Deck 6: Accounting for Merchandise Inventory

Question 1

The two main types of inventory systems are the perpetual system and the periodic system.

Answer 1

True

Question 2

Which of the following methods represents the most accurate cost?

A)FIFO
B)specific-unit-cost
C)average cost
D)weighted-average cost

Answer 2

B

Question 3

Gross margin is the excess of net sales revenue over cost of goods sold.

Answer 3

True

Question 4

FIFO costing is consistent with the physical movement of inventory for many companies.

Question 5

Under the perpetual system, ending inventory and cost of goods sold will be the same when FIFO inventory costing method is used.

Question 6

Inventory is classified:

A)as a property, plant, and equipment asset on the balance sheet.
B)as a current asset on the balance sheet.
C)as a current liability on the balance sheet.
D)as either an investment or a current asset on the balance sheet.

Question 7

A jeweller selling unique, high-priced items of jewellery would most likely use which method of inventory costing?

A)FIFO
B)average cost
C)specific-unit-cost
D)weighted-average cost

Question 8

Under moving-weighted-average cost method, the cost of goods sold is based on the oldest purchases.

Question 9

All balance sheets have inventory listed as an asset.

Question 10

Measuring the cost of inventory is difficult when prices are constant.

Question 11

The specific-unit-cost method is useful for inventory items that have a distinctive identity.

Question 12

In a perpetual inventory system, recording a sale also includes a corresponding journal entry to record the inventory reduction.

Question 13

Which of the following is not an acceptable inventory cost method?

A)first-in, first-out
B)last-out, first-in
C)specific-unit-cost
D)weighted-average cost

Question 14

It is necessary to do a physical count of inventory when using a perpetual inventory system.

Question 15

The specific-unit-cost method is useful for inventory items that have common characteristics, such as tonnes of ore or litres of paint.

Question 16

A FIFO perpetual inventory system:

A)assigns the most recent costs to ending inventory.
B)assigns the most recent costs to cost of goods sold when goods are sold.
C)reports the oldest costs for ending inventory values.
D)does not match the typical physical flow of goods.

Question 17

The inventory costing method used must match the physical flow of goods in and out of inventory.

Question 18

A perpetual inventory system:

A)keeps a running record of all goods.
B)can be maintained only with computer software.
C)is used only for inexpensive goods.
D)does not require a physical count at the end of the fiscal year.

Question 19

Under the FIFO method, ending inventory is valued based on the most recent purchases.

Question 20

If inventory items may be identified individually, the business could easily use this method of inventory costing:

A)average cost.
B)specific-unit-cost.
C)FIFO.
D)weighted-average cost.

Question 21

Table 6-5
Assume the following data for Kruger Sales for November 2019: On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate gross margin for Kruger Sales assuming the perpetual FIFO cost method is being used.

Question 22

Table 6-5
Assume the following data for Kruger Sales for November 2019: On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate gross margin for Kruger Sales assuming the perpetual moving-weighted-average-cost method is being used.

Question 23

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the gross margin for the two months assuming that Sam's uses the perpetual inventory weighted-average-cost method?

A)$13,504
B)$21,728
C)$10,800
D)$17,977

Question 24

Table 6-4
Assume the following data for Burnette Sales for 2019: $$\begin{array} { | c | l | } \hline \text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { Sale } & 20 \text { units at } \$ 15 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { Sale } & 12 \text { units at } \$ 15 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline \text { Sale } & 10 \text { units at } \$ 16 \text { each } \\\hline\end{array}$$ On December 31, a physical count reveals 15 units on hand.

-Refer to Table 6-4. Under the FIFO method (assuming a perpetual inventory system), ending inventory would be valued at:

A)$162.
B)$105.
C)$115.
D)$135.

Question 25

Table 6-5
Assume the following data for Kruger Sales for November 2019: On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate ending inventory for Kruger Sales assuming the perpetual FIFO cost method is being used.

Question 26

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the gross margin for the two months assuming that Sam's uses the perpetual inventory FIFO inventory method?

A)$18,275
B)$4,100
C)$11,600
D)$21,600

Question 27

The following data pertain to Cross Company (assume a perpetual inventory system)for the month ended January 31, 2019: Required:
1. Compute the cost of goods sold and ending inventory under FIFO.
2. Compute Gross Margin under FIFO

Question 28

When the FIFO method of inventory valuation is used, cost of goods sold is assumed to consist of the:

A)most recently purchased units.
B)most expensive units.
C)least expensive units.
D)oldest units.

Question 29

Table 6-5
Assume the following data for Kruger Sales for November 2019: On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate ending inventory for Kruger Sales assuming the perpetual moving-weighted-average-cost method is being used.

Question 30

The adjusting entry at year end under a perpetual inventory system to record cost of goods sold includes a:

A)debit to cost of goods sold and a credit to inventory for the ending balance of inventory.
B)debit to purchases and a credit to cost of goods sold for the beginning balance of purchases.
C)debit to cost of goods sold and a credit to inventory for the beginning balance of inventory.
D)No adjusting entry is required under a perpetual inventory system to adjust the beginning and ending balances.

Question 31

Table 6-4
Assume the following data for Burnette Sales for 2019: $$\begin{array} { | c | l | } \hline \text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { Sale } & 20 \text { units at } \$ 15 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { Sale } & 12 \text { units at } \$ 15 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline \text { Sale } & 10 \text { units at } \$ 16 \text { each } \\\hline\end{array}$$ On December 31, a physical count reveals 15 units on hand.

-Refer to Table 6-4. Assume a perpetual system. Under the moving-weighted-average-cost method, the cost of goods sold for the first sale (20 units)would be valued at:

A)$164.
B)$105.
C)$115.
D)$135.

Question 32

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the value of the February ending inventory assuming that Sam's uses the perpetual weighted-average inventory method?

A)$13,877
B)$17,628
C)$6,700
D)$9,404

Question 33

Which of the following inventory costing methods requires a company to keep track of the actual physical movement of individual inventory items?

A)specific-unit-cost
B)weighted-average cost
C)FIFO
D)average cost

Question 34

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the cost of goods sold for the two months assuming that Sam's uses the perpetual weighted-average inventory method?

A)$38,772
B)$42,523
C)$49,700
D)$46,996

Question 35

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the cost of goods sold for the two months assuming that Sam's uses the perpetual FIFO inventory method?

A)$42,225
B)$56,400
C)$48,900
D)$38,900

Question 36

When the FIFO method is used, ending inventory is assumed to consist of the:

A)oldest units.
B)most recently purchased units.
C)units with the highest per unit cost.
D)units with the lowest per unit cost.

Question 37

Table 6-6 Sam's Wholesale Bikes $$\begin{array} { | l | l | } \hline \text { January } 1 \text { inventory balance } & 15 \text { units at } \$ 350 \text { per unit } \\\hline \text { January } 4 \text { purchase } & 50 \text { units at } \$ 375 \text { per unit } \\\hline \text { January } 15 \text { sale } & 40 \text { units at } \$ 550 \text { per unit } \\\hline \text { February } 8 \text { purchase } & 80 \text { units at } \$ 405 \text { per unit } \\\hline \text { February } 15 \text { sale } & 70 \text { units at } \$ 550 \text { per unit } \\\hline\end{array}$$

-Refer to Table 6-6. What is the value of the February ending inventory assuming that Sam's uses the perpetual FIFO inventory method?

A)$7,500
B)$17,500
C)$14,175
D)$15,875

Question 38

Table 6-4
Assume the following data for Burnette Sales for 2019: $$\begin{array} { | c | l | } \hline \text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { Sale } & 20 \text { units at } \$ 15 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { Sale } & 12 \text { units at } \$ 15 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline \text { Sale } & 10 \text { units at } \$ 16 \text { each } \\\hline\end{array}$$ On December 31, a physical count reveals 15 units on hand.

-Refer to Table 6-4. Assume a perpetual inventory system. Under FIFO method, the cost of goods sold for the second sale (12 units)would be calculated as:

A)$165.
B)$105.
C)$115.
D)$135.

Question 39

If a company uses a perpetual inventory system, it will maintain all the following accounts except:

A)cost of goods sold.
B)inventory.
C)sales.
D)purchases.

Question 40

Using the perpetual inventory method, what is the weighted-average cost of ending inventory rounded to the nearest whole dollar? $$\begin{array} { | l | l | } \hline \text { Sales revenue } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { Beginning inventory } & 50 \text { units at } \$ 8 \text { per unit } \\\hline \text { Purchases } & 90 \text { units at } \$ 9 \text { per unit } \\\hline\end{array}$$

A)$400
B)$360
C)$346
D)$864

Question 41

Moving-weighted-average matches cost of goods sold to sales on the income statement better than FIFO.

Question 42

FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average.

Question 43

The moving-weighted-average-cost method generates a gross margin that will be lower than the gross margin generated under FIFO costing when prices are rising.

Question 44

Once an inventory method is selected by a business, the consistency characteristic of accounting would require that this method be used from year to year.

Question 45

When prices are falling, the cost of goods sold reported on the income statement on a weighted-average basis is generally:

A)lower than on a FIFO basis.
B)greater than on a FIFO basis.
C)equal to ending inventory reported on a FIFO basis.
D)equally likely to be higher or lower on a weighted-average basis as opposed to a FIFO basis.

Question 46

When inventory prices are rising, the FIFO method will generally yield a gross margin that is:

A)less than the weighted average method.
B)equal to the gross margin of the weighted-average method.
C)higher than the weighted-average method.
D)FIFO does not generally cause a gross margin that is different from that of any other costing method.

Question 47

The disclosure principle of accounting requires that a business reveal to the user of the financial statement the method used to value inventory.

Question 48

The materiality concept of accounting allows a business to expense the cost of freight-in rather than add it to the cost of the inventory on the basis that the difference in the accounting treatment would not sway a decision by a financial statement user.

Question 49

When prices are rising, the cost of goods sold on the income statement reported on a weighted-average basis is generally:

A)lower than on a FIFO basis.
B)equal to ending inventory reported on a FIFO basis.
C)greater than on a FIFO basis.
D)equally likely to be higher or lower on a weighted-average basis as opposed to a FIFO basis.

Question 50

FIFO will report the lowest cost of goods sold on the income statement when prices are falling.

Question 51

Under either the periodic or the perpetual system, ending inventory will be the same when FIFO inventory costing method is used.

Question 52

Sam's Corner Store has the following purchase and sales information for one of their inventory items: Required:
For (a)and (b)assume the company uses the periodic inventory system.
(a)Calculate the gross profit if the company uses first-in, first-out (FIFO)
(b)Calculate the value of the ending inventory if the company uses weighted average.
For (c)and (d)assume the company uses the perpetual inventory system.
(c)What is the cost of goods sold for the Feb 25 sale if the company uses weighted average to cost the inventory?
(d)What is the value of the ending inventory if the company uses FIFO?

Question 53

When prices are rising, the ending inventory balance reported on a weighted-average basis is generally:

A)lower than on a FIFO basis.
B)greater than on a FIFO basis.
C)equal to ending inventory reported on a FIFO basis.
D)equally likely to be higher or lower on a weighted-average basis as opposed to a FIFO basis.

Question 54

When inventory costs are rising, FIFO results in the highest cost of goods sold and the lowest gross margin.

Question 55

Jan-Con Company provides the following information for the month of August. Required:
(a)What is the value of the ending inventory assuming the company uses a periodic inventory system and the weighted-average method?
(b)What is the cost of goods sold if the company uses a perpetual inventory system and the FIFO method of valuing inventory?
(c)What is the cost of goods sold if the company uses a perpetual inventory system and the weighted average method of valuing inventory?

Question 56

When inventory prices are declining, the FIFO method will generally yield a gross margin that is:

A)less than the weighted-average method.
B)equal to the gross margin of the weighted-average method.
C)higher than the weighted-average method.
D)FIFO does not generally cause a gross margin that is different from that of any other costing method.

Question 57

Sam Levine Merchandising had the following transactions during May: Required:
1. Assuming FIFO and that the perpetual inventory system is used, prepare the journal entries to record the above transactions.
2. Assuming weighted-average and that the periodic inventory system is used, prepare the journal entries to record the above transactions.

Question 58

When inventory prices are rising, the weighted-average method will generally result in a:

A)higher gross margin than FIFO.
B)lower ending inventory value than FIFO.
C)higher owner's equity balance than FIFO.
D)lower cost of goods sold than FIFO.

Question 59

The FIFO method can result in misleading inventory costs on the balance sheet because the oldest prices are left in ending inventory.

Question 60

When prices are falling, the ending inventory balance reported on a FIFO basis is generally:

A)lower than on a weighted-average basis.
B)greater than on a weighted-average basis.
C)equal to ending inventory reported on a weighted-average basis.
D)equally likely to be higher or lower on a weighted-average basis as opposed to a FIFO basis.

Question 61

Table 6-2 $\begin{array} { | l | l | } \hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \\\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \\\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \\\hline\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.

-Referring to Table 6-2, assuming all goods are sold throughout the year for $17 per unit, gross margin calculated under the periodic FIFO method would be:

A)$1,210.
B)$1,260.
C)$1,150.
D)$900.

Question 62

If a company uses periodic inventory and FIFO when prices are falling, the effect will:

A)reduce cost of goods sold.
B)increase the inventory ending balance on the balance sheet.
C)reduce the gross margin.
D)increase the gross margin.

Question 63

Table 6-1
Assume the following data for Burnette Merchandising for 2019: $\begin{array} { | l | l | } \hline\text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline\end{array}$ On December 31, a physical count reveals 15 units in ending inventory.

-Refer to Table 6-1. Assume a periodic inventory system. Under the FIFO method, ending inventory would be valued at:

A)$165.
B)$105.
C)$162.
D)$135.

Question 64

The perpetual and periodic inventory systems will produce identical cost of goods sold and ending inventory balances using which of the following cost flow assumptions?

A)FIFO
B)average
C)weighted-average
D)just in time

Question 65

Which of the following statements is true about a company making an accounting change in its financial statements?

A)It must disclose the effect of the change on net income.
B)It is generally entitled to make one accounting change per year.
C)Companies can never make accounting changes because of the consistency characteristic.
D)Management must ask permission from the federal government.

Question 66

Given the following data, what is the value of ending inventory if the FIFO periodic method is used? $\begin{array} { | l | l | } \hline \text { Sales revenue } & 200 \text { units at } \$ 20 \text { per unit } \\\hline \text { Beginning inventory } & 60 \text { units at } \$ 12 \text { per unit } \\\hline \text { Purchases } & 210 \text { units at } \$ 13 \text { per unit } \\\hline\end{array}$

A)$1,400
B)$840
C)$910
D)$1,600

Question 67

Table 6-2 $\begin{array} { | l | l | } \hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \\\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \\\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \\\hline\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.

-Referring to Table 6-2, the cost of ending inventory using the periodic weighted-average-cost method rounded to the nearest whole number would be:

A)$1,910.
B)$860.
C)$834.
D)$850.

Question 68

Given the following data, what is the cost of ending inventory rounded to the nearest whole dollar using periodic FIFO? $\begin{array} { | l | l | } \hline \text { Sales revenue } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { Beginning inventory } & 50 \text { units at } \$ 8 \text { per unit } \\\hline \text { Purchases } & 90 \text { units at } \$ 9 \text { per unit } \\\hline\end{array}$

A)$400
B)$360
C)$890
D)$850

Question 69

An item is considered material if:

A)it facilitates comparison with the financial statements of another company in the same industry.
B)its inclusion in the financial statements would cause a statement user to change a decision.
C)its dollar value is greater than 10% of net income.
D)it is accounted for using a treatment that is not normally allowed by generally accepted accounting principles.

Question 70

The lower-of-cost-and-net-realizable-value rule is an application of the consistency principle.

Question 71

Table 6-1
Assume the following data for Burnette Merchandising for 2019: $\begin{array} { | l | l | } \hline\text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline\end{array}$ On December 31, a physical count reveals 15 units in ending inventory.

-Refer to Table 6-1. Assume a periodic inventory system. Under the weighted-average method, cost of goods sold on the income statement would be:

A)$396.
B)$294.
C)$389.
D)$420.

Question 72

Table 6-2 $\begin{array} { | l | l | } \hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \\\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \\\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \\\hline\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.

-Referring to Table 6-2, the cost of ending inventory using the periodic FIFO method would be:

A)$1,910.
B)$860.
C)$800.
D)$850.

Question 73

Table 6-1
Assume the following data for Burnette Merchandising for 2019: $\begin{array} { | l | l | } \hline\text { Beginning inventory } & 10 \text { units at } \$ 7 \text { each } \\\hline \text { March } 18 \text { purchase } & 15 \text { units at } \$ 9 \text { each } \\\hline \text { June } 10 \text { purchase } & 20 \text { units at } \$ 10 \text { each } \\\hline \text { October } 30 \text { purchase } & 12 \text { units at } \$ 11 \text { each } \\\hline\end{array}$ On December 31, a physical count reveals 15 units in ending inventory.

-Refer to Table 6-1. Assume a periodic inventory system. Under the FIFO method, cost of goods sold on the income statement would be:

A)$294.
B)$375.
C)$462.
D)$420.

Question 74

Given the following data, what is the cost of goods sold rounded to the nearest whole dollar using periodic FIFO? $\begin{array} { | l | l | } \hline \text { Sales revenue } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { Beginning inventory } & 50 \text { units at } \$ 8 \text { per unit } \\\hline \text { Purchases } & 90 \text { units at } \$ 9 \text { per unit } \\\hline\end{array}$

A)$400
B)$360
C)$890
D)$850

Question 75

Table 6-2 $\begin{array} { | l | l | } \hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \\\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \\\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \\\hline\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.

-Referring to Table 6-2, assuming all goods are sold throughout the year for $19 per unit, gross margin calculated under the periodic FIFO method would be:

A)$1,620.
B)$1,510.
C)$1,260.
D)$1,570.

Question 76

Given the following data, what is the gross margin if cost of goods sold is determined using the weighted-average method? $\begin{array} { | l | l | } \hline \text { Sales revenue } & 200 \text { units at } \$ 20 \text { per unit } \\\hline \text { Beginning inventory } & 60 \text { units at } \$ 12 \text { per unit } \\\hline \text { Purchases } & 210 \text { units at } \$ 13 \text { per unit } \\\hline\end{array}$

A)$2,556
B)$1,444
C)$2,500
D)$1,500

Question 77

Table 6-2 $\begin{array} { | l | l | } \hline \text { Manuary } 1 \text { inventory balance } & 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { March } 2 \text { purchase } & 50 \text { units at } \$ 11 \text { per unit } \\\hline \text { July } 8 \text { purchase } & 80 \text { units at } \$ 10 \text { per unit } \\\hline \text { November } 15 \text { purchase } & 30 \text { units at } \$ 12 \text { per unit } \\\hline\end{array}$ On December 31, a physical count reveals 80 units in ending inventory.

-Referring to Table 6-2, cost of goods sold calculated under the periodic FIFO method would be:

A)$1,800.
B)$2,160.
C)$1,910.
D)$1,850.

Question 78

Given the following data, what is the gross margin if cost of goods sold is determined using the FIFO periodic method? $\begin{array} { | l | l | } \hline \text { Sales revenue } & 200 \text { units at } \$ 20 \text { per unit } \\\hline \text { Beginning inventory } & 60 \text { units at } \$ 12 \text { per unit } \\\hline \text { Purchases } & 210 \text { units at } \$ 13 \text { per unit } \\\hline\end{array}$

A)$2,540
B)$1,460
C)$1,400
D)$1,390

Question 79

Using the FIFO method, the earliest purchases of inventory are assumed to be contained:

A)on the balance sheet as part of ending inventory.
B)on the income statement as part of cost of goods sold.
C)equally split between the income statement and the balance sheet.
D)majority on the income statement and minority on the balance sheet.

Question 80

Which statement addresses the consistency characteristic of accounting information?

A)Companies in the same industry must use the same inventory costing method to facilitate comparison of results.
B)Financial reporting practices in one country should be consistent with those in other countries.
C)Businesses should generally use the same accounting methods and procedures from one period to the next.
D)Once a company selects an inventory costing method, it must always use that method.