7/31/2011

Inventory and Cost of Goods Sold Quiz

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Inventory and Cost of Goods Sold

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NOTE: For multiple-choice and true/false questions, simply place your cursor over what you think is the correct answer. (There is no need to click the answer.) For fill-in-the-blank questions place your cursor over the _________. If you have difficulty answering the following questions, learn more about this topic by reading our Inventory and Cost of Goods Sold Explanation. We also have Crosswords and Q&A for this topic.

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1. The inventory cost flow assumption where the cost of the most recent purchase is matched first against sales revenues is FIFO LIFO Average

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2.

The inventory cost flow assumption where the cost of the most recent purchases are likely to remain in inventory FIFO LIFO Average

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3.

The inventory cost flow assumption where the oldest cost of inventory items is likely to remain on the balance sheet is FIFO LIFO Average

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4.

The account Inventory will appear on the balance sheet as a current asset at an amount that often reflects the __________ of the merchandise on hand. cost sales value

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Join Our Newsletter 5. The inventory system that does NOT update the Inventory account automatically at the time of each purchase or sales is the _______________ method/system.

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periodic perpetual

6.

If a company is experiencing continuous cost increases for the merchandise that it purchases, which cost flow assumption will result in the least amount of profit and the least amount of income tax expense? FIFO LIFO Average

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7/31/2011
7.

Inventory and Cost of Goods Sold Quiz

A company in the computer industry is experiencing continuously lower costs. Which cost flow assumption w ill result in less income tax expense for this company? FIFO LIFO Average

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8.

A company purchased items for inventory during 2010 at continuously higher costs. Its last two purchases of 2010 were 20 units on December 20 at a cost of $14 per unit and 30 units on December 30 at a cost of $15 per unit. On December 28, 2010 the company made its last sale for the year when it sold 10 units. Which inventory cost flow assumption will cause the $15 cost per unit to be expensed as part of the year 2010's cost of goods sold? LIFO periodic LIFO perpetual Neither

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Use the following information for questions 9 through 14: A company purchased merchandise to be resold at increasing costs during the year 2010. The purchases were made at the following costs... January 1, 2010 (carried over from 2009) January 25, 2010 purchase June 20, 2010 purchase October 10, 2010 purchase 20 units at $10 40 units at $11 40 units at $12 50 units at $13

The company sold 10 items at the end of each month.

9.

What are the number of units and the cost of the goods available for sale? _____ units $________ cost of goods available for sale

10.

Assuming the LIFO periodic cost flow assumption, w hat will be the company's cost of goods sold for the 120 items sold in 2010? $1,380 $1,386 $1,400 $1,460

11.

Assuming the FIFO periodic cost flow assumption, w hat will be the company's cost of goods sold for the 120 items sold in 2010? $1,380 $1,386 $1,410 $1,460

12.

Assuming the periodic weighted-average cost flow assumption, what is the company's cost of goods sold for the 120 items sold in 2010? $1,386 $1,410 $1,416 $1,460

13.

Assuming the LIFO perpetual cost flow assumption, what w ill be the company's cost of goods sold for the 120 items sold in 2010? $1,386 $1,410 $1,416 $1,460

14.

Assuming the perpetual moving-average cost flow assumption, what is the company's cost of goods sold for the 120 items sold in 2010? $1,386 $1,410 $1,416 $1,460

15.

A company's inventory was destroyed in a fire on January 28, 2011. The company's December 31, 2010 inventory had a cost of $40,000. The company's gross profit has consistently been 30% of sales. During January the company purchased merchandise costing $36,000 and sales of $50,000 at regular selling prices. W hat is the estimated cost of the inventory that was destroyed on January 28, 2011?

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$26,000

Inventory and Cost of Goods Sold Quiz

$35,000 $41,000

cost of the inventory that was destroyed on January 28, 2011?

A retailer has the follow ing information:

December 31, 2010 ending inventory at cost December 31, 2010 ending inventory at retail
16.

$ 15,000 21,000 12,000 15,000 16,000

January 2011 purchases at cost January 2011 purchases at retail selling prices January 2011 sales at regular retail prices

The estimated cost of inventory to be shown on the retailer's January 31, 2011 balance sheet is $15,000 $16,000 $20,000

17.

A company has properly recorded all of its purchases of merchandise inventory, but made an error when counting its ending inventory. As a result of the error the company's Inventory account is overstated by $24,000. (This means that the amount in the Inventory account is too high by $24,000.) What is the impact of this error on the company's income statement? Specifically, the company's reported profit (ignoring income tax expense) in the period of the error is.... Too High Too Low Not Affected

18.

A retailer's inventory cost should include freight-in on the merchandise purchased with terms FOB shipping point?

True

False

19.

Net Purchases is Gross Purchases minus Purchase Returns and Allowances and __________ ___________.

20.

The difference between the Cost of Goods Available and the Cost of Goods Sold is __________ ___________.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years. He is the author of the 2011 Master Accounting Download Package which has been praised for its ability to simplify accounting in a way that anybody can understand.

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