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Exam 9: Inventories and Cost of Goodscalculation

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Question 1

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Barnett Restaurant Equipment has a beginning merchandise inventory of $20,000.During the period, purchases were $60,000; purchase returns, $2,000; and freight-in $5,000.A physical count of inventory at the end of the period revealed that $10,000 was still on hand.The cost of goods available for sale was

A) $77,000
B) $73,000
C) $83,000
D) $87,000

E) A) and B)
F) A) and C)

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Question 2

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If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of $\quad$ Cost of Goods Sold $\quad$ Net Income

A) $\quad$ Understated $\quad$ $\quad$ $\quad$ Understated
B) $\quad$ Overstated $\quad$ $\quad$ $\quad$ Overstated
C) $\quad$ Understated $\quad$ $\quad$ $\quad$ Overstated
D) $\quad$ Overstated $\quad$ $\quad$ $\quad$ Understated

E) A) and B)
F) A) and C)

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Question 3

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Which of the following statements is true regarding inventory cost flow assumptions?

The managers of Totally Thai Restaurant receive performance bonuses based on the net income of the restaurant.Which inventory costing method are they likely to favor in periods of declining prices?

Consigned goods are goods held for sale by one party although ownership of the goods is retained by another party.

Ken's Hotel Heating and Ventilation uses the specific identification method of costing inventory.During March, Ken purchased three air conditioning units for $5,000, $6,000, and $8,000, respectively.During March, two units are sold for $8,500 each.Ken determines that at March 31, the $8,000 unit is still on hand.What is Ken's gross profit for March?

The journal entry to record a return of merchandise purchased on account under a periodic inventory system would be

________________ measures the number of times on average the inventory sold during the period.

Inventory turnover is calculated by dividing cost of goods sold by

Selection of an inventory costing method by management does not usually depend on

Independent internal verification of the physical inventory process occurs when

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000.The amounts reflected in the current end of the period balance sheet are $\quad$$\quad$ Assets $\quad$$\quad$ Stockholders' Equity

The following information is available for Tye Produce Company at December 31, 2008: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000.Tye's inventory turnover in 2008 is

Understating beginning inventory will understate

The cost of goods sold section of an income statement prepared under a periodic inventory system will contain more detail than under a perpetual inventory system.

It is generally recognized that a major objective of accounting for inventory is the proper determination of ______________.

The accountant at Blackjack Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method.The tax rate is 30% and the FIFO method will result in income before taxes of $3,640.The LIFO method will result in income before taxes of $3,290.What is the difference in tax that would be paid between the two methods?

In a manufacturing enterprise, goods that are ready to be sold to customers are referred to as ________________, whereas in a merchandising enterprise they are generally referred to as _______________.

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Under a periodic inventory system, acquisition of merchandise is debited to the