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Exam 8: Inventory

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Question 41

Multiple Choice

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Which of the following best describes the concept of product costs?

A) They are costs that are "attached" to inventory.
B) They are costs that are usually expenses.
C) They usually don't include freight charges
D) They usually don't include conversion costs.

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Question 42

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An exception to the general rule that costs should be charged to expense in the period incurred is

A) factory overhead costs incurred on a product manufactured but not sold during the current accounting period.
B) interest costs for financing of inventories that are routinely manufactured in large quantities on a repetitive basis.
C) general and administrative fixed costs incurred in connection with the purchase of
D) sales commission and salary costs incurred in connection with the sale of inventory.

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Question 43

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When the conventional retail inventory method is used, markdowns are commonly ignored in the calculation of the cost to retail ratio because

According to U.S.GAAP, under the lower of cost and market method, the replacement cost of an inventory item would be used as the designated market value

Which of the following best describes the concept of standard costs?

Which of the following statements with respect to the gross profit method of estimating inventory is not correct?

Dubb Co.received merchandise on consignment.As of March 31, Dubb had recorded the transaction as a purchase and included the goods in inventory.The effect of this on its financial statements for March 31 would be

Use the following information for questions -Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Use the following information for questions Chi Co.records purchases at net amounts.On May 5 Chi purchased merchandise on account, $8,000, terms 2/10, n/30.Pye returned $500 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid. -The amount to be recorded as a purchase return is

Assume that no correcting entries were made at December 31, 2010, or December 31, 2011 and that no additional errors occurred in 2011.Ignoring income taxes, by how much will working capital, at December 31, 2011 be overstated or understated?

Which statement is true about the retail inventory method?

Use the following information for questions -Peak's 2011 entry to record to adjust its inventory from cost to the lower of cost and net realizable value (NRV) is

Danner, Ltd.estimates the cost of its physical inventory at March 31 for use in an interim financial statement.The rate of mark-up on cost is 25%.The following account balances are available: The estimate of the cost of inventory at March 31 would be

Use the following information for questions -Assuming Chu uses a periodic inventory system, the entry to account for the March 1 purchase is:

On January 1, 2010, the merchandise inventory of Morton, Ltd.was $1.2 million.During 2010 Morton purchased $2,300,000 of merchandise and recorded sales of $2.7 million.The gross profit rate on these sales was 35%. What is the merchandise inventory of Morton at December 31, 2010?

Use the following information for questions Toby Co.uses the retail inventory method.The following information is available for the current year. -The ending inventory at retail should be

Which of the following does not correctly describe a perpetual inventory accounting system?

On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store.The following data are available: The amount of the inventory loss is estimated to be

When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?

Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost?