1) Merchandise shipped FOB shipping point on the last day of the year should ordinarily be added

to
A. The buyer’s inventory balance B. the sellers inventory balance C. neither the buyers nor
the sellers inventory balance D. both the buyer and the sellers inventory balance

I choose A is that right

2) Miller Inc. is a wholesale of office supplies. The activity for Model III calculators during August is
shown below.
Date Bal/Transaction unit cost
Aug 1 Inventory 2,000 36.00
Aug 7 Purchase 3,000 37.20
Aug 12 Sales 3,600
Aug 21 Purchase 4,800 38.00
Aug 22 Sales 3,800
Aug 29 Purchase 1,600 38.00

If Miller Inc. uses a FIFO inventory system , the ending inventory of Model III calculators at
August 31 is reported as A. 150,080 B. 150,160 C. 152,288 D. 152,960

3) The use of discounts lost account implies that the recorded cost of a purchased inventory item is
its
A. Invoice price. B. invoice price plus the purchase discount lost. C. invoice price less the
purchase taken. D. invoice price less the purchase discount allowable whether taken or
not.

I choose D, is that correct.

4) A company sells four products; I,II, III and IV. The company values all inventories using the lower
–of-cost-or-market procedure. The company has consistently experienced a profit margin of 20
percent of sales and expects this rate to hold for the future. Additional information, shown
below, is available for the most recent year as of December 31.

Product Original Cost Cost to replace Est. cost to sell Expected selling price
I $60 $70 $10 $100
II 70 90 20 120
III 80 60 10 60
IV 90 80 20 90
Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31 for
one unit of product III? A. $50 B. $60 C. $70 D. $80

5) Ami Retailers purchased merchandise with a list price of $100,000, subject to a trade discount of
20 percent and credit terms of 2/10, n/30. If you use the gross method, at what amount should
Ami record the cost of this merchandise?
 A. 100,00 B. 80,000 C. 98,000 D. 78,400
6) Elrond company began operations in 2007. During the first two years of operations, Elrond
made undiscovered errors in taking its year –end inventories, which overstated 2007 ending
inventory by $50,000 and overstated 2008 ending inventory by $40,000. The combined effect of
these errors on reported income is
2007 2008 2009
A. overstated 50,000 overstated 90,000 understated 40,000
B. overstated 50,000 overstated 40,000 not affected
C. understated 50,000 understated 90,000 not affected
D. overstated 50,000 understated 10,000 understated 40,000

7) Consider the following for the XYZ corporation as of May 1, 2007:

Beginning Inventory $ 500

Ending inventory 1,500
Purchases 2,000

Cost of goods sold for May 1, 2007 would be

A. 500 B. 1,000 C. 1,500 D. 3,500

8) Jupiter company prepares monthly income statements. A physical inventory is taken only at
year-end; hence, month-end inventories must be estimated. All sales are made on account. The
rate of markup on cost is 50 percent. The following information relates to the month of May.
Accounts receivable, May 1 20,000
Accounts receivable, May 31 30,000
Collection of accounts receivable during May 50,000
Inventory, may 1 36,000
Purchases of inventory during May 32,000

The estimated cost of the May 31 inventory is

A. 24,000 B. 28,000 C. 38,000 D. 44,000

9) The following information is available for Lyman Company.

Cost of goods sold 2007 $1,200,000
Inventories at Dec 31, 2006 350,000
Inventories at Dec 31, 2007 310,000

Assuming that a business year consists of 360 days , what was the number of days sales in average
inventories for 2007?

A. 49.5 B. 93 C. 99 D. 105

10) On October 31, a flood at Payne Company’s only warehouse caused severe damage to its entire
inventory. Based on recent history. Payne has a gross profit of 25 percent of net sales. The
following information is available from Payne’s record for the 10 months ended October 31.
Inventory, jan 1 520,000
Purchase 4,120,000
Purchase returns 60,000
Sales 5,600,000
Sales discounts 400,000

A physical inventory disclosed usable damage goods that Payne estimates it can sell for 70,000. Using
the gross profit method, the estimated cost of goods sold for the 10 months ended October 31 should
be
A. 680,000 B. 3,830,000 C. 3,900,000 D. 4,200,000

11) Consider the following : What is the weighted-average cost per unit?
A. 15.00 B. 10.00 C. 8.00 D. 7.00

12) Which of the following refers to the difference between the catalog price and the selling price of
a product?
A. Cash discount B. net discount C. trade discount D. purchase discount

13) The following information is available for Carter Corp for the month of June
Beginning Inventory 8 units at 20.00 =160
Purchased, June 3 5 units at 22.00=110
Purchased, June 5 7 units at 24.00=168
Sold, June 9 9 units
Purchased, June 15 8 units at 26.00= 208
Sold, June 19 7 units

Given this information, the ending inventory balance using the average cost method is

A. 276 B. 302 C. 368 D. 386

14) The Fairbanks Department store uses the LIFO method to approximate a LIFO value for ending
inventory. Information relating to the computation of the inventory at December 31 is as
follows:
Cost retail
Inventory, Jan 1 32,000 80,000
Sales 640,000
Purchase 246,000 600,000

What is the ending inventory at cost at December 31 using the retail inventory method and a LIFO
approximation?

A. 16,000 B. 16,400 C. 32,000 D. 40,000

15) Goods on consignment are

A. Included in the consignee’s inventory B. recorded in a consignment out account, which is an
inventory account C. recorded in a consignment in account, which is an inventory account
D. recorded as sales

16) Excessive spoilage, idle capacity and reprocessing are examples of

A. Product(inventoriable costs) B. cost drivers C. trade discounts D. replacement costs
I choose B on this one is that correct
 17) The following information was taken from Frandsen Company’s accounting records.
Increase in raw materials inventory 7,500
Decrease in finished goods inventory 17,500
Raw materials purchased 215,000
Direct-labor payroll 100,000
Factory overhead 150,000
Freight-out 22,500

There was no work-in-process inventory at the beginning or end of the year. Frandsen’s cost of goods
sold is
A. 497,500 B. 487,500 C. 482,500 D. 475,000

18) The gross profit method can be calculated using which of the following formulas?
A. Cost of goods sold – sales /sales
B. Sales – cost of goods sold/ sales
C. Sales – cost of goods sold/ cost of goods sold
D. Cost of goods sold – sales/cost of goods sold

19) With LIFO, cost of goods sold is 195,000 and ending inventory is 45,000 If FIFO ending inventory
is 65,000 how much is FIFO cost of goods sold?
A. 215,000 B. 195,000 C. 175,000 D. 65,000

20) Western Manufacturing Company uses a perpetual inventory system for its raw materials. The
inventory records reflect a raw materials balance of 378,500 at December 31. A physical
inventory taken in that date revealed raw materials of 375,750. How will the 2,750 difference
affect raw materials inventory and cost of goods sold, assuming it’s attributed to normal
shrinkage?

Raw Materials Cost of goods sold

A. Increase decrease
B. Decrease no effect
C. Decrease increase
D. No effect increase