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Question Pool Accounting > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Whats the formula for cost of goods sold in a periodic system?

A

(Beginning inventory + purchases) - Ending inventory = COGS

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2
Q

Whats the formula for the average-cost per unit method?

A

Cost of goods available : number of goods available = Average cost per unit method

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3
Q

How do you calculate the COGS under the average cost method?

A

Number of units sold x Average cost per unit = COGS

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4
Q

How do you calculate the inventory under the average cost method?

A

Number of units on hand x average cost of units = inventory

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5
Q

Whats the formula of the NRV (net realizable value)?

A

NRV = Estimated selling price - Estimated costs neccessary to make the sale

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6
Q

162.Which statement is true ?
A.The invoice is the purchaser’s request for collection from the customer
B.A service company purchases products from suppliers and then sells them
C.Gross profit is the excess of sales revenue over cost of goods sold
D.The Sales accountis used to record only sales on account

A

C

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7
Q

163.Sales discounts should appear in the financial statements
A.As an addition to inventory
B.As a deduction from sales
Chapters are based on last year book but all the questions are still relevant
C.Among the current liabilities
D.As an addition to sales
E.As an operating expense

A

B

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8
Q

168.When the applying the lower of cost or net realizable value, NRV means
A.Selling price lessdiscounts B.Original cost plus profit margin
C.Selling price less cost to sell D.Original cost less physical deterioration

A

C

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9
Q 
169.During a period of rising prices, the inventory method that will yield the highest net income and asset value is
A.LIFO
B.FIFO
C.Specific identification
D.Average cost
A

B

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10
Q

170.Which statement is true?
A.The inventory method that best matches current expense with revenue is FIFO
B.When the prices are rising, the inventory method that results in the lowest ending inventory value is FIFO
C.An error overstating ending inventory in 2010 will understate 2010 net income
D.Application of the inventory valuation rule may result in a lower inventory value

A

D

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11
Q 
171.The ending inventory of Mistry Harbor Co. is $75,000. If beginning inventory was $86,000 and goods available totaled $127,000, the cost of goods sold is
A.$41,000
B.$52,000
C.$86,000
D.$138,000
E.None of the above
A

Answer: B
Explanation: Beginning inventory + Purchases –Cost of Goods sold = Ending inventory Beginning inventory + Purchases = Cost of Goods available Cost of Goods available –Ending inventory = Cost of Goods Sold$127,000 -$75,000=$52,000

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12
Q 
172.Lantern Company had cost of goods sold of $148,000. The beginning and ending inventory were $16,000 and $28,000, respectively. Purchases for the period must have been
A.$136,000
B.$160,000
C.$164,000
D.$176,000
E.$192,000
A

Answer: B
Explanation:Beginning inventory + Purchases –Cost of Goods Sold = Ending inventory $16,000 + X -$148,000 = $28,000X = $160,000

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13
Q 
Highway Company had a $28,000 beginning inventory and a $35,000 ending inventory. Net sales were $184,000; purchases, $93,000; purchase returns and allowances, $7,000; and freight-in, $3,000173.Cost of goods sold for the period is 
A.$96,000
B.$98,000
C.$82,000
D.$81,000
E.None of the above
A 
Answer: C
Chapter: 6
Explanation: Beginning inventory + Purchases –Cost of Goods Sold = Ending inventory
$28,000 + $93,000 –X = $35,000
X = $82,000
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14
Q

Highway Company had a $28,000 beginning inventory and a $35,000 ending inventory. Net sales were $184,000; purchases, $93,000; purchase returns and allowances, $7,000; and freight-in, $3,000
174.What is Highway’s gross profit percentage (rounded to the nearest percentage)?A.50%
B.55%
C.45%
D.None of the above

A

Answer: B
Chapter: 6
Explanation: Gross Profit = Sales –Cost of Goods Sold
$184,000 -$82,000 = $102,000
Gross Profit percentage = Gross Profit/Sales
$102,000/$184,000 = 55%

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15
Q 
176.Beginning inventory is $120,000, purchases are $270,000, and sales total $460,000. The normal gross profit is 40%. Using the gross profit method, how much is ending inventory? A.$206,000
B.$132,000
C.$114,000
D.$88,000
E.None of the above
A

Answer: C
Chapter: 6
Explanation: Gross profit percentage = Gross Profit/Sales0.4 = Gross Profit/$460,000Gross Profit= $184,000Gross Profit = Sales -Cost of Goods Sold $184,000 = $460,000 –Cost of Goods SoldCost of Goods Sold = $276,000Beginning inventory + Purchases –Cost of Goods Sold = Ending Inventory $120,000 + $270,000 -$276,000= Ending inventoryEnding inventory = $114,000

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16
Q

177.An overstatement of ending inventory in one period results in A.An understatement of the beginning inventory of the next period
B.An understatement of net income of the next period
C.An overstatement of net income of the next period
D.No effect on net income of the next period

A

B

17
Q

178.A company purchased inventory for $800 per unit. The inventory was marked up to sell for $1,000 per unit. The entries to record the sale for cash and the cost of a unit of inventory would include debits to which of the following accounts?
A.Sales, $1,000; Inventory, $800
Ask question
Chaptersare based on last year book but all the questions are still relevant
B.Cash, $1,000; Cost of Goods Sold, $800
C.Cash, $800; Cost of Goods Sold, $1,000
D.Sales, $800; Inventory, $800

A

B

18
Q 
179.The use of the FIFO method generally increases taxable income:
A.When prices are constant
B.When prices are declining
C.When price are increasing
D.Under all circumstances
A

C

19
Q 
182.The sum of ending inventory and cost of goods sold is:
A.Beginning inventory
B.Goods available
C.Net purchase of inventory
D.Gross profit
A

B

20
Q 
183.Inventory held by a business is a(n) \_\_\_\_ and when sold becomes a(n) \_\_\_ . 
A.Asset; expense
B.Expense; asset
C.Revenue; expense
D.Liability; cost
A

A

21
Q

186.All of the following are reasons why managers often use FIFO instead of LIFO except:
A.For companies with high inventory turnover rates, there is little or no difference in taxable income when either LIFO or FIFO is used
B.Companies confronted with increasing inventory prices will generally reduce their taxes by using FIFO
C.Companies sometimes want to report higher income to shareholders to attract investors
D.Companies confronted withdeclining inventory prices will generally reduce their taxes by using FIFO

A

B

22
Q 
187.Sales revenue is based on the \_\_\_\_ price of the inventory, while cost of goods sold is based on the \_\_\_\_\_ of the inventory.
A.Cost, Sales
B.Cost, Cost
C.Sales, Sales
D.Sales, Cost
A

D

23
Q

191.The cost of inventory that is still on hand and has NOT been sold tocustomers is called:
A.Cost of Goods Sold and it appears on the Income Statement
B.Inventory, current asset that appears on the Income Statement
C.Cost of Goods Sold and it appears on the Balance Sheet
D.Inventory, a current asset that appears on the Balance Sheet

A

D

24
Q

194.ABC Company’s ending inventory (at cost) is $75,000. The inventory is expected to be sold for only $60,000. How will this affect the reported ending inventory and cost of goods sold?
A.It will increase both ending inventory and cost of goods sold by $15,000
B.It will decrease ending inventory by $15,000 and increase cost of goods sold by $15,000
C.It will increase ending inventory by $15,000 and have no effect on cost of goods sold
D.It will have no effect on either ending inventory orcost of goods sold

A

B

25
Q

195.ABC Company’s ending inventory (at cost) is $75,000. The inventory is expected to be sold for only $60,000. The adjustment made to the inventory and cost of goods sold is an example of:
A.The matching principle
B.The lower of cost and net realizable value principle
C.The accrual principle
D.The comparability principle

A

B

26
Q

197.The choice of an inventory costing method will affect:
Chaptersare based on last year book but all the questions are still relevant
A.The cost of goods sold and the amount of cash
B.The cost of goods sold only
C.The cost of goods sold and the ending inventory
D.The ending inventory and the amount of cash

A

C

Question Pool Accounting (16 decks)

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