Which inventory method is better described as having a balance-sheet focus and why is it considered as such?

A) FIFO; better approximates the value of ending inventory.

B) LIFO; better approximates the value of ending inventory.

C) LIFO; better approximates inventory cost necessary to generate revenue.

D) FIFO; better approximates inventory cost necessary to generate revenue.

Answer: FIFO; better approximates the value of ending inventory.

What is the ending inventory balance for Julia & Company assuming that it uses FIFO?

A) $125.

B) $100.

C) $110.

D) $85.

Answer: $85.

LIFO is considered an income-statement approach for reporting inventory because it:

A) Always results in a higher amount of net income being reported.

B) Better approximates the value of ending inventory.

C) Better approximates inventory cost necessary to generate revenue.

D) Always results in a lower amount of net income being reported.

Answer: Better approximates inventory cost necessary to generate revenue.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be:

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $16,733.

B) $17,408.

C) $16,713.

D) $16,089.

Answer: $16,713.

The company reports cost of goods sold of $16,000. Which inventory cost method is the company using?

A) FIFO.

B) LIFO.

C) Weighted-average.

D) The answer cannot be determined with the information given.

Answer: FIFO.

What is the cost of goods sold for Julia & Company assuming it uses LIFO?

A) $125.

B) $100.

C) $110.

D) $85.

Answer: $110.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be:

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $5,087.

B) $5,107.

C) $5,077.

D) $5,005.

Answer: $5,087.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:

A) $5,140.

B) $5,080.

C) $5,060.

D) $5,050.

Answer: $5,140.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming FIFO would be:

A) $16,800.

B) $16,760.

C) $16,540.

D) $16,660.

Answer: $16,660.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $1,711.

B) $1,700.

C) $1,720.

D) $1,708.

Answer: $1,711.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $502.

B) $490.

C) $489.

D) $480.

Answer: $489.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming LIFO would be:

A) $1,730.

B) $1,700.

C) $1,720.

D) $1,710.

Answer: $1,720.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming FIFO would be:

A) $500.

B) $490.

C) $470.

D) $480.

Answer: $500.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming LIFO would be:

A) $5,040.

B) $5,055.

C) $5,075.

D) $5,135.

Answer: $5,040.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming LIFO would be:

A) $16,800.

B) $16,760.

C) $16,540.

D) $16,660.

Answer: $16,760.

The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Specific identification.

Answer: LIFO.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming FIFO would be:

A) $1,730.

B) $1,700.

C) $1,720.

D) $1,710.

Answer: $1,700.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming LIFO would be:

A) $500.

B) $490.

C) $470.

D) $480.

Answer: $480.

At what amount would Shoeless report cost of goods sold using the weighted-average cost flow assumption?

A) $110.

B) $73.

C) $70.

D) $105.

Answer: $105.

At what amount would Shoeless report gross profit using LIFO cost flow assumptions?

A) $105.

B) $80.

C) $175.

D) $120.

Answer: $80

At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?

A) $55.

B) $170.

C) $110.

D) $70.

Answer: $110.

The inventory cost flow assumption that results in a random mixture of goods

The inventory cost flow assumption that results in a random mixture of goods being included in the balance of inventory and cost of goods sold is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: Weighted-average.

The inventory costing method that matches each unit of inventory with its actual cost is referred to as the ________ method.

A) Weighted-average.

B) Specific identification.

C) Actual cost.

D) Matching unit.

Answer: Specific identification

The inventory cost flow assumption that generally best matches the physical flow of inventory is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: FIFO.

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating ability of a company?

A) Gross profit.

B) Operating income.

C) Income before income taxes.

D) Net income.

Answer: Operating income.

A company is most likely to utilize the specific identification method if its inventory consists of:

A) Unique products.

B) Very expensive products.

C) A relatively small number of products.

D) All of the other answers are reasons to utilize the specific identification method

Answer: All of the other answers are reasons to utilize the specific identification method

Operating income is calculated as net sales minus:

A) Utilities expense.

B) Salaries expense.

C) Cost of goods sold.

D) All of the other answers are subtracted from net sales to calculate operating income.

Answer: All of the other answers are subtracted from net sales to calculate operating income

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

A) $76,000.

B) $80,000.

C) $74,000.

D) $72,000.

Answer: $80,000.

What amount will the company report for operating income?

A) $200,000.

B) $210,000.

C) $380,000.

D) $120,000.

Answer: $210,000.

Gross profit is calculated as net sales minus:

A) Nonoperating expenses and income tax expense.

B) Operating expenses.

C) Cost of goods sold.

D) All of the other answers are subtracted from net sales to calculate gross profit.

Answer: Cost of goods sold.

Given the information in the table below, what is the company's gross profit?

Sales revenue $ 350,000

Accounts receivable $ 280,000

Ending inventory $ 230,000

Cost of goods sold $ 180,000

Sales returns $ 50,000

Sales discounts $ 20,000

A) $280,000.

B) $170,000.

C) $50,000.

D) $100,000.

Answer: $100,000.

Which of the following items may be classified as nonoperating revenues and expenses?

A) Interest expense.

B) Loss on the sale of equipment.

C) Interest revenue.

D) All of the other answers are classified as nonoperating revenues and expenses.

Answer: All of the other answers are classified as nonoperating revenues and expenses.

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ________ income statement.

A) Single-step.

B) Subtotaled.

C) Multiple-step.

D) Classified.

Answer: Multiple-step.

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000 and has cost of goods sold equal to $233,000. Tyler's ending inventory equals:

A) $15,000.

B) $18,000.

C) $21,000.

D) $19,000.

Answer: $15,000.

The primary distinction between operating activities and nonoperating activities in a multiple-step income statement is whether the activity is:

A) A large or small dollar amount.

B) Part of primary business operations.

C) Related to current versus long-term assets.

D) Reported as a revenue or an expense.

Answer: Part of primary business operations.

The distinction between operating and nonoperating income relates to:

A) Current versus noncurrent.

B) Primary versus peripheral activities of the reporting entity.

C) Revenues versus expenses.

D) Reliability of measurements.

Answer: Primary versus peripheral activities of the reporting entity.

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000 and ends the year with $20,000 of inventory. The company will report cost of goods sold equal to:

A) $150,000.

B) $158,000.

C) $142,000.

D) $170,000.

Answer: $142,000.

Beginning inventory is $30,000. Purchases of inventory during the year are $50,000. Cost of goods sold is $60,000. What is ending inventory?

A) $20,000.

B) $30,000.

C) $10,000.

D) $50,000.

Answer: $20,000.

The type of income statement that classifies items as operating and nonoperating is the ________ income statement.

A) Consolidated.

B) Multiple-step.

C) Classified.

D) Single-step.

Answer: Multiple-step.

The cost of the goods that a company sold during a period is shown in its financial statements as ________ and the cost of the goods that a company still has on hand at the end of the year is shown in the financial statements as ________.

A) Cost of goods sold; inventory

B) Goods on hand; inventory expense

C) Inventory; cost of goods sold

D) Sales revenue; cost of goods sold

Answer: Cost of goods sold; inventory

The largest expense on a retailer's income statement is typically:

A) Salaries.

B) Cost of goods sold.

C) Income tax expense.

D) Depreciation expense.

Answer: Cost of goods sold.

The balance of the Cost of Goods Sold account at the end of the year represents:

A) The cost of inventory not sold in the current year.

B) The total sales revenue to customers.

C) The cost of inventory sold in the current year.

D) Total purchases of inventory for the year.

Answer: The cost of inventory sold in the current year.

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory that has not yet completed production is known as:

A) Work-in-process.

B) Finished goods.

C) Merchandise.

D) Retail goods.

Answer: Work-in-process.

A manufacturer's inventory consists of what type of inventory?

A) Raw materials.

B) Finished goods.

C) Work-in-process.

D) All of the other answers are included in a manufacturer's inventory.

Answer: All of the other answers are included in a manufacturer's inventory.

Cost of Goods Sold is:

A) An asset account.

B) A revenue account.

C) An expense account.

D) A permanent equity account.

Answer: An expense account.

The cost of unsold inventory at the end of the year is classified as a(n) ________ in the ________.

A) Asset; Balance sheet

B) Expense; Income statement

C) Liability; Balance sheet

D) Revenue; Income statement

Answer: Asset; Balance sheet

Inventory does not include:

A) Materials used in the production of goods to be sold.

B) Assets intended to be sold in the normal course of business.

C) Equipment used in the manufacturing of assets for sale.

D) Assets currently in production for normal sales.

Answer: Equipment used in the manufacturing of assets for sale.

What type of company purchases raw materials and makes goods to sell?

A) Wholesaler.

B) Retailer.

C) Merchandiser.

D) Manufacturer.

Answer: Manufacturer.

One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers

One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for:

A) Current assets.

B) Inventory.

C) Selling expenses.

D) Deferred revenue.

Answer: Inventory.

Companies that purchase inventories that are primarily in finished form for resale to customers are known as:

A) Delivering companies.

B) Service companies.

C) Merchandising companies.

D) Manufacturing companies.

Answer: Merchandising companies.

Firms that want to grow quickly in the global marketplace often employ the cost leadership strategy because

A) this produces favorable customs rates and import duties.

B) manufacturers around the world adopt lean manufacturing methods to bring their costs down.

C) this allows them to employ and benefit from enterprise management systems.

D) there are relatively few product variations across different countries.


Answer: B) manufacturers around the world adopt lean manufacturing methods to bring their costs down.