1. under a perpetual inventory system, the amount of each type of

1.  Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

 

 a. inventory ledger. 

 b. purchase ledger. 

 c. customer’s ledger. 

 d. creditor’s ledger. 

 

2.  Taking a physical count of inventory

 

 a. has no internal control relevance. 

 b. is not necessary when a perpetual inventory system is used. 

 c. is not necessary when a periodic inventory system is used. 

 d. should be done near year-end. 

 

3.  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?

 

a. Check the invoice extensions and totals 

b. Check the invoice to the purchase order 

c. Check the invoice with the person who specifically purchased the item 

d. Check the invoice to the receiving report 

 

4.  Which of the following is not an example for safeguarding inventory?

 

 a. Matching receiving documents, purchase orders, and vendor’s invoice. 

 b. Returning inventory that is defective or broken.

 c. Physical devices such as two-way mirrors, cameras, and alarms. 

 d. Storing inventory in restricted areas.  

 

5.  Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?

 

 a. Specific Identification

 b. LIFO

 c. FIFO

 d. Average 

 

6.  Ending inventory is made up of the oldest purchases when a company uses

 

a. average cost. 

b. retail method. 

c. last-in, first-out. 

d. first-in, first-out. 

 

7.  The two most widely used methods for determining the cost of inventory are

 

a. FIFO and LIFO.

b. LIFO and average.

c. gross profit and average. 

d. FIFO and average. 

 

8.  Cost flow is in the order in which costs were incurred when using

 

 a. last-in, first-out. 

 b. first-in, first-out. 

 c. average cost. 

 d. weighted average. 

 

9.  Which of the following companies would be more likely to use the specific identification inventory costing method?

 

a. Lowe’s 

b. Best Buy

c. Gordon’s Jewelers 

d. Wal-Mart  

 

10.  The inventory data for an item for November are:

 

Nov. 01      Inventory    20 units at $20.00

Nov. 04      Sold          11  units

Nov. 10      Purchased   30 units  at $19.00

Nov. 17      Sold           22 units

Nov. 30      Purchased   23 units  at $24.00

 

Using the perpetual LIFO system, what is the cost of the merchandise sold for November?

 

 $647.00 

 $638.00 

 $818.00 

 $875.00  

 

11.  The Boxwood Company sells blankets for $ 34.00 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

 

Date           Product Z       Units            Cost

May 03         Purchase         8             $18.00

May 10         Sale               5

May 17         Purchase      11                $17.00

May 20           Sale           4

May 23           Sale           2

May 30          Purchase    8                  $22.00

 

Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method.  

 

 $272.00 

 $352.00

 $288.00 

 $312.00    

 

12.  The following lots of a particular commodity were available for sale during the year:

 

Beginning inventory 8 units at $47.00

First purchase  16 units at $55.00

Second purchase  54 units at $59.00

Third purchase  19 units at $62.00

 

The firm uses the periodic system and there are 22 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the LIFO method?  

 

 $1,355.00 

 $5,620.00 

 $1,146.00     

 $1,034.00

 

13.  If the cost of an item of inventory is $53.00 and the current replacement cost is $65.00, what is the amount included in inventory according to the lower of cost or market?  

 

 $65.00 

 $53.00 

 $12.00 

 $118.00 

 

14.  During the taking of its physical inventory on December 31, 2014, Barry’s Bike Shop incorrectly counted its inventory as $218,938.00 instead of the correct amount of $178,577.00. What would be the effect on the balance sheet and income statement?  

 

 assets overstated by $40,361.00 retained earnings understated by $40,361.00 net income statement understated by $40,361.00.

 

 assets overstated by $218,938.00 retained earnings understated by $178,577.00 no effect on the income statement.

 

 assets and retained earnings overstated by $40,361.00 net income overstated by $40,361.00.

 

 assets and retained earnings overstated by $178,577.00 net income understated by $218,938.00.

 

15.  Garrison Company uses the retail method of inventory costing. They started the year with an inventory that had a retail cost of $44,741.00. During the year they purchased an inventory with a retail cost of $662,662.00. After performing a physical inventory, they calculated their inventory cost at retail to be $66,731.00. The mark up is 100% of cost. Determine the ending inventory at its estimated cost.  

 

$320,336.00 

$66,731.00 

$33,365.50 

$11,375.50  

 

16.  A business using the retail method of inventory costing determines that merchandise inventory at retail is $511,100. If the ratio of cost to retail price is 50%, what is the amount of inventory to be reported on the financial statements?

 

17.  On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?

 

                                          Cost                  Retail

May 01Merchandise Inventory    $23,960        $39,930

May 01-31Purchases (net)         $45,860        $61,850

May 01-31Sales (net)                                   $96,960

 

 

 $19,400 

 $16,094 

 $3,306 

 $27,140  

 

18.  If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September 30, based on the following data?

 

Sep. 01Merchandise inventory      $88,513.00

Sep. 01-30Purchases (net)           $175,962.00

Sep. 01-30Sales (net)                  $126,601.00

 

 $52,788.60 

 $37,980.30 

 $88,620.70 

 $175,854.30  

 

19.  The Boxwood Company sells blankets for $31.00 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

 

Date      Product Z       Units    Cost

May 03       Purchase     27    $18.00

May 10        Sale         11

May 17       Purchase    32      $20.00

May 20       Sale           14

May 23       Sale             8

May 30       Purchase    29      $21.00

 

Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.  

 

$92 

$288 

$160 

$248  

 

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