Question 1

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Inventory items for which the manufacturing process is complete.

Accepted Answer

Finished goods are inventory items for which the manufacturing process is complete and ready to be sold.

Answer: A
 Work-in-process inventory refers to items that are still in the process of being manufactured and have not yet been completed.

Answer: B
 Merchandising companies are businesses that purchase finished goods from manufacturers and wholesalers and then sell them to customers.

Answer: D
 Raw materials are inventory items that have not yet been used in the manufacturing process.

Answer: E
 Manufacturing companies are businesses that produce their own goods, as opposed to purchasing them from other companies.

Question 2

At the beginning of 2012, Calston Incorporated reports inventory of $9,000. During 2012, the company purchases additional inventory for $25,000. At the end of 2012, the cost of inventory remaining is $8,000. Calculate cost of goods sold for 2012.

Accepted Answer

The answer of At the beginning of 2012, Calston Incorporated...

Question 3

What does the balance of cost of goods sold in the income statement represent? What does the balance of inventory in the balance sheet represent?

Accepted Answer

The answer of What does the balance of cost of...

Question 4

Using LIFO, the amount reported for ending inventory does not differ depending on whether a company uses a periodic system or a perpetual system.

Accepted Answer

The amount reported for ending inventory (or cost of goods sold) will differ.

Question 5

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Companies that purchase inventories that are primarily in finished form for resale to customers.

Accepted Answer

Merchandising companies are companies that purchase inventories that are primarily in finished form for resale to customers.

A) Work-in-process inventory: This refers to inventory that is in the process of being manufactured into finished goods.

C) Finished goods: This refers to inventory that is completed and ready to be sold.

D) Raw materials: This refers to inventory that is used in the manufacturing process.

E) Manufacturing companies: This refers to companies that produce and sell goods usually involving the use of raw materials and work-in-process inventory.

Question 6

A company that has average inventory of $500 and cost of goods sold of $2,000 would have an inventory turnover ratio of 0.25.

Accepted Answer

The inventory turnover ratio equals cost of goods sold ($2,000) divided by average inventory ($500), which equals 4.0 in this example.

Question 7

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.

Accepted Answer

A periodic inventory system requires a physical count of inventory to be taken at the end of the reporting period to adjust for purchases and sales, rather than continuously modifying inventory amounts.

Question 8

The gross profit ratio measures the amount by which the sale price of inventory exceeds its cost per dollar of sales.

Accepted Answer

The gross profit ratio is calculated by dividing gross profit by net sales. It represents the percentage of each dollar of sales that is left after deducting the cost of goods sold.

Question 9

Overstating ending inventory in the current year causes net income in the current year to be overstated.

Accepted Answer

Overstating ending inventory in the current year causes an increase in the cost of goods sold and a decrease in the cost of goods sold in the following year, leading to an overstatement of net income in the current year.

Question 10

Generally, a higher inventory turnover ratio reflects positively on a company's ability to manage its inventory.

Accepted Answer

A higher inventory turnover ratio means that a company is selling its inventory quickly and efficiently, which can indicate effective management of inventory levels and customer demand.

Question 11

Understating ending inventory in the current year causes cost of goods sold in the current year to be understated.

Accepted Answer

Understating ending inventory in the current year will cause cost of goods sold in the current year to be overstated.

Question 12

The inventory turnover ratio equals cost of goods sold divided by average inventory.

Accepted Answer

The inventory turnover ratio formula is cost of goods sold divided by average inventory, which measures how many times a company sold and replaced its inventory during a period.

Question 13

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Cost of components that will become part of the finished product but have not yet been used in production.

Accepted Answer

The cost of components that will become part of the finished product but have not yet been used in production is referred to as raw materials.

A) Work-in-process inventory refers to products that are still undergoing production and have not yet been completed.
B) Merchandising companies are businesses that purchase finished goods and resell them to customers.
C) Finished goods are completed products that are ready for sale to customers.
E) Manufacturing companies are businesses that produce goods using raw materials and labor.

Question 14

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Inventory costing method that assumes both cost of goods sold and ending inventory consist of a random mixture of all the goods available for sale.

Accepted Answer

The answer of Listed below are ten terms followed by...

Question 15

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Cost flow assumption that assumes first units purchased are sold first.

Accepted Answer

The phrase describing "cost flow assumption that assumes first units purchased are sold first" is referring to the FIFO method.

Question 16

Generally, a lower gross profit ratio reflects positively on a company's ability to manage its inventory.

Accepted Answer

A higher ratio is generally a stronger signal about the company's successful management of inventory.

Question 17

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ LIFO must be used for financial reporting if elected for taxes.

Accepted Answer

The answer of Listed below are ten terms followed by...

Question 18

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Cost of inventory not sold by the end of the period.

Accepted Answer

Ending inventory refers to the cost of inventory that remains unsold at the end of the accounting period.

Answer: C
 Cost of goods sold refers to the cost of the inventory that was sold during the accounting period.

Answer: B
 Freight-in refers to the cost of transporting goods purchased by the company.

Answer: D
 LIFO conformity rule is a requirement that companies must follow when they use the LIFO method for valuing inventory.

Answer: E
 LIFO (last in, first out) is a method of valuing inventory where the last items purchased are assumed to be the first items sold.

Note: The remaining five terms (F-J) do not have any corresponding phrases listed.

Question 19

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Cost of freight not included in inventory.

Accepted Answer

The answer of Listed below are ten terms followed by...

Question 20

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided.
Terms:
-_____ Products that have started the production process but are not yet complete at the end of the period.

Accepted Answer

Work-in-process inventory refers to products that have started the production process but are not yet complete at the end of the period. Raw materials are the components needed to create the finished product, manufacturing companies are those that produce their own products, and merchandising companies are those that purchase and resell products without changing them. Finished goods are products that are complete and ready for sale.

Quiz 6: Inventory and Cost of Goods Sold

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Inventory items for which the manufacturing process is complete.

At the beginning of 2012, Calston Incorporated reports inventory of $9,000. During 2012, the company purchases additional inventory for $25,000. At the end of 2012, the cost of inventory remaining is $8,000. Calculate cost of goods sold for 2012.

What does the balance of cost of goods sold in the income statement represent? What does the balance of inventory in the balance sheet represent?

Using LIFO, the amount reported for ending inventory does not differ depending on whether a company uses a periodic system or a perpetual system.

A company that has average inventory of $500 and cost of goods sold of $2,000 would have an inventory turnover ratio of 0.25.

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.

The gross profit ratio measures the amount by which the sale price of inventory exceeds its cost per dollar of sales.

Overstating ending inventory in the current year causes net income in the current year to be overstated.

Generally, a higher inventory turnover ratio reflects positively on a company's ability to manage its inventory.

Understating ending inventory in the current year causes cost of goods sold in the current year to be understated.

The inventory turnover ratio equals cost of goods sold divided by average inventory.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Cost flow assumption that assumes first units purchased are sold first.

Generally, a lower gross profit ratio reflects positively on a company's ability to manage its inventory.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ LIFO must be used for financial reporting if elected for taxes.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Cost of inventory not sold by the end of the period.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Cost of freight not included in inventory.