Question 1

In a manufacturing enterprise, goods that are ready to be sold to customers are referred to as ________________, whereas in a merchandising enterprise they are generally referred to as _______________.

Accepted Answer

The answer of In a manufacturing enterprise, goods that are...

Question 2

The following information is available for Tye Produce Company at December 31, 2008: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000.Tye's inventory turnover in 2008 is

Accepted Answer

Inventory turnover is calculated as Cost of Goods Sold divided by Average Inventory. Average Inventory is ($80,000 + $120,000) / 2 = $100,000. Therefore, Inventory Turnover = $1,200,000 / $100,000 = 12 times.

Question 3

Cost of goods purchased is the sum of ___________________ and ________________.

Accepted Answer

The answer of Cost of goods purchased is the sum...

Question 4

Ken's Hotel Heating and Ventilation uses the specific identification method of costing inventory.During March, Ken purchased three air conditioning units for $5,000, $6,000, and $8,000, respectively.During March, two units are sold for $8,500 each.Ken determines that at March 31, the $8,000 unit is still on hand.What is Ken's gross profit for March?

Accepted Answer

Ken sold two units for $8,500 each, totaling $17,000. The cost of the sold units is $5,000 and $6,000, totaling $11,000. Gross profit is $17,000 - $11,000 = $6,000.

Question 5

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad $Cost of Goods Sold $\quad $Net Income

Accepted Answer

The answer of If beginning inventory is understated by $10,000,...

Question 6

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Accepted Answer

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the cost of goods sold and cost of goods available for sale could differ for each company. However, since the companies have the same inventoriable costs, the cost of goods available for sale minus the cost of goods sold must result in the same ending inventory for each company. Therefore, the ending inventory of the companies will be identical regardless of the flow assumptions they use. Net income will be affected by the cost of goods sold, which can differ depending on the inventory flow assumption used, so it is not identical.

Question 7

Inventory turnover is calculated by dividing cost of goods sold by

Accepted Answer

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory for the period, which gives the number of times that a company has depleted and replaced its inventory during the period.

Question 8

The LIFO inventory method assumes that the cost of the latest units purchased are

Accepted Answer

LIFO stands for Last In, First Out, which means that the cost of the latest units purchased are the first to be allocated to cost of goods sold. This results in the oldest inventory being left in ending inventory.

Question 9

The LIFO inventory method assumes that the cost of the latest units purchased are

Accepted Answer

LIFO stands for "last in, first out," meaning that the cost of the latest units purchased are the first to be allocated to the cost of goods sold. This method assumes that the items that were most recently purchased are the first to be sold, leaving the older inventory items on hand for a longer period of time. Therefore, the cost of the most recent inventory purchases is matched against current revenue, while the cost of older inventory items is carried forward to be matched against future revenue.

Question 10

Which one of the following inventory methods is often impractical to use?

Accepted Answer

Specific identification involves tracking the cost of each individual item in inventory. This method can become impractical to use if a company has a large number of individual items with varying costs, making it difficult and time-consuming to track each item's cost. Instead, companies often choose to use methods such as FIFO or Average cost, which are simpler and more practical to implement.

Question 11

Selection of an inventory costing method by management does not usually depend on

Accepted Answer

The fiscal year end does not impact the selection of an inventory costing method as it is already determined and fixed. The selection usually depends on the income statement and balance sheet effects as well as any tax effects.

Question 12

The following information is available for Starr Company at December 31, 2007: 
Beginning inventory $ 80,000
Ending inventory 120,000
Cost of goods sold 900,000
Sales 1,200,000
Starr's inventory turnover in 2008 is

Accepted Answer

The answer of The following information is available for Starr...

Question 13

In periods of inflation, phantom or paper profits may be reported as a result of using the

Accepted Answer

During periods of inflation, the FIFO (First-In, First-Out) costing assumption can lead to reporting higher profits. This is because older, lower-cost inventory is used up first, leading to lower COGS (Cost of Goods Sold) and higher reported profits, which may not reflect the current replacement cost of the inventory, thus creating "phantom" or "paper" profits.

Question 14

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000.The amounts reflected in the current end of the period balance sheet are $\quad$$\quad$Assets $\quad$$\quad$ Stockholders' Equity

Accepted Answer

The answer of A company uses the periodic inventory method...

Question 15

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad $Cost of Goods Sold $\quad $Net Income

Accepted Answer

The answer of If beginning inventory is understated by $10,000,...

Question 16

Understating beginning inventory will understate

Accepted Answer

Beginning inventory is a key component in calculating cost of goods sold (COGS). Understating beginning inventory will result in a lower COGS and therefore, a higher net income. This is because COGS is subtracted from revenue to calculate gross profit, and a lower COGS will result in a higher gross profit. Higher gross profit will increase net income, which is the amount of profit reported on the income statement. However, assets and owner's equity are not directly affected by understating beginning inventory.

Question 17

Which of the following statements is true regarding inventory cost flow assumptions?

Accepted Answer

A company can use more than one costing method concurrently for different products or different inventory accounts. The choice of costing method is usually based on management's judgment and is not dictated by industry standards or regulations. Additionally, while it is generally advisable for a company to stick with a consistent costing method, it may change its method if it can justify the change and properly disclose the change in financial statements.

Question 18

The accountant at Lloyd Produce Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method.The tax rate is 30% and the FIFO method will result in income before taxes of $4,600.The LIFO method will result in income before taxes of $3,850.What is the difference in tax that would be paid between the two methods?

Accepted Answer

The difference in income before taxes between FIFO and LIFO is $4,600 - $3,850 = $750. The difference in taxes paid is 30% of $750, which is $225.

Question 19

The managers of Totally Thai Restaurant receive performance bonuses based on the net income of the restaurant.Which inventory costing method are they likely to favor in periods of declining prices?

Accepted Answer

The answer of The managers of Totally Thai Restaurant receive...

Question 20

The accountant at Blackjack Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method.The tax rate is 30% and the FIFO method will result in income before taxes of $3,640.The LIFO method will result in income before taxes of $3,290.What is the difference in tax that would be paid between the two methods?

Accepted Answer

To find the difference in tax that would be paid, we first need to calculate the taxable income for each method. 
For FIFO: 
Taxable Income = Income before taxes - Cost of Goods Sold = $3,640 - COGS 
For LIFO: 
Taxable Income = Income before taxes - Cost of Goods Sold = $3,290 - COGS
Since the only difference between the two methods is the cost of goods sold amount, we can set up the following equation: 
($3,640 - COGS) x 0.3 = ($3,290 - COGS) x 0.3
Simplifying this equation, we can solve for COGS: 
$342 = COGS
Now that we know the cost of goods sold for each method, we can calculate the taxable income and taxes paid:

FIFO: 
Taxable Income = $3,640 - $342 = $3,298 
Taxes = $3,298 x 0.3 = $989.40

LIFO: 
Taxable Income = $3,290 - $342 = $2,948 
Taxes = $2,948 x 0.3 = $884.40

The difference in tax paid between the two methods is: 
$989.40 - $884.40 = $105 
Therefore, the best choice is to use the FIFO method, which results in a higher taxable income and a slightly higher tax paid. This method may be better if the company wants to show higher profits for investors or if they anticipate future tax rate increases.

Quiz 9: Inventories and Cost of Goodscalculation

In a manufacturing enterprise, goods that are ready to be sold to customers are referred to as __, whereas in a merchandising enterprise they are generally referred to as _.

The following information is available for Tye Produce Company at December 31, 2008: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000.Tye's inventory turnover in 2008 is

Cost of goods purchased is the sum of ___ and .

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad$ Cost of Goods Sold $\quad$ Net Income

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Inventory turnover is calculated by dividing cost of goods sold by

The LIFO inventory method assumes that the cost of the latest units purchased are

The LIFO inventory method assumes that the cost of the latest units purchased are

Which one of the following inventory methods is often impractical to use?

Selection of an inventory costing method by management does not usually depend on

The following information is available for Starr Company at December 31, 2007: Beginning inventory $ 80,000 Ending inventory 120,000 Cost of goods sold 900,000 Sales 1,200,000 Starr's inventory turnover in 2008 is

In periods of inflation, phantom or paper profits may be reported as a result of using the

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad$ Cost of Goods Sold $\quad$ Net Income

Understating beginning inventory will understate

Which of the following statements is true regarding inventory cost flow assumptions?

The managers of Totally Thai Restaurant receive performance bonuses based on the net income of the restaurant.Which inventory costing method are they likely to favor in periods of declining prices?

Quiz 9: Inventories and Cost of Goodscalculation

In a manufacturing enterprise, goods that are ready to be sold to customers are referred to as ________________, whereas in a merchandising enterprise they are generally referred to as _______________.

The following information is available for Tye Produce Company at December 31, 2008: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000.Tye's inventory turnover in 2008 is

Cost of goods purchased is the sum of ___________________ and ________________.

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of \quad Cost of Goods Sold \quad Net Income

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Inventory turnover is calculated by dividing cost of goods sold by

The LIFO inventory method assumes that the cost of the latest units purchased are

The LIFO inventory method assumes that the cost of the latest units purchased are

Which one of the following inventory methods is often impractical to use?

Selection of an inventory costing method by management does not usually depend on

The following information is available for Starr Company at December 31, 2007: Beginning inventory $ 80,000 Ending inventory 120,000 Cost of goods sold 900,000 Sales 1,200,000 Starr's inventory turnover in 2008 is

In periods of inflation, phantom or paper profits may be reported as a result of using the

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000.The amounts reflected in the current end of the period balance sheet are \quad\quad Assets \quad\quad Stockholders' Equity

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of \quad Cost of Goods Sold \quad Net Income

Understating beginning inventory will understate

Which of the following statements is true regarding inventory cost flow assumptions?

The managers of Totally Thai Restaurant receive performance bonuses based on the net income of the restaurant.Which inventory costing method are they likely to favor in periods of declining prices?

In a manufacturing enterprise, goods that are ready to be sold to customers are referred to as __, whereas in a merchandising enterprise they are generally referred to as _.

Cost of goods purchased is the sum of ___ and .

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad$ Cost of Goods Sold $\quad$ Net Income

If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad$ Cost of Goods Sold $\quad$ Net Income