Easy Button Review!
Chapter 6
Inventory Costing
Let’s Begin!
Q1
• The more inventory a company has in
stock, the greater the company's profit.
True or False
• Answer:
• False
Q2
• Goods that have been purchased FOB
destination but are in transit, should be
excluded from a physical count of goods
by the seller.
• Answer:
• False
Q3
• Goods out on consignment should be
included in the inventory of the consignor.
True or False?
• Answer:
• True
Q4
• Goods that have been purchased FOB
shipping point but are in transit should be
included in the buyer’s physical count of
goods. True or False?
• Answer:
• True
Q5
• A periodic inventory system results in a
detailed inventory record of inventory
items at any point in time. True or False?
• Answer:
• False
Q6
• The periodic inventory system requires a
second journal entry, increasing Cost of
Goods Sold and decreasing Merchandise
Inventory when goods are sold. True or
False?
• Answer:
• False
Q7
• Cost of goods sold, in a periodic inventory
system, is determined by adding the cost
of goods purchased to the ending
inventory. True or False?
• Answer:
• False
Q8
• The income statement for a merchandising
company using a periodic inventory
system contains less detail for the cost of
goods sold. True or False?
• Answer:
• False
Q8
• The specific identification method of
costing inventories tracks the actual
physical flow of the goods available for
sale. True or False?
• Answer:
• True
Q9
• The First-in, First-out (FIFO) inventory
method results in an ending inventory
valued at the most recent cost. True or
False?
• Answer:
• True
Q10
• If the unit price of inventory is increasing
during a period, a company using the LIFO
inventory method will show less gross
profit for the period, than if it had used the
FIFO inventory method. True or False?
• Answer:
• True
Q11
• A company may use more than one
inventory costing method concurrently
True or False?
• Answer:
• False
Q12
• If a company changes its inventory
valuation method, the effect of the change
should be disclosed in the financial
statements. True or False?
• Answer:
• True
Q13
•
a.
b.
c.
d.
•
•
The factor which determines whether or not
goods should be included in a physical count
of inventory is
physical possession.
legal title.
management's judgement.
whether or not the purchase price has been
paid.
Answer:
B – legal Title
Q15
• Under a consignment arrangement, the
a. consignor has ownership until goods are sold
to a customer.
b. consignor has ownership until goods are
shipped to the consignee.
c. consignee has ownership when the goods are
in the consignee's possession.
d. consigned goods are included in the inventory
of the consignee.
• Answer:
• A – consignor has ownership until sold.
Q16
•
a.
b.
c.
d.
•
•
The FIFO inventory method assumes that the
cost of the latest units purchased are
the last to be allocated to cost of goods sold.
the first to be allocated to ending inventory.
the first to be allocated to cost of goods sold.
not allocated to cost of goods sold or ending
inventory.
Answer:
B – first allocated to ending inventory
Q17
June 1
June 10
June 15
June 28
150 units
200 units
200 units
150 units
$ 780
1,170
1,260
990
$4,200
A physical count on June 30 shows 250 units on hand.
Calculate ending inventory using LIFO on June 30th.
a. $1,365.
b. $1,620.
c. $2,580.
d. $2,835.
• Answer:
• A - $1,365
Q18
June 1
June 10
June 15
June 28
150 units
200 units
200 units
150 units
$ 780
1,170
1,260
990
$4,200
A physical count on June 30 shows 250 units on hand.
Calculate COGS using FIFO on June 30th.
a. $1,620.
b. $2,290.
c. $2,580.
d. $2,835.
• Answer:
• C - $2,580
Q19
June 1
June 10
June 15
June 28
150 units
200 units
200 units
150 units
$ 780
1,170
1,260
990
$4,200
A physical count on June 30 shows 250 units on hand.
Calculate ending inventory using Average Cost on
June 30th.
a. $4,200.
b. $2,700.
c. $1,150.
d. $1,500
• Answer:
• D - $1,500
Q20
•
a.
b.
c.
d.
•
•
Levy's Used Cars uses the specific identification
method of costing inventory. During March, Levy
purchased three cars for $5,000, $6,500, and
$8,000, respectively. During March, two cars are
sold for $7,500 each. Levy determines that at March
31, the $8,000 car is still on hand. What is Levy's
gross profit for March?
$2,000.
$3,500.
$500.
$7,000.
Answer:
B - $3,500
Q21
•
a.
b.
c.
d.
•
•
The journal entry to record a return of merchandise
purchased on account under a periodic inventory
system would be
Accounts Payable
Purchase Returns and Allowances
Purchases Returns and Allowances
Accounts Payable
Accounts Payable
Inventory
Inventory
Accounts Payable
Answer:
A
Q22
•
Beginning inventory $120, purchases $1080,
freight in $110, net purchases is $1020,
ending inventory is $310. How much is
purchase returns and allowances?
a. $70
b.$290
c.$180
d. $60
• Answer:
• D $60
Q23
•
Beginning inventory $20,000, Cost of Goods
Purchased $150,000, Cost of Goods Available
for Sale is $170,000, Cost of Goods Sold is
$140,000. How much is ending inventory?
a. $200,000
b.$20,000
c.$30,000
d. $50,000
• Answer:
• C $30,000
Q24
•
In 2009 Beginning inventory $20,000, Cost of Goods
Purchased $150,000, Cost of Goods Available for
Sale is $170,000, Ending Inventory is $30,000, Cost
of Goods Sold is $140,000. If Beginning inventory in
2009 is understated by $4,000 and ending inventory
is overstated by $6,000 – How much is the correct
COGS in 2009?
a.$130,000
b.$150,000
c.$138,000
d. $142,000
• Answer:
• B $150,000