Deck 6: Retail Inventory

Question 1

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

Answer 1

False

Question 2

Which of the following states that a business must report enough information for outsiders to make knowledgeable decisions about the company?

A)Materiality concept
B)Accounting conservatism
C)Comparability principle
D)Relevance principle

Answer 2

D

Question 3

Ending inventory equals the cost of goods available for sale less beginning inventory.

Answer 3

False

Question 4

Which of the following states that a company must perform strictly proper accounting ONLY for items that are significant to the business's financial statements?

A)Accounting conservatism
B)Relevance principle
C)Comparability principle
D)Materiality concept

Question 5

Under Last- In, First- Out, the Cost of sales is based on the oldest purchases.

Question 6

Which of the following states that the business should use the same accounting methods from period to period?

A)Comparability principle
B)Materiality concept
C)Relevance principle
D)Accounting conservatism

Question 7

A company should NOT change the inventory costing method each period in order to maximise profit. This is an example of the materiality principle.

Question 8

A company discovers that its Cost of sales is understated by an insignificant amount. They do not need to correct the error because of the materiality concept.

Question 9

A company changes its inventory costing method each period in order to maximise profit. This is a violation of the consistency principle.

Question 10

Which of the following concepts states that a company must perform strictly proper accounting ONLY for significant items?

A)Consistency principle
B)Accounting conservatism
C)Materiality concept
D)Disclosure principle

Question 11

The materiality concept requires that a company should report enough information for outsiders to make wise decisions about the company.

Question 12

The comparability principle states that a business should use the same accounting methods from period to period.

Question 13

Which of the following requires that financial statements should report the LEAST favourable figures?

A)Accounting conservatism
B)Relevance principle
C)Materiality concept
D)Comparability principle

Question 14

A company is uncertain whether a complex transaction should result in an asset being recorded at
$100 000 or at $150 000. Under the conservatism principle, they should choose to show it at the lower amount.

Question 15

The accounting principle that states that we should never anticipate gains is which of the following?

A)Materiality concept
B)Comparability principle
C)Relevance principle
D)Accounting conservatism

Question 16

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 as a loss.

Question 17

A company discovers that its Cost of sales is understated by an insignificant amount. They do NOT need to correct the error because of the conservatism principle.

Question 18

Ending inventory equals the number of units on hand multiplied by the unit cost.

Question 19

Changing from the LIFO (Last- In, First- Out)to specific- identification method of valuing inventory ignores the:

A)Principle of comparability.
B)Concept of materiality.
C)Principle of relevance.
D)Principle of conservatism.

Question 20

A company decides to ignore a very small error in their inventory balance. This is an example of which of the following principles?

A)Comparability principle
B)Materiality concept
C)Accounting conservatism
D)Relevance principle

Question 21

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the Last- In, First- Out inventory costing method, what is the amount of Cost of sales on the 31 December income statement?

A)$3 500
B)$4 000
C)$6 750
D)$3 750

Question 22

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the First- In, First- Out inventory costing method, what is the amount of ending inventory on 31 December?

A)$1 000
B)$1 250
C)$2 250
D)$1 500

Question 23

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

Question 24

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the Last- In, First- Out inventory costing method, what is the amount of ending inventory on 31 December?

A)$1 250
B)$2 250
C)$1 500
D)$1 000

Question 25

A new average cost is calculated after each purchase when a business is using which of the following methods?

A)Last- In, First- Out
B)Specific- unit- cost
C)Average- cost
D)First- In, First- Out

Question 26

When a company uses FIFO, the Cost of sales correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.

Question 27

Under which of the following inventory costing methods is the Cost of sales based on the cost of the oldest purchases?

A)Last- In, First- Out
B)Average- cost
C)First- In, First- Out
D)Specific- unit- cost

Question 28

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the 31 December 2013 balance sheet if the perpetual Last- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$560
B)$490
C)$540
D)$554

Question 29

Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?

A)Specific- unit- cost
B)First- In, First- Out
C)Average- cost
D)Last- In, First- Out

Question 30

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the average cost inventory costing method, what is the amount of Cost of sales on the 31 December income statement?

A)$6 750
B)$3 750
C)$3 500
D)$4 000

Question 31

The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.

Question 32

Samson Company had the following balances and transactions during 2013. What would the company's Cost of sales be on the 31 December 2013 income statement if the perpetual First- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$1 740
B)$1 840
C)$1 760
D)$1 610

Question 33

Under which of the following inventory costing methods is ending inventory based on the cost of the oldest purchases?

A)Last- In, First- Out
B)Average- cost
C)First- In, First- Out
D)Specific- unit- cost

Question 34

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the First- In, First- Out inventory costing method, what is the amount of Cost of sales on the 31 December income statement?

A)$4 000
B)$3 500
C)$6 750
D)$3 750

Question 35

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the 31 December 2013 balance sheet if the perpetual First- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$560
B)$490
C)$554
D)$540

Question 36

Samson Company had the following balances and transactions during 2013. What would the company's Inventory amount be on the 31 December 2013 balance sheet if the perpetual average- costing method is used? (Answers are rounded to the nearest dollar.)

A)$490
B)$554
C)$560
D)$537

Question 37

Samson Company had the following balances and transactions during 2013. What would the company's Cost of sales be on the 31 December 2013 income statement if the perpetual Last- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$1 690
B)$1 760
C)$1 810
D)$1 540

Question 38

A company purchased 100 units for $20 each on 31 January. It purchased 100 units for $30 on 28 February. It sold 150 units for $45 each from 1 March through to 31 December. If the company uses the average- cost inventory costing method, what is the amount of ending inventory on 31 December?

A)$1 000
B)$1 500
C)$2 250
D)$1 250

Question 39

Under which of the following inventory costing methods is ending inventory based on the cost of the most recent purchases?

A)First- In, First- Out
B)Specific- unit- cost
C)Average- cost
D)Last- In, First- Out

Question 40

When a company uses LIFO, the Cost of sales correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.

Question 41

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies the average- costing method. How much is Cost of sales for the month? (When calculating average cost, please round to the nearest cent. When calculating Cost of sales and Ending inventory, please round to the nearest whole dollar.)

A)$170
B)$162
C)$168
D)$158

Question 42

Metro Computer Company had the following balances and transactions during 2014. What would the Inventory amount be as reported on the balance sheet at 31 December 2014 if the perpetual First- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$8 600
B)$7 750
C)$7 000
D)$8 000

Question 43

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of sales be as reported on the income statement at 31 December 2014 if the perpetual First- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$16 000
B)$15 500
C)$15 000
D)$12 000

Question 44

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies FIFO. How much is the Cost of sales for the month?

A)$180
B)$150
C)$170
D)$165

Question 45

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Ending inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$112
B)$388
C)$135
D)$128

Question 46

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale, and calculate the Cost of sales for the 14 January sale. (Please round to the nearest whole dollar.)

A)$38
B)$33
C)$40
D)$43

Question 47

Samson Company had the following balances and transactions during 2013. What would the company's Cost of sales be on the 31 December 2013 income statement if the perpetual average- costing method is used? (Answers are rounded to the nearest dollar.)

A)$1 746
B)$1 590
C)$1 652
D)$1 840

Question 48

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Cost of sales for the month of January. (Please round to the nearest whole dollar.)

A)$388
B)$249
C)$240
D)$246

Question 49

Metro Computer Company had the following balances and transactions during 2014. What would the Inventory amount be as reported on the balance sheet at 31 December 2014 if the perpetual average- costing method is used? (Answers are rounded to the nearest dollar.)

A)$8 000
B)$7 900
C)$8 600
D)$7 750

Question 50

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies LIFO. How much is Cost of sales for the month?

A)$150
B)$170
C)$110
D)$180

Question 51

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies the average- costing method. How much is the Ending inventory balance? (When calculating average cost, please round to the nearest cent. When calculating Cost of sales and Ending inventory, please round to the nearest whole dollar.)

A)$126
B)$118
C)$109
D)$122

Question 52

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Cost of sales for the month of January. (Please round to the nearest whole dollar.)

A)$230
B)$249
C)$228
D)$242

Question 53

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale and calculate the inventory balance after the sale on 14 January. (Please round to the nearest whole dollar.)

A)$230
B)$228
C)$216
D)$330

Question 54

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies LIFO. How much is the Ending inventory balance?

A)$130
B)$110
C)$132
D)$116

Question 55

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of sales be as reported on the income statement at 31 December 2014 if the perpetual average- costing method is used? (Answers are rounded to the nearest dollar.)

A)$17 750
B)$14 600
C)$13 900
D)$15 600

Question 56

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit. Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units. Martin uses a perpetual inventory system, and applies FIFO. How much is the Ending inventory balance?

A)$132
B)$130
C)$116
D)$110

Question 57

Berring Sales uses FIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale and calculate the Cost of sales for the sale on 14 January. (Please round to the nearest whole dollar.)

A)$43
B)$40
C)$46
D)$38

Question 58

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale, and calculate the Inventory balance after the 14 January sale. (Please round to the nearest whole dollar.)

A)$330
B)$228
C)$380
D)$230

Question 59

Metro Computer Company had the following balances and transactions during 2014. What would the company's Inventory amount be on the 31 December 2014 balance sheet if the perpetual Last- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$8 000
B)$7 300
C)$7 750
D)$7 500

Question 60

Metro Computer Company had the following balances and transactions during 2014. What would the Cost of sales be as reported on the income statement at 31 December 2014 if the perpetual Last- In, First- Out costing method is used? (Answers are rounded to the nearest dollar.)

A)$12 000
B)$15 750
C)$15 000
D)$3 750

Question 61

Given the same purchase and sales data, the three major costing methods will result in three different amounts for Gross profit.

Question 62

The Cost of goods available for sale is equal to the:

A)Ending inventory plus the Sales revenues.
B)Sales revenue minus the Cost of sales.
C)Cost of sales plus the Ending inventory.
D)Cost of sales minus the Ending inventory.

Question 63

Which of the following inventory costing methods yields the lowest Ending inventory when costs are rising during the accounting period?

A)Last- In, First- Out
B)First- In, First- Out
C)Specific- unit- cost
D)Average- cost

Question 64

Which of the following inventory costing methods yields the highest cost of sales when costs are rising during the accounting period?

A)Last- In, First- Out
B)First- In, First- Out
C)Average- cost
D)Specific- unit- cost

Question 65

Which of the following inventory costing methods yields the lowest Gross profit when costs are rising during the accounting period?

A)First- In, First- Out
B)Average- cost
C)Last- In, First- Out
D)Specific- unit- cost

Question 66

Which inventory valuation model serves as a middle- of- the- road approach for taxes and income?

A)Last- In, First- Out
B)Specific- unit- cost
C)Average- cost
D)First- In, First- Out

Question 67

Berring Sales uses the average- cost method. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale, and calculate the Inventory balance after the 14 January sale. (Please round to the nearest whole dollar.)

A)$330
B)$228
C)$230
D)$380

Question 68

In a period of rising costs, FIFO produces lower Cost of sales and higher Gross profit than LIFO.

Question 69

Which of the following inventory costing methods yields the highest Gross profit when costs are rising during the accounting period?

A)Specific- unit- cost
B)Last- In, First- Out
C)Average- cost
D)First- In, First- Out

Question 70

Berring Sales uses the average- cost method. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record through to the 14 January sale, and calculate the Cost of sales for the 14 January sale. (Please round to the nearest whole dollar.)

A)$42
B)$40
C)$38
D)$33

Question 71

The sum of the Cost of sales and the Ending inventory equals the Cost of goods available.

Question 72

If the historical cost of inventory falls below replacement cost, the business must write down the inventory cost.

Question 73

Given the same purchase and sales data, the three major costing methods will result in three different amounts for Cost of sales.

Question 74

Which of the following inventory costing methods yields the highest Ending inventory when costs are rising during the accounting period?

A)Last- In, First- Out
B)Specific- unit- cost
C)First- In, First- Out
D)Average- cost

Question 75

Berring Sales uses the average- cost method. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$228
B)$141
C)$249
D)$135

Question 76

Given the same purchase and sales data, the three major costing methods will result in three different amounts for Sales revenue.

Question 77

Which of the following inventory costing methods yields the lowest Cost of sales when costs are rising during the accounting period?

A)Last- In, First- Out
B)First- In, First- Out
C)Specific- unit- cost
D)Average- cost

Question 78

Which inventory valuation model minimises income tax when costs are rising?

A)Specific- unit- cost
B)Average- cost
C)Last- In, First- Out
D)First- In, First- Out

Question 79

Berring Sales uses the average- cost method. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Cost of sales for the month of January. (Please round to the nearest whole dollar.)

A)$243
B)$228
C)$249
D)$230

Question 80

Berring Sales uses LIFO. The partially completed inventory record for January appears below. On 14 January, the company sold 10 units. On 29 January, the company sold 50 units. Complete the inventory record and calculate the Inventory balance at the end of January. (Please round to the nearest whole dollar.)

A)$143
B)$249
C)$228
D)$135