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Question(s) / Instruction(s):

100. If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of Goods Sold Net Income a. Understated Understated b. Overstated Overstated c. Understated Overstated d. Overstated Understated

101. A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000. The amounts reflected in the current end of the period balance sheet are Assets Owner’s Equity a. Overstated Overstated b. Correct Correct c. Understated Understated d. Overstated Correct

102. Inventory turnover is calculated by dividing cost of goods sold by a. beginning inventory. b. ending inventory. c. average inventory. d. 365 days.

103. The following information is available for Starr Company at December 31, 2002: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $900,000; and sales $1,200,000. Starr’s inventory turnover in 2002 is a. 12 times. b. 11.3 times. c. 9.0 times. d. 7.5 times. a104. Inventories are estimated a. more frequently under a periodic inventory system than a perpetual inventory system. b. using the wholesale inventory method. c. more frequently under a perpetual inventory system than the periodic inventory system. d. using the net method.

a105. Nolan Department Store estimates inventory by using the retail inventory method. The following information was developed: At Cost At Retail Beginning inventory $260,000 $400,000 Goods purchased 400,000 700,000 Net sales 800,000 The estimated cost of the ending inventory is a. $480,000. b. $180,000. c. $440,000. d. $300,000.

a106. Watson Department Store utilizes the retail inventory method to estimate its inventories. It calculated its cost to retail ratio during the period at 70%. Goods available for sale at retail amounted to $400,000 and goods were sold during the period for $240,000. The estimated cost of the ending inventory is a. $160,000. b. $280,000. c. $112,000. d. $168,000.

a107. Grant Company prepares monthly financial statements and uses the gross profit method to estimate ending inventories. Historically, the company has had a 30% gross profit rate. During June, net sales amounted to $100,000; the beginning inventory on June 1 was $30,000; and the cost of goods purchased during June amounted to $50,000. The estimated cost of Grant Company's inventory on June 30 is a. $10,000. b. $70,000. c. $50,000. d. $30,000.

a108. When valuing ending inventory under a perpetual inventory system, the a. valuation using the LIFO assumption is the same as the valuation using the LIFO assumption under the periodic inventory system. b. moving average requires that a new average be computed after every sale. c. valuation using the FIFO assumption is the same as under the periodic inventory system. d. earliest units purchased during the period using the LIFO assumption are allocated to the cost of goods sold when units are sold.

a109. The Jansen Company uses the perpetual inventory system and the moving average method to value inventories. On August 1, there were 5,000 units valued at $15,000 in the beginning inventory. On August 10, 10,000 units were purchased for $6 per unit. On August 15, 12,000 units were sold for $12 per unit. The amount charged to cost of goods sold on August 15 was a. $40,000. b. $60,000. c. $72,000. d. $54,000.

The following questions are from the Study Guide.

s110. Inventory items on an assembly line in various stages of production are classified as a. Finished goods. b. Work in process. c. Raw materials. d. Merchandise inventory.

s111. Which of the following is true concerning Freight-in? a. Freight-in is subtracted from net purchases in determining cost of goods purchased. b. Freight-in is added to net purchases in determining cost of goods purchased. c. Freight-in is a selling expense. d. Freight-in is an administrative expense.

s112. On December 31, Seurat Company has the following amounts in the determination of cost of goods purchased: Purchases $60,000; Freight-in $10,000; Net purchases $48,000; Purchase returns and allowances $7,000; and Cost of goods purchased $58,000. What is the amount of purchase discounts? a. $2,000. b. $3,000. c. $5,000. d. $15,000.

s113. Rudolf Diesel Company's inventory records show the following data: Units Unit Cost Inventory, January 1 10,000 $9.00 Purchases: June 18 9,000 8.00 November 8 6,000 7.00 A physical inventory on December 31 shows 8,000 units on hand. Under the FIFO method, the December 31 inventory is a. $56,000. b. $58,000. c. $64,000. d. $72,000.

s114. In a period of rising prices, FIFO will have a a. lower net income than LIFO. b. lower cost of goods sold than LIFO. c. lower income tax expense than LIFO. d. lower net purchases than LIFO.

s115. Euler Company made an inventory count on December 31, 2002. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, 2002, the effects of this error are Assets Liabilities Owner’s Equity a. overstated understated overstated b. understated no effect understated c. overstated no effect overstated d. overstated overstated understated

as116. Oppenheimer Company's records indicate the following information for the year: Merchandise inventory, 1/1 $ 550,000 Purchases 2,250,000 Net Sales 3,000,000 On December 31, a physical inventory determined that ending inventory of $600,000 was in the warehouse. Oppenheimer's gross profit on sales has remained constant at 30%. Oppenheimer suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory? a. $100,000. b. $200,000. c. $300,000. d. $700,000.

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