71. The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:
A. FIFO.
B. Weighted average.
C. LIFO.
D. Specific identification.
E. All of these.
72. The inventory valuation method that results in the lowest taxable income in a period of inflation is:
A. LIFO method.
B. FIFO method.
C. Weighted-average cost method.
D. Specific identification method.
E. Gross profit method.
73. The consistency concept:
A. Prescribes a company to consistently apply the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting.
B. Requires a company to use one method of inventory valuation exclusively.
C. Requires that all companies in the same industry use the same accounting methods of inventory valuation.
D. Is also called the full disclosure principle.
E. Is also called the matching principle.
74. The full disclosure principle:
A. Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income.
B. Requires that companies use the same accounting method for inventory valuation period after period.
C. Is not subject to the materiality principle.
D. Is only applied to retailers.
E. Is also called the consistency principle.
75. Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?
A. FIFO and LIFO
B. LIFO and weighted-average cost
C. Specific identification and FIFO
D. FIFO and weighted-average cost
E. LIFO and specific identification
76. If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:
A. Cost of goods sold.
B. Gross profit.
C. Net sales.
D. Current assets.
E. Net income.
77. An error in the period-end inventory causes an offsetting error in the next period and therefore:
A. Managers can ignore the error.
B. It is sometimes said to be self-correcting.
C. It affects only income statement accounts.
D. If affects only balance sheet accounts.
E. Is immaterial for managerial decision making.
78. The understatement of the ending inventory balance causes:
A. Cost of goods sold to be overstated and net income to be understated.
B. Cost of goods sold to be overstated and net income to be overstated.
C. Cost of goods sold to be understated and net income to be understated.
D. Cost of goods sold to be understated and net income to be overstated.
E. Cost of goods sold to be overstated and net income to be correct.
79. The understatement of the beginning inventory balance causes:
A. Cost of goods sold to be understated and net income to be understated.
B. Cost of goods sold to be understated and net income to be overstated.
C. Cost of goods sold to be overstated and net income to be overstated.
D. Cost of goods sold to be overstated and net income to be understated.
E. Cost of goods sold to be overstated and net income to be correct.
80. Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows:
Thelma Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods sold figure for Year 2 would be:
A. $291,000
B. $276,000
C. $264,000
D. $285,000
E. $249,000
61 all of the following statements regarding accounting information systems are true 4299143
/in /by Carlos61. All of the following statements regarding accounting information systems are true except:
A. Accounting information systems consist of people, records, methods, and equipment.
B. Accounting information systems have the same goals and share basic components.
C. Accounting information systems are less important than ever to decision makers.
D. Accounting information systems are designed to provide output including financial, managerial, and tax reports.
E. Accounting information systems are designed to capture information about a company's transactions.
62. The basic components of an accounting information system include all of the following except:
A. Source documents.
B. Warehouses.
C. Information processors.
D. Information storage.
E. Input devices.
63. Source documents:
A. Are input devices.
B. Provide the basic information processed by an accounting system.
C. Cannot be electronic files.
D. Store processed information for future use.
E. Cannot be paper documents.
64. Input devices include:
A. Bar-code readers.
B. Printers.
C. Software.
D. Ledgers.
E. Information processors.
65. Information storage:
A. Eliminates the need for professional judgment.
B. Keeps data in a form accessible to information processors.
C. Provides the basic information processed by an accounting system.
D. Captures information from source documents.
E. Cannot be online.
66. Output devices include all of the following except:
A. Printers.
B. Monitors.
C. LCD projectors.
D. Web communications.
E. Bar code readers.
67. Information processors:
A. Include information storage.
B. Interpret, transform, and summarize information for use in analysis and reporting.
C. Are components of an accounting system that keep data in accessible form.
D. Are the means to take information out of an accounting system and make it available to users.
E. Include scanners.
68. The special journals of many accounting systems include the:
A. Sales journal.
B. Purchases journal.
C. Cash receipts journal.
D. Cash disbursements journal.
E. General Ledger.
69. The sales journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
E. Cash receipts.
70. The purchases journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
E. Cash disbursements.
113 a company entered into the following transactions match each transaction with th 4299144
/in /by Carlos113. A company entered into the following transactions. Match each transaction with the appropriate journal.
1. General journal
Borrowed $5,000 cash from the bank.
2. Purchases journal
A customer returned a $250 item purchased on account.
3. Cash disbursements journal
Purchased merchandise on account, $2,700.
4. Cash receipts journal
Purchased a display rack on account for $4,700.
5. Purchases journal
Paid $65,000 cash in wages and salaries.
6. General journal
Paid a utility bill for $3,400 cash.
7. Purchases journal
Purchased $1,590 of store supplies on account.
8. Cash receipts journal
Recorded depreciation on store equipment of $4,000.
9. Cash disbursements journal
Returned defective inventory purchased on account, $2,900.
10. General journal
Recorded cash sales of $14,700.
71 the inventory valuation method that has the advantages of assigning an amount to 4299147
/in /by Carlos71. The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:
A. FIFO.
B. Weighted average.
C. LIFO.
D. Specific identification.
E. All of these.
72. The inventory valuation method that results in the lowest taxable income in a period of inflation is:
A. LIFO method.
B. FIFO method.
C. Weighted-average cost method.
D. Specific identification method.
E. Gross profit method.
73. The consistency concept:
A. Prescribes a company to consistently apply the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting.
B. Requires a company to use one method of inventory valuation exclusively.
C. Requires that all companies in the same industry use the same accounting methods of inventory valuation.
D. Is also called the full disclosure principle.
E. Is also called the matching principle.
74. The full disclosure principle:
A. Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income.
B. Requires that companies use the same accounting method for inventory valuation period after period.
C. Is not subject to the materiality principle.
D. Is only applied to retailers.
E. Is also called the consistency principle.
75. Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?
A. FIFO and LIFO
B. LIFO and weighted-average cost
C. Specific identification and FIFO
D. FIFO and weighted-average cost
E. LIFO and specific identification
76. If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:
A. Cost of goods sold.
B. Gross profit.
C. Net sales.
D. Current assets.
E. Net income.
77. An error in the period-end inventory causes an offsetting error in the next period and therefore:
A. Managers can ignore the error.
B. It is sometimes said to be self-correcting.
C. It affects only income statement accounts.
D. If affects only balance sheet accounts.
E. Is immaterial for managerial decision making.
78. The understatement of the ending inventory balance causes:
A. Cost of goods sold to be overstated and net income to be understated.
B. Cost of goods sold to be overstated and net income to be overstated.
C. Cost of goods sold to be understated and net income to be understated.
D. Cost of goods sold to be understated and net income to be overstated.
E. Cost of goods sold to be overstated and net income to be correct.
79. The understatement of the beginning inventory balance causes:
A. Cost of goods sold to be understated and net income to be understated.
B. Cost of goods sold to be understated and net income to be overstated.
C. Cost of goods sold to be overstated and net income to be overstated.
D. Cost of goods sold to be overstated and net income to be understated.
E. Cost of goods sold to be overstated and net income to be correct.
80. Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows:
Thelma Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods sold figure for Year 2 would be:
A. $291,000
B. $276,000
C. $264,000
D. $285,000
E. $249,000
112 match the following terms with the appropriate definitions cash receipts journal 4299149
/in /by Carlos112. Match the following terms with the appropriate definitions.
Cash receipts journal:;The special journal that is used to record all receipts of cash.
Segment return on assets:A measure of the profitability of a segment, calculated as segment operating income divided by segment average assets.
1. Cost-benefit principle
An information system principle requiring that an accounting information system conform with a company's activities, personnel, and structure.
2. Special journal
An information system principle requiring that the benefits from an activity in an accounting information system outweigh the costs of that activity.
3. Schedule of accounts receivable
A journal used to record all purchases on credit.
4. Information storage
A journal used to record sales of merchandise on credit.
5. Controlling account
The component of an accounting system that keeps data in a form accessible to information processors.
6. Sales journal
Any journal used for recording and posting transactions of a similar type.
7. Compatibility principle
A general ledger account, the balance of which (after posting) equals the sum of the balances of the accounts in a related subsidiary ledger.
8. Purchases journal
A list of each customer from the accounts receivable ledger with their balances and the total.
51 a company 39 s cost of inventory was 317 500 due to phenomenal demand the market 4299151
/in /by Carlos51. A company's cost of inventory was $317,500. Due to phenomenal demand the market value of its inventory increased to $323,000. This company should write up the value of its inventory according to the consistency principle.
52. When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.
53. The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.
54. The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio, we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.
55. The reliability of the gross profit method depends on a good estimate of the gross profit ratio.
56. In the retail inventory method of inventory valuation, the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.
57. To avoid the time-consuming process of taking an inventory each year, most companies use the gross profit method to estimate ending inventory.
58. Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.
Multiple Choice Questions
59. Damaged and obsolete goods that can be sold:
A. Are never counted as inventory.
B. Are included in inventory at their full cost.
C. Are included in inventory at their net realizable value.
D. Should be disposed of immediately.
E. Are assigned a value of zero.
60. Merchandise inventory includes:
A. All goods owned by a company and held for sale.
B. All goods in transit.
C. All goods on consignment.
D. Only damaged goods.
E. Only non-damaged goods.