Quiz 6

Question 1

Damaged goods are not counted in inventory if they cannot be sold

Answer 1

True

Question 2

If absolute or damaged goods can be sold, they will be included in inventory at their net realizable value if it is less than cost

Answer 2

true

Question 3

If the supplier pays freight charges, then ownership of inventory passes when goods arrive at their destination

Answer 3

true

Question 4

The cost of an inventory item includes its invoice price any added or incidental costs necessary to put it in a place and condition for sale

Answer 4

true

Question 5

Incidental costs added to the value of inventory include import duties, transportation-in, storage, and insurance

Answer 5

true

Question 6

A business that had inventory items that are ordinarily interchangeable is required to use the specific identification method of assigning costs to inventory

Answer 6

false

Question 7

a business that has inventory items that are ordinarily interchangeable may use either the FIFO or moving weighed average methods to assign costs to inventory

Answer 7

true

Question 7

the three methods of inventory valuation that are most often used in Canada are specific identification FIFO and moving weighted average

Answer 7

true

Question 8

The FIFO method assumes that costs for the most recently purchased items are recovered frist

Answer 8

false

Question 8

The consistency principle helps ensure that financial statements are comparable across periods

Answer 8

true

Question 9

The decline in merchandise inventory from cost to NRV is recorded in an adjusting entry at the end of the period

Answer 9

true

Question 10

Trekking Company’s total cost of inventory was $305,000 the net realizable value is $297,000 under LCNRV the amount reported should be $305,000

Answer 10

false

Question 11

Trekking Company has inventory with a net realizable value of $217,000 and a cost of $241,000 according to the guidance provided by the principle of faithful representation the inventory should be written down to $217,000

Answer 11

true

Question 12

Trekking Conpany’s cost of inventory was $317,500 Due to phenomenal demand the net realizable value has increased to $323,00 trekking Company should write up the value of inventory under the LCNRV rule

Answer 12

false

Question 13

An error in valuing inventory will cause an error in the amount of cost of goods sold

Answer 13

true

Question 14

An understatement of beginning inventory will understate cost of goods sold and overstate net income

Answer 14

true

Question 15

If the cost to retail ratio is 60% and ending inventory at retail is $45,000 then estimated ending inventory at cost is $27,000

Answer 15

true

Question 16

if your inventory is destroyed by fire you can estimate the estimate the amount of inventory destroyed if you know: beginning inventory, purchases, net sales, and gross profit ratio

Answer 16

true

Question 17

all businesses should take an inventory count once each year to avoid inventory errors or shortages

Answer 17

false

Question 18

All businesses should take an inventory count once each year to identify inventory errors or shortages

Answer 18

true

Question 19

a company’s ability to pay its short-term obligations depends on how quickly it sells it merchandise inventory

Answer 19

true

Question 20

Costs included in the value of inventory are

Answer 20

purchase price less discounts plus transportation-in

Question 21

If an inventory amount is reported in error, it can cause a misstatement in

Answer 21

cost of goods sold, gross profit, net income, current assets

Question 22

interim statement

Answer 22

are usually monthly or quarterly statements prepared in between the traditional, annual statements

Question 23

the merchandise turnover ratio

Answer 23

measures how quickly a firm sells its merchandise inventory