Essay on Chapter 7 Inventory Review Questions

Submitted By retweetdat
Words: 990
Pages: 4
Open Document
INVENTORY REVIEW QUESTIONS
1. Ringo Starr Company agreed to purchase certain inventory items from John Lennon Corporation. Lennon shipped the goods F.O.B. destination. On December 31, Ringo’s accounting year-end, Ringo was aware that the goods had been shipped and would be received any day. Ringo should:
-Should not be included because the title has not been passed on, since it’s the seller who is paying for the shipping cost
a. include the goods in its inventory calculated on December 31.
b. include the goods in its inventory calculated on December 31, but should not record the obligation to pay for them.
c. not include the goods in its inventory calculated on December 31, but should include the related payable on its balance sheet at December 31.
d. not include the goods in its inventory calculated on December 31, and should not include the related payable on its balance sheet at December 31.

2. George Harrison Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.
January 2
Beginning Inventory
500 units at $3.00
April 7
Purchased
1,100 units at $3.20
June 30
Purchased
400 units at $4.00
December7
Purchased
1,600 units at $4.40

a). Sales during the year were 2,700 units at $5.00. If Harrison used the first-in, first-out method, ending inventory would be:
500x 3 = 1500
1100x 3.2 = 3520
400x 4 = 1600
700x 4.4 = 5080 // 900 left x 4.40 = 3960
a. $2,780
b. $3,960
c. $9,700
d. $10,880

b). Using same info, what is the Cost of Goods Sold if Harrison used the LIFO method?
Cost of goods
1600 x 4.40 = 2040
400 x 4 = 1600
700 x 3.20 = 2240
= 10,880 ending inventory
400 x 3.2 = 1280
500 x 3 = 1500
= 2780

a. $2,780
b. $3,960
c. $9,700
d. $10,880

c). Again, using above info, now Harrison wants to know what the gross profit would be if he used the weighted-average method, gross profit would be:
13,660/3600 = 3.79 the average cost sales are 2700 x 5 =13500 cost of goods 2700 x 3.79 = <10,233>
Gross profit 3267
a. $3,267
b. $3,415
c. $10,245
d. $13,500

3. Yellow Submarine Corporation failed to record the purchase of merchandise on account. The merchandise and related accounts payable should have been recorded but were not. What is the effect of these errors on assets, liabilities, retained earnings, and net income, respectively?
a. Understated, understated, no effect, no effect <----
b. Understated, understated, understated, understated
c. Understated, overstated, overstated, understated
d. Overstated, overstated, understated, overstated

7. The inventory cost flow assumption where the cost of the most recent purchase is matched first against sales revenues is:
a. FIFO
b. Average Cost
c. LIFO 
d. Gross profit %

8. Calculate the inventory turnover if:
Beg. Inventory = 25,000
Purchases = 12,000
Closing Inventory = 31,000
Cost of goods sold / Avg Inventory = 6000/28000

a. 50%
b. 12%
c. 21% 
d. 13%

9. If Lennon & Brothers is experiencing continuous cost increases for the merchandise that it purchases, which cost flow assumption will result in the least amount of profit and the least amount of income tax expense?
a. LIFO 
b. FIFO
c. Average
d. All of above

10. Paul McCartney owns an art gallery; which inventory valuation method is he likely to use?
a. LIFO
b. Specific identification method 
c. retail method
d. gross % method

11. The periodic inventory system:
a. automatically updates inventory at the time of each purchase or sales
b. has a physical inventory count at the end of the accounting period 
c. must know sale amounts and dates in order for records to be complete
d. is the same as the perpetual system
12. Starr company is in the computer industry and is experiencing continuously lower unit
Show More

Related Documents: Essay on Chapter 7 Inventory Review Questions

Notes On Managerial Accounting

Chapter 1-1 CHAPTER 1 MANAGERIAL ACCOUNTING Managerial Accounting, Fifth Edition Chapter 1-2 Study Study Objectives Objectives 1. Explain the distinguishing features of managerial accounting. 2. Identify the 3 broad functions of management. 3. Define the 3 classes of manufacturing costs. 4. Distinguish between product and period costs. 5. Explain the differences between a merchandising and a manufacturing income statement. Chapter 1-3 Study Study Objectives Objectives 6. Indicate…

Words 2485 - Pages 10

Essay on Final Exam Questions: Auditing

Final Exam Essay Questions Chapter 11 #2. Functions that should be segregated to provide for effective internal control over sales transactions include: Authorization of sales, credit approval, billing of accounts, and finally shipping of merchandise. Other internal controls over sale transactions include: verification of invoices as well as mailing of monthly customer statements. Chapter 12 #1. Auditors are concerned about detecting damaged and obsolete inventory because the recorded…

Words 647 - Pages 3

Financial Ratios and Review Questions Essay

Chapter 3 REVIEW QUESTIONS 3-1 Balance Sheet: Provides a snapshot of the firm’s financial position at a specific point in time, presenting its asset holdings, liabilities, and owner-supplied capital Income Statement: Indicates the amount of profit generated by a firm over a given period of time, often 1 year. Statement of Cash Flows: A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating…

Words 853 - Pages 4

detailed exam preparation guide Essay

chapter 6 – The main topic is the bank reconciliation. Pages 354-55, 358-59 - and don’t forget the student resources section on the left panel in the home page of your online PearsonMyLab for an interactive review. A second topic to be prepared for is the petty cash fund. Know how to journalize the creation of a PCF, and how to journalize the replenishment and recording of receipts expenses – making sure you know where to put [debit? or credit?] any cash overage or shortfall discovered at…

Words 330 - Pages 2

Importance Of Master Budget

CHAPTER 8 NOTES COURSE OBJECTIVE D: Prepare a master budget and use the information in it to analyze the results of operations. This chapter will examine in detail the preparation of a master budget, including schedules for sales, collections, cost of sales, payments, operating expenses, a cash budget, and budgeted income statement and balance sheet. It will discuss the purposes and uses of budgets for managers. Profit planning involves the preparation of a number of budgets, integrated as the…

Words 1777 - Pages 8

How To Write A Study Guide

Study Guide – Test #1 The test will consist of 50 objective multiple-choice questions on information drawn from the course readings and class lectures. The purpose of the test is to assess acquisition of core terminology and concepts covered in the course, so your study habits for the test should be designed to ensure that you are familiar with these major terms and concepts discussed in the readings and lecture. When the study guide simply lists a particular term, you should know its definition…

Words 420 - Pages 2

Reflection Paper

cover in very short time. There are around 15 chapters to cover in a semester so that we have to learn a chapter in a week because we have to use some classes to take the exams and quizzes. And if I want to learn this course well and get a good grade as what I did in ACC221 and ACC222. I will have to read the book, listen to the teacher carefully, do the quiz well, prepare for the exam well and finish all the homework online. It is very important to…

Words 1797 - Pages 8

Notes On Global Operations

As of December 5, 2013 OPIM‐560 Global Operations January‐February 2014 Section 1: MW 14:00‐15:20 Section 2: MW 15:30‐16:50 Section 3: MW 8:00‐9:20 Section 4: MW 9:30‐10:50 All classes meet in 340 Hariri Building Instructor Kasra Ferdows 541 Hariri Building Phone: (202) 687‐3814 Ferdowsk@Georgetown.edu Office hours by appointment You can find me in office most Mondays and Wednesdays between 11:15 and 12:15. Feel free to drop in even if you haven’t made an appointment…

Words 2827 - Pages 12

English: Writing and Review Drafts / Strategy Essay

number: 248-942-3162 Office Hours: Thursday 9 – 12 Noon, and by appointment E-mail: brhewelt@occ.edu Department phone: 248-942-3232 Office: 352 Woodland Hall Library (WH 2nd floor) ASC (WH 20) M-Th 8:00 AM - 10:00 PM M-TH 8:30 AM - 7:45 PM F 8:00 AM - 4:30 PM F 8:30 AM - 4:30 PM Sat 9:00 AM – 3:00 PM Sat 10:00 AM – 2:00 PM Sun Closed Sun Closed 248-942-3125 248-942-3035 Required Text: M. Satterwhite and J Olson-Sutton. Business Communication…

Words 1402 - Pages 6

SYLL 161 Essay

Texts: Intermediate Accounting. Kieso, Weygandt and Warfield (Wiley, 15th edition, with access to WileyPlus). Available at the Bookstore. Access to: www.wileyplus.com class URL: http://edugen.wileyplus.com/edugen/class/cls430524/ Additional text chapters: Gordon, Raedy, Sannella. Provided by professor. News: The Wall Street Journal Purchase at wsj.com/class Instructor: Susan Hughes Assessment Tests Online: www.Gleim.com. (more details appears on Blackboard) https://www.gleim.com/?promoID=ASSESS-UVT-SPR(15)-BSAD-161-AZ…

Words 3202 - Pages 13