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Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?


A) Purchases are overstated.
B) Purchases are understated.
C) Gross margin is understated.
D) Cost of sales is overstated.

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Which statement is not correct about overhead?


A) Fixed overhead is capitalized under absorption costing.
B) Fixed overhead is expensed under variable costing.
C) Variable overhead is expensed under both absorption and variable costing.
D) Both fixed and variable overhead are capitalized under absorption costing.

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Which statement best explains the retail inventory method?


A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period.
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item.
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products.
D) This method is least appropriate for inventory items that are not distinguishable from one another.

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Explain how manufacturing companies can manipulate earnings through its production process. What should an auditor or financial statement user do to detect this type of manipulation?

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For manufacturing companies, producing m...

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Compare the perpetual inventory control system and the periodic inventory control system. Which system provides better information for inventory management?

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Perpetual inventory system: One that dir...

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Which statement is not correct about the periodic inventory system for inventory management?


A) The periodic inventory system keeps continuous information about the amount of inventory on hand.
B) The cost of goods sold is a calculated number under the periodic inventory system.
C) Under both the periodic and perpetual systems, the final amounts reported in financial statements are the same.
D) The perpetual inventory system provides more information to allow an enterprise to better manage its inventories.

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Given the following information, what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system? Given the following information, what would the ending inventory value be on December 31 under the LIFO method in a periodic inventory system? A) $1,510 B) $1,575 C) $2,075 D) $3,120


A) $1,510
B) $1,575
C) $2,075
D) $3,120

Correct Answer

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Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?


A) Gross margin is understated by $1,000.
B) Cost of sales is overstated by $1,000.
C) Ending inventory is understated by $1,000.
D) Beginning inventory is understated by $1,000.

Correct Answer

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The following information was taken from the inventory records of Hope Corp.: The following information was taken from the inventory records of Hope Corp.: What would be the ending inventory, assuming that the LIFO method is used in a periodic inventory system? A) $920 B) $930 C) $940 D) $950 What would be the ending inventory, assuming that the LIFO method is used in a periodic inventory system?


A) $920
B) $930
C) $940
D) $950

Correct Answer

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Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?


A) Gross margin is understated by $1,000.
B) No effect on cost of goods available for sale.
C) Cost of sales is understated by $1,000.
D) Beginning inventory is overstated by $1,000.

Correct Answer

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Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $300,000? Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $300,000? A) $ 0 B) $100,000 C) $150,000 D) $250,000


A) $ 0
B) $100,000
C) $150,000
D) $250,000

Correct Answer

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Which statement best explains the LIFO cost flow assumption?


A) A method that uses the most recent costs in the calculation of cost of sales.
B) A method that uses the cost of goods available for sale divided by the number of units available for sale.
C) A method that assigns costs to inventories and cost of sales based on actual costs of each item.
D) A method that uses the oldest costs in the calculation of cost of sales.

Correct Answer

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Assume that a $400 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?


A) Cost of sales is overstated by $400.
B) Gross margin is overstated.
C) Cost of goods available for sale is understated.
D) There is no effect on fiscal 2013.

Correct Answer

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The inventory records of ZUP indicate the following regarding its best-selling product for the month of January: The inventory records of ZUP indicate the following regarding its best-selling product for the month of January: Required: Calculate the dollar amount of ending inventory and cost of goods sold under each of the following cost flow assumptions: a. Weighted-average cost, periodic inventory. b. First-in, first-out (FIFO), perpetual inventory. c. Weighted-average cost, perpetual inventory. Required: Calculate the dollar amount of ending inventory and cost of goods sold under each of the following cost flow assumptions: a. Weighted-average cost, periodic inventory. b. First-in, first-out (FIFO), perpetual inventory. c. Weighted-average cost, perpetual inventory.

Correct Answer

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a.
COGAS / units available for sale = WA...

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Assume that a $100 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 financial reporting?


A) Cost of sales is understated by $100.
B) Gross margin is understated.
C) Sales are understated by $100.
D) Operating profit is understated by $100.

Correct Answer

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Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?

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Inventories need to be assessed for impa...

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