| Question 1. | Question : | (TCO 4) For a merchandising company |
| | Student Answer: | | the balance sheet reports the cost of the inventory that was on hand at the beginning of the period. | | | | the income statement reports the cost of the inventory sold during the period. | | | | ending inventory can be an asset or an expense. | | | | inventory is generally not a significant factor in their operations. | | | |
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| Question 2. | Question : | (TCO 4) Two accounts that would appear on the financial statements of a merchandising company that are not needed by a service company are |
| | Student Answer: | | cost of goods sold and depreciation. | | | | cost of goods sold and net income. | | | | cost of goods sold and inventory. | | | | inventory and depreciation. | |
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| Question 3. | Question : | (TCO 4) The inventory system that uses computer software to keep a running record of inventory on hand is the |
| | Student Answer: | | cost of goods sold inventory system. | | | | periodic inventory system. | | | | perpetual inventory system. | | | | hybrid inventory system. | | | |
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| Question 4. | Question : | (TCO 4) All of the following costs would be included in inventory except for |
| | Student Answer: | | freight-in. | | | | advertising. | | | | taxes paid on the purchase price. | | | | insurance while in transit. | | | |
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| Question 5. | Question : | (TCO 4) If the cost to purchase a unit of inventory does not change, ending inventory |
| | Student Answer: | | will be the highest under FIFO. | | | | will be the highest under LIFO. | | | | cannot be computed using the average-cost method. | | | | will be the same under LIFO and FIFO. | | | |
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| Question 6. | Question : | (TCO 4) To determine cost of goods sold under the FIFO method |
| | Student Answer: | | the first costs into inventory are the first costs assigned to cost of goods sold. | | | | the last costs into inventory are the first costs assigned to cost of goods sold. | | | | the average cost of the inventory must be determined. | | | | the company must first determine the specific units sold. | | | |
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| Question 7. | Question : | (TCO 4) Under the _____ method, ending inventory is based on the costs of the most recent purchases. |
| | Student Answer: | | average-cost | | | | FIFO | | | | LIFO | | | | specific-identification | | | |
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| Question 8. | Question : | (TCO 4) The disclosure principle states that a company should report _____ and _____ information about itself. |
| | Student Answer: | | material, relevant | | | | important, conservative | | | | representational faithful, financial | | | | relevant, representational faithful | | | |
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| Question 9. | Question : | (TCO 4) The lower-of-cost-or-market rule requires a company to report inventories at the lower of |
| | Student Answer: | | historical cost or current sales price. | | | | historical cost or current replacement cost. | | | | current replacement cost or sales invoice price. | | | | FIFO cost or LIFO cost. | | | |
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| Question 10. | Question : | (TCO 4) The inventory turnover ratio |
| | Student Answer: | | is determined by dividing cost of goods sold by net sales. | | | | shows how many times the company sold its average level of inventory. | | | | should be high for a company that sells high-priced inventory items. | | | | will be lower for companies that have many low-priced items in their inventory . | | I | |
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