Question 1

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Accepted Answer

A subsidiary inventory ledger is a tool that helps a company keep track of inventory by providing detailed information on each item. This allows the company to adjust inventory levels as needed to avoid understocking or overstocking. Therefore, a subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Question 2

Inventory controls start when the merchandise is shelved in the store area.

Accepted Answer

Inventory controls start before the merchandise is shelved, during the receiving and stocking process. Once the merchandise is shelved, ongoing monitoring and inventory management is necessary to ensure accurate tracking of stock levels.

Question 3

During periods of increasing costs,the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

Accepted Answer

During periods of increasing costs, the FIFO method assumes that older, cheaper inventory is sold first, leaving newer, more expensive inventory on hand. This results in a lower cost of goods sold and a higher ending inventory value, which leads to a greater amount of net income. In contrast, the LIFO method assumes that newer, more expensive inventory is sold first, resulting in a higher cost of goods sold and a lower ending inventory value, which leads to a lower amount of net income.

Question 4

The three inventory costing methods will normally each yield different amounts of net income.

Accepted Answer

The three inventory costing methods (FIFO, LIFO, and weighted average) will yield different amounts of ending inventory and cost of goods sold, which will ultimately affect the company's net income. Therefore, each method may result in a different amount of net income.

Question 5

When using the FIFO inventory costing method,the most recent costs are assigned to the cost of goods sold.

Accepted Answer

When using the FIFO inventory costing method, the oldest costs are assigned to the cost of goods sold, not the most recent.

Question 6

During periods of increasing costs,the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.

Accepted Answer

This is because FIFO (first-in, first-out) assumes that the items that were purchased or produced first are sold first, leaving the newer and more expensive items in inventory. Therefore, when costs are increasing, FIFO will assign the higher costs to the items that were purchased last and sold first, resulting in a higher inventory amount for the balance sheet. In contrast, LIFO (last-in, first-out) assumes that the items that were purchased or produced last are sold first, leaving the older and less expensive items in inventory, resulting in a lower inventory amount for the balance sheet during periods of increasing costs.

Question 7

Under the periodic inventory system,a physical inventory is taken to determine the cost of the inventory on hand and the cost of the goods sold.

Accepted Answer

Under the periodic inventory system, the cost of goods sold and the cost of the inventory on hand are determined by taking a physical inventory at the end of a period. This is different from the perpetual inventory system, where the inventory and cost of goods sold are continuously updated through the use of inventory software and tracking of individual transactions.

Question 8

Under the periodic inventory system,the inventory account continuously discloses the amount of inventory on hand.

Accepted Answer

Under the periodic inventory system, the inventory account is not continuously updated and only reflects the inventory balance at the end of a certain period.

Question 9

A perpetual inventory system is an effective means of control over inventory.

Accepted Answer

A perpetual inventory system provides real-time tracking of inventory levels, which helps in maintaining accurate inventory records, reducing stockouts, and minimizing inventory carrying costs. Hence, it is an effective means of control over inventory.

Question 10

If the perpetual inventory system is used,the inventory account is debited for purchases of merchandise.

Accepted Answer

In a perpetual inventory system, the inventory account is updated in real-time, and purchases of merchandise would increase the inventory balance, hence the inventory account is debited.

Question 11

Of the three widely used inventory costing methods (FIFO,LIFO,and average cost),the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first.

Accepted Answer

The answer of Of the three widely used inventory costing...

Question 12

A purchase order establishes an initial record of the receipt of the inventory.

Accepted Answer

The answer of A purchase order establishes an initial record...

Question 13

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

Accepted Answer

The answer of One of the two internal control procedures...

Question 14

The choice of an inventory costing method has no significant impact on the financial statements.

Accepted Answer

The answer of The choice of an inventory costing method...

Question 15

FIFO is the inventory costing method that follows the physical flow of the goods.

Accepted Answer

The answer of FIFO is the inventory costing method that...

Question 16

The weighted average cost method will always yield results between FIFO and LIFO.

Accepted Answer

The answer of The weighted average cost method will always...

Question 17

Under the LIFO inventory costing method,the most recent costs are assigned to ending inventory.

Accepted Answer

The answer of Under the LIFO inventory costing method,the most...

Question 18

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

Accepted Answer

The answer of Safeguarding inventory and proper reporting of the...

Question 19

The specific identification inventory method should be used when the inventory consists of identical,low-cost units that are purchased and sold frequently.

Accepted Answer

The answer of The specific identification inventory method should be...

Question 20

A physical inventory should be taken at the end of every month.

Accepted Answer

The answer of A physical inventory should be taken at...

Question 21

During periods of decreasing costs,the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.

Accepted Answer

The answer of During periods of decreasing costs,the use of...

Question 22

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

Accepted Answer

The answer of Average inventory is computed by adding the...

Question 23

Generally,the lower the number of days' sales in inventory,the better.

Accepted Answer

The answer of Generally,the lower the number of days' sales...

Question 24

During periods of increasing costs,an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

Accepted Answer

The answer of During periods of increasing costs,an advantage of...

Question 25

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

Accepted Answer

The answer of One negative effect of carrying too much...

Question 26

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item,by major classification of inventory,or by the total inventory.

Accepted Answer

The answer of The lower-of-cost-or-market method of determining the value...

Question 27

Inventory errors,if not discovered,will self-correct within two years.

Accepted Answer

The answer of Inventory errors,if not discovered,will self-correct within two...

Question 28

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

Accepted Answer

The answer of The use of the lower-of-cost-or-market method of...

Question 29

Unsold consigned merchandise should be included in the consignee's inventory.

Accepted Answer

The answer of Unsold consigned merchandise should be included in...

Question 30

The lower of cost or market is a method of inventory valuation.

Accepted Answer

The answer of The lower of cost or market is...

Question 31

When inventory is shown on the balance sheet,both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

Accepted Answer

The answer of When inventory is shown on the balance...

Question 32

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

Accepted Answer

The answer of A consignor who has goods out on...

Question 33

If ending inventory for the year is overstated,stockholders' equity reported on the balance sheet at the end of the year is understated.

Accepted Answer

The answer of If ending inventory for the year is...

Question 34

Inventory turnover measures the length of time it takes to acquire,sell,and replace the inventory.

Accepted Answer

The answer of Inventory turnover measures the length of time...

Question 35

If ending inventory for the year is understated,net income for the year is overstated.

Accepted Answer

The answer of If ending inventory for the year is...

Question 36

In valuing merchandise for inventory purposes,net realizable value is the estimated selling price less any direct costs of disposal.

Accepted Answer

The answer of In valuing merchandise for inventory purposes,net realizable...

Question 37

It's not unusual for large companies to use different inventory costing methods for different segments of its inventory.

Accepted Answer

The answer of It's not unusual for large companies to...

Question 38

During periods of rapidly rising costs,the use of the LIFO method results in illusory or inventory profits.

Accepted Answer

The answer of During periods of rapidly rising costs,the use...

Question 39

Direct disposal costs do not include special advertising or sales commissions.

Accepted Answer

The answer of Direct disposal costs do not include special...

Question 40

&#34;Market&#34; as used in the phrase &#34;lower of cost or market&#34; for valuing inventory,refers to the price at which the inventory is being offered for sale by the company.

Accepted Answer

The answer of &#34;Market&#34; as used in the phrase &#34;lower...

Question 41

Which of the following is not an example for safeguarding inventory?&#10;A) Storing inventory in restricted areas.&#10;B) Physical devices such as two-way mirrors,cameras,and alarms.&#10;C) Matching receiving documents,purchase orders,and vendor's invoice.&#10;D) Returning inventory that is defective or broken.

Accepted Answer

The answer of Which of the following is not an...

Question 42

If a company uses a periodic inventory system,the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Accepted Answer

The answer of If a company uses a periodic inventory...

Question 43

Taking a physical count of inventory&#10;A) is not necessary when a periodic inventory system is used&#10;B) should be done near year-end&#10;C) has no internal control relevance&#10;D) is not necessary when a perpetual inventory system is used

Accepted Answer

The answer of Taking a physical count of inventory&#10;A) is...

Question 44

Under a perpetual inventory system,the amount of each type of merchandise on hand is available in the&#10;A) customer's ledger&#10;B) creditor's ledger&#10;C) inventory ledger&#10;D) purchase ledger

Accepted Answer

The answer of Under a perpetual inventory system,the amount of...

Question 45

Cost flow is in the reverse order in which costs were incurred when using&#10;A) weighted average&#10;B) last-in,first-out&#10;C) first-in,first-out&#10;D) average cost

Accepted Answer

The answer of Cost flow is in the reverse order...

Question 46

If a fire destroys the inventory,the gross profit method can be used to estimate the cost of merchandise destroyed.

Accepted Answer

The answer of If a fire destroys the inventory,the gross...

Question 47

The inventory costing method that reports the most current prices in ending inventory is&#10;A) FIFO&#10;B) specific identification&#10;C) LIFO&#10;D) average cost

Accepted Answer

The answer of The inventory costing method that reports the...

Question 48

Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique,high-cost items?&#10;A) FIFO&#10;B) LIFO&#10;C) average&#10;D) specific identification

Accepted Answer

The answer of Which of the following methods is appropriate...

Question 49

Use of the retail inventory method requires taking a physical count of inventory.

Accepted Answer

The answer of Use of the retail inventory method requires...

Question 50

In the retail inventory method,the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the goods sold.

Accepted Answer

The answer of In the retail inventory method,the cost to...

Question 51

Ending inventory is made up of the oldest purchases when a company uses&#10;A) first-in,first-out&#10;B) last-in,first-out&#10;C) average cost&#10;D) retail method

Accepted Answer

The answer of Ending inventory is made up of the...

Question 52

Which document authorizes the purchase of the inventory from an approved vendor?&#8203;&#10;A) &#8203;the purchase order&#10;B) &#8203;the petty cash voucher&#10;C) the receiving report&#10;D) the vendor's invoice

Accepted Answer

The answer of Which document authorizes the purchase of the...

Question 53

Cost flow is in the order in which costs were incurred when using&#10;A) average cost&#10;B) last-in,first-out&#10;C) first-in,first-out&#10;D) weighted average

Accepted Answer

The answer of Cost flow is in the order in...

Question 54

Which document establishes an initial record of the receipt of the inventory?&#8203;&#10;A) &#8203;receiving report&#10;B) &#8203;vendor's invoice&#10;C) &#8203;purchase order&#10;D) &#8203;petty cash voucher

Accepted Answer

The answer of Which document establishes an initial record of...

Question 55

The inventory costing method that reports the earliest costs in ending inventory is&#10;A) FIFO&#10;B) LIFO&#10;C) weighted average&#10;D) specific identification

Accepted Answer

The answer of The inventory costing method that reports the...

Question 56

When merchandise sold is assumed to be in the order in which the purchases were made,the company is using&#10;A) first-in,last-out&#10;B) last-in,first-out&#10;C) first-in,first-out&#10;D) average cost

Accepted Answer

The answer of When merchandise sold is assumed to be...

Question 57

&#8203;The primary objectives of control over inventory are&#10;A) &#8203;safeguarding the inventory from damage and maintaining constant observation of the inventory&#10;B) &#8203;reporting inventory in the financial statements&#10;C) &#8203;maintaining constant observation of the inventory and reporting inventory in the financial statements&#10;D) &#8203;safeguarding inventory from damage and reporting inventory in the financial statements

Accepted Answer

The answer of &#8203;The primary objectives of control over inventory...

Question 58

Control of inventory should begin as soon as the inventory is received.Which of the following internal control steps is not done to meet this goal?&#10;A) check the invoice to the receiving report&#10;B) check the invoice to the purchase order&#10;C) check the invoice with the person who specifically purchased the item&#10;D) check the invoice extensions and totals

Accepted Answer

The answer of Control of inventory should begin as soon...

Question 59

&#8203;All of the following are documents used for inventory control except&#10;A) a &#8203;petty cash voucher&#10;B) a &#8203;vendor's invoice&#10;C) &#8203;a receiving report&#10;D) &#8203;a purchase order

Accepted Answer

The answer of &#8203;All of the following are documents used...

Question 60

The inventory method that assigns the most recent costs to cost of goods sold is&#10;A) FIFO&#10;B) LIFO&#10;C) weighted average&#10;D) specific identification

Accepted Answer

The answer of The inventory method that assigns the most...

Question 61

Assuming that the company uses the perpetual inventory system,determine the cost of goods sold for the sale of May 20 using the FIFO inventory cost method.&#10;A) $120&#10;B) $180&#10;C) $136&#10;D) $144

Accepted Answer

The answer of Assuming that the company uses the perpetual...

Question 62

What is the amount of cost of goods sold for the year according to the FIFO method?&#10;A) $1,380&#10;B) $1,375&#10;C) $1,510&#10;D) $1,250

Accepted Answer

The answer of What is the amount of cost of...

Question 63

The value of ending inventory using LIFO is &#8203;&#10;A) $1,250&#10;B) $1,350&#10;C) $1,375&#10;D) $1,150

Accepted Answer

The answer of The value of ending inventory using LIFO...

Question 64

When using a perpetual inventory system,the journal entry to record the cost of goods sold is:&#10;A) debit Cost of Goods Sold; credit Sales&#10;B) debit Cost of Goods Sold; credit Inventory&#10;C) debit Inventory; credit Cost of Goods Sold&#10;D) No journal entry is made to record the cost of goods sold.

Accepted Answer

The answer of When using a perpetual inventory system,the journal...

Deck 6: Inventories