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Exam 6: Merchandise Inventory

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Question 61

True/False

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A company is uncertain whether a complex transaction should be recorded as gain or loss. Under the conservatism principle, they should choose to treat it a loss.

A) True
B) False

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Question 62

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Lewis Company had the following balances and transactions during 2014: What would the Cost of Goods Sold be as reported on the income statement for the year ending December 31, 2014 if the perpetual weighted-average costing method is used? (Round your intermediate calculations to two decimal places)

A) $8,160
B) $20,400
C) $16,240
D) $12,000

E) A) and C)
F) All of the above

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Question 63

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Which of the following inventory costing methods uses the costs of the oldest purchases to calculate the value of the ending inventory?

Which of the following is the correct formula to calculate days' sales in inventory?

A company decides to ignore a very small error in their inventory balance. This is an example of application of the:

James Company earned revenue of $500,000 and incurred cost of goods sold of $100,000. How much is the gross profit percent?

Which of the following methods of inventory valuation requires the calculation of a new average cost after each purchase?

When inventory costs are declining, which of the following inventory costing method will result in the lowest ending merchandise inventory?

The days' sales in inventory ratio is calculated by dividing cost of goods sold by the average merchandise inventory.

If the merchandise inventory's market value is greater than its cost, then it must be adjusted for the difference in amount.

Sandra Company had two hundred units of inventory on hand at the end of the year. These were recorded at a cost of $12 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Sandra Company for each finished product is $15. As a result of recording the adjusting entry as per the lower-of-cost-or-market rule, the gross profit will:

Which of the following inventory costing methods yields the highest cost of goods sold during a period of rising inventory costs?

Which of the following is an application of the conservatism concept?

Ending inventory is calculated by multiplying the number of units on hand with the unit cost.

The specific identification method of inventory costing is recommended when a business deals in unique and high-priced inventory items.

Under the retail method, the amount of ending merchandise inventory is estimated by using the ratio of the:

An overstatement of ending merchandise inventory in the current period results in an overstatement of cost of goods sold in the current period.

Misty Company had 20,000 units of ending inventory that were recorded at their cost of $5.00 per unit using the first-in, first-out (FIFO) method. The current replacement cost is $4.25 per unit. Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?

During a period of declining inventory costs, which of the following costing methods should be used by a company that intends to minimize its tax expenses?

The following data is available: Using the gross profit method, the amount of gross profit would be: