Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CZC1 - Accounting II > Chapter 17 ("Merchandise Inventory") > Flashcards

Chapter 17 ("Merchandise Inventory") Flashcards

1
Q

The steps and proper order for estimating EI cost using the gross profit method are as follows:

  • determine COGA, estimate COGS, subtract COGS from COGA.
  • determine COGA, estimate COGS, subtract COGA from COGS.
  • estimate COGS, determine COGA, subtract COGA from COGS.
  • estimate COGS, determine COGA, subtract COGS from COGA.
A

-estimate COGS, determine COGA, subtract COGS from COGA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

In periods of rising prices, the inventory valuation procedure that results in the highest net income is

  • the lower of cost or market method.
  • the LIFO method.
  • the average cost method.
  • the FIFO method.
A

the FIFO method.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q 
An increase above the initial retail price of merchandise is
net profit.
gross profit.
markup.
markon.
A

markup

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

The average cost method of inventory valuation will always result in the lowest reported net income.
True
False

A

false

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Cost ratio is calculated by

  • dividing merchandise available for sale at cost by merchandise available for sale at retail.
  • dividing merchandise available for sale at retail by merchandise available for sale at cost.
  • dividing net retail sales by the cost of the merchandise sold.
  • dividing the cost of merchandise sold by net retail sales.
A

-dividing merchandise available for sale at cost by merchandise available for sale at retail.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q 
The difference between the cost and the initial retail price of merchandise is
markup.
markon.
markdown.
market price.
A

markon

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The use of the FIFO method of inventory valuation

  • results in a matching of current inventory costs against sales revenue.
  • results in the most current costs in ending inventory.
  • results in a lowest reported net income in a time of rising prices.
  • results in a highest reported net income in a time of falling prices.
A

-results in the most current costs in ending inventory.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The weighted average cost of an inventory item is calculated by

  • dividing the sum of the unit cost on the purchase invoices by the number of units purchased.
  • dividing the cost of goods available for sale by the number of units on the ending inventory.
  • dividing the cost of goods available for sale by the number of units available during the period.
  • dividing the cost of goods sold by the number of units available during the period.
A

-dividing the cost of goods available for sale by the number of units available during the period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.
True
False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.
True
False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Gross profit ratio is determined by dividing Net Sales by Gross Profit.
True
False

A

False

逆。

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A physical inventory should be taken at least annually to verify the goods on hand.
True
False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q 
Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?
the retail method
the average cost method
the gross profit method
the lower of cost or market method
A

the average cost method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The steps and proper order for estimating EI cost using the gross profit method are as follows:
determine COGA, estimate COGS, subtract COGS from COGA.
determine COGA, estimate COGS, subtract COGA from COGS.
estimate COGS, determine COGA, subtract COGA from COGS.
estimate COGS, determine COGA, subtract COGS from COGA.

A

estimate COGS, determine COGA, subtract COGS from COGA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q 
The merchandise available for sale cost a company $90,000 and was marked to sell at a retail price of $125,000. Sales during the period totaled $80,000. If the retail method is used, the estimated cost of the ending inventory is
$32,400.
$12,600.
$22,400.
$45,000.
A

32400

Explanation:
90000/125000 = 70%
70% x 80000 = 57600
90000 - 57600 = 32400.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q 
A matching of the most recent costs to revenue results from the use of
the LIFO method.
the FIFO method.
the average cost method.
the lower of cost or market method.
A

LIFO

17
Q

The modifying convention of conservatism requires that inventory be presented on the balance sheet at

  • cost.
  • market value.
  • either cost or market value, whichever is lower.
  • average cost during the period.
A

either cost or market value, whichever is lower.

Conservatism
According to the modifying convention of conservatism, if GAAP allows alternatives, assets in the balance sheet should be understated rather than overstated.

つまりconservatismはlower of cost or market rule

18
Q

If other items remain the same, the larger the ending inventory valuation, the

  • higher the cost of goods sold.
  • higher the reported net income.
  • lower the reported gross profit on sales.
  • lower the reported net income.
A

higher the reported net income.

19
Q

When the replacement cost of an item is below its original purchase cost, it is necessary to value the inventory at market price in order to reflect the lower current value in the firm’s financial records.
True
False

A

True

（テストではFalseと答えてしまった）

20
Q

On July 1, a tornado destroyed the warehouse where The Brooks Boys Sports Equipment Company stored their inventory. The inventory was, for the most part, carried away by the force of the storm. The usual gross profit rate for the company was 30%. The beginning inventory of $220,000 was recorded on the prior year’s financial reports. The net sales to date are known to be $886,450, and net purchases (including freight-in charges and purchases returns) were $580,000.

Using the gross profit method of inventory valuation, determine the value of the inventory that was destroyed.

A

179,485

Explanation:
Estimated ending inventory $179,485. If the usual gross profit rate is 30%, COGS is 70% or $620,515. COGA totaled $800,000.

21
Q

Many retail stores take a periodic inventory at retail values, using the sales price marked on the merchandise.
True
False

A

True

（クイズではFalseと答えてしまった）

CZC1 - Accounting II (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions