Chapter 1. T F A periodic inventory system does not continually modify inventory amounts, but instead adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand. 2. T F Accountants often call FIFO the balance sheet approach because the amount it reports for ending inventory better approximates the current cost of inventory. 3. T F Under the perpetual inventory system, cost of goods sold is recorded at the time inventory is sold 4. T F When the value of inventory falls below its cost, companies have the option of recording the inventory at cost S. T F Generally, a lower gross profit ratio reflects positively on a company's ability to manage its inventory 6. T F Overstating ending inventory in the current year causes net income in the current year to be overstated. 7. T F For inventory that is shipped FOB shipping point, title transfers from the seller to the buyer once the inventory or the lower market value begins shipment. 8. The largest expense on a retailer's income statement is typically: 1. Salaries and Wages 3. Income tax expense 2. Cost of Goods Sold 4. Depreciation expense Baker Fine Foods has beginning inventory for the year of $12,000. During the year Baker purchases inventory for $150,000 and ends the year with $20,000 of inventory. What is Baker's CoGS? 9. 10. Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise costing $629 for $960 on account? Make the journal entry(s) 11. Below is year-end information for Spitzer Inc. $420,000 $800,000 $10,000 $170,000 $80,000 What is Spitzer's Gross Profit COGS Net sales Non-operating expenses Operating expenses Income tax Expense 12. The practice of using the lower-of-cost-or-market to evaluate inventory reflects which of the following 3. Conservatism4. Materiality 13. Under the principle of lower-of-cost-or-market, when a company has 10 items with a market value of accounting principles? 1. Neutrality 2. Matching principle $50 and a cost of $60, what is the adjusting entry