1 Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items? Answer FIFO LIFO average specific identification 2 points Question 2 Which of the following measures the relationship between cost of merchandise sold and the amount of inventory carried during the period? Answer inventory turnover number of days sales in inventory retail method of inventory costing gross profit method of inventory costing 2 points Question 3 Which of the following is used to analyze the efficiency and effectiveness of inventory management? Answer inventory turnover only number of days sales in inventory only both inventory turnover and number of days sales in inventory neither inventory turnover or number of days sales in inventory 2 points Question 4 When merchandise sold is assumed to be in the order in which the purchases were made, the company is using Answer first-in, last-out last-in, first-out first-in, first-out average cost 2 points Question 5 Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 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 3 Purchase 5 $30 May 10 Sale 3 May 17 Purchase 10 $34 May 20 Sale 6 May 23 Sale 3 May 30 Purchase 10 $40 Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method. Answer $250 $180 $196 $204 2 points Question 6 Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 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 3 Purchase 5 $30 May 10 Sale 3 May 17 Purchase 10 $34 May 20 Sale 6 May 23 Sale 3 May 30 Purchase 10 $40 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. Answer $494 $502 $422 $520 2 points Question 7 Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 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 3 Purchase 5 $30 May 10 Sale 3 May 17 Purchase 10 $34 May 20 Sale 6 May 23 Sale 3 May 30 Purchase 10 $40 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. Answer $78 $90 $102 $180 2 points Question 8 Too much inventory on hand Answer reduces solvency increases the cost to safeguard the assets increases the losses due to price declines all of the above 2 points Question 9 The inventory costing method that reports the most current prices in ending inventory is Answer FIFO Specific identification LIFO Average cost 2 points Question 10 The inventory costing method that reports the earliest costs in ending inventory is Answer FIFO LIFO Average cost Specific identification 2 points Question 11 Taking a physical count of inventory Answer is not necessary when a periodic inventory system is used should be dine near year-end has no internal control relevance is not necessary when a perpetual inventory system is used 2 points Question 12 Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? Answer net income is understated net income is overstated cost of merchandise sold is understated merchandise inventory reported on the balance sheet is overstated 2 points Question 13 Kristins Boutiques has identified the following items for possible inclusion in its December 31, 2010 inventory. Which of the following would not be included in the year end inventory? Answer Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristins Boutique as of December 31, 2010. Kristin has in its warehouse merchandise on consignment from Abby Co. Kristin has sent merchandise to various retailers on a consignment basis. Kristin has merchandise on hand which has been returned by customers because of wrong size. 2 points Question 14 If the cost of an item of inventory is $50 and the current replacement cost is $57, the amount included in inventory according to the lower of cost or market is Answer $7 $50 $57 $107 2 points Question 15 If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income? Answer average cost LIFO FIFO weighted average 2 points Question 16 If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is Answer periodic LIFO FIFO average 2 points Question 17 Damaged merchandise that can be sold only at prices below cost should be valued at Answer net realizable value LIFO FIFO average 2 points Question 18 For the year ended December 31, 2011 Depot Maxs cost of merchandise sold was $54,350. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Maxs number of days sales in inventory is closest to Answer 43 50 8 47 2 points Question 19 For the year ended December 31, 2011 Depot Maxs cost of merchandise sold was $54,350. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Maxs inventory turnover for the year. Answer 8.3 7.5 7.9 47 2 points Question 20 If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the Answer consignee retailer manufacturer shipper 2 points Question 21 The two most widely used methods for determining the cost of inventory are Answer FIFO and LIFO FIFO and average LIFO and average gross profit and average 2 points Question 22 Under the _________ inventory method, accounting records maintain a continuously updated inventory value. Answer retail periodic physical perpetual 2 points Question 23 During the taking of its physical inventory on December 31, 2010, Barrys Bike Shop incorrectly counted its inventory as $270,000 instead of the correct amount of $190,000. The effect on the balance sheet and income statement would be as follows: Answer assets overstated by $80,000;retained earnings understated by $80,000; net income statement understated by $80,000. assets overstated by $80,000;retained earnings understated by $80,000; no effect on the income statement. assets and retained earnings overstated by $80,000; net income overstated by $80,000. assets and retained earnings overstated by $80,000; net income understated by $80,000. 2 points Question 24 The following lots of a particular commodity were available for sale during the year: Beginning inventory 5 units at $61 First purchase 15 units at $63 Second purchase 10 units at $74 Third purchase 10 units at $77 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of goods sold the year according to the LIFO method? Answer $1,380 $1,375 $1,510 $1,250 2 points Question 25 Kristins Boutiques has identified the following items for possible inclusion in its December 31, 2010 inventory. Which of the following would not be included in the year end inventory? Answer Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristins Boutique as of December 31, 2010. Kristin has in its warehouse merchandise on consignment from Abby Co. Kristin has sent merchandise to various retailers on a consignment basis. Kristin has merchandise on hand which has been returned by customers because of wrong size