Accounting 100

1. Once the manufacturing process is complete, the product is transferred from the Work-in-Process account to Raw Materials account.

True

False

2. FOB shipping means the seller owns the inventory until it reaches the buyers premise.

True

False

3. Perpetual inventory systems provide more timely information than periodic systems.

True

False

4. Gross margin is the difference between sales revenue and costs of goods available for sale.

True

False

5. If a companys inventory turnover ratio is 6.6, it takes them on average 55 days to sell their inventory.

True

False

6) Customers become frustrated if a company does not have a product available when they order it. This is called

a) a sell out.

b) spoilage.

c) obsolescence.

d) a stockout.

7) Goods available for sale are found in

a) work-in-process inventory.

b) raw materials inventory.

c) finished goods inventory.

d) cost of goods sold.

8) Which of the following is NOT an inventory account in a manufacturing company?

a) Raw Material

b) Work-in-Process

c) Goods Available For Sale

d) Finished Goods

9) Physical inventory counts are

a) only necessary for periodic systems.

b) only necessary for perpetual systems.

c) necessary for periodic and perpetual systems as part of internal control.

d) not necessary at all if a company has an appropriate accounting system.

10) Which of the following is true under a periodic system?

a) A COGS expense is recognized each time a sale is made.

b) The inventory account is not updated with each purchase.

c) Inventory shrinkage is easily identified.

d) This system can be costly to implement.

11) Which of the following should be included in the cost of inventory?

a) the cost of keeping the inventory records

b) depreciation on the inventory warehouse

c) the salespersons commission

d) shipping costs to purchase the inventory

12) Which of the following statements best describes net realizable value when applying the lower of cost and net realizable value rule?

a) Net realizable value is the selling price less the costs necessary to sell the item.

b) Net realizable value is the selling price plus the costs necessary to sell the item.

c) Net realizable value is the selling price plus the normal profit margin.

d) Net realizable value is the selling price less the normal profit margin.