at the endof a period

17. In a period of falling prices, the use of which of thefolliwng inventory cost flow methods would typically result inhighest cost of goods sold?

a. FIFO

b. LIFO

c. Weighted average cost

d. Specific identification

18. In a period of rising prices, the inventory cost allocationmethod that tends to result in the lowest reported net incomeis

a. LIFO

b. FIFO

c. Moving average

d. Weighted average

19. The LIFO inventory cost flow method may be applied to whichof the following inventory systems?

Periodic Perpetual

a. no no

b. no yes

c. yes yes

d. yes no

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