Accounting I – Week 4

Accounting, Introduction to Accounting
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  • Question 1

1 out of 1 points

Acme uses a weighted average perpetual inventory system. Examine the following.
August 2              10 units were purchased at $12 per unit
August 18            15 units were purchased at $15 per unit
August 29            20 units were sold
August 31            14 units were purchased at $16 per unit

What is the per-unit value of ending inventory on August 31?
Selected Answer: $15.42

 

Response Feedback: Correct! $15.42/unit is the per-unit value of ending inventory on August 31.
  • Question 2

1 out of 1 points

Use the following information for Razor Company to compute inventory turnover for 2013:

  2013 2012
Net sales $647,5000 $582,000
Cost of goods sold 388,500 360,840
Ending inventory 77,700 79,380
Selected Answer: 4.95

 

Response Feedback: Correct! In this problem, the calculation is Inventory Turnover = $388,500/[($77,700 + $79,380)/2] and Inventory Turnover = $388,500/$78,540 = 4.95.
  • Question 3

0 out of 1 points

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using FIFO.

Date                      Activities                                              Units Acquired at Cost                   Units Sold at Retail
May 1                    Beginning Inventory                        150 units @ $10
May 5                    Purchase                                             220 units @ $12
May 10                 Sold                                                                                                              140 units @ $20
May 15                 Purchase                                              100 units @ $13
May 24                 Sold                                                                                                                150 units @ $21
Selected Answer: $3,180

 

Response Feedback: Try again! For this problem: (100 * $13 = $1300) + (80 * $12 = $960) = $2.260. Review the First In, First Out section in Chapter 6 of the textbook for more information.
  • Question 4

1 out of 1 points

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between ______.
Selected Answer: ending inventory and cost of goods sold

 

Response Feedback: Correct! The basic inventory formula is: beginning inventory + transferred in = transferred out + ending inventory.
  • Question 5

1 out of 1 points

The cost of an inventory item includes its invoice cost minus any discount, plus any added or incidental costs necessary to put it in a place and condition for sale.
Selected Answer: True

 

Response Feedback: Correct! The cost of an inventory item includes costs to ready inventory for sale minus inventory discounts.
  • Question 6

1 out of 1 points

A company has an inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchases 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?
Selected Answer: $124

 

Response Feedback: Correct! The formula for this FIFO problem is: ($10 * 10) + ($12 * 2) = $124.
  • Question 7

0 out of 1 points

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

Date                      Activities                                              Units Acquired at Cost                   Units Sold at Retail
May 1                    Beginning Inventory                        150 units @ $10
May 5                    Purchase                                             220 units @ $12
May 10                 Sold                                                                                                                      140 units @ $20
May 15                 Purchase                                              100 units @ $13
May 24                 Sold                                                                                                                       150 units @ $21
Selected Answer: $3,580

 

Response Feedback: Try again! For this problem: (150 * $10 = $1,500) + (30 * $12 = $360) = $1,860. Review the Last In, First Out section in Chapter 6 of the textbook for more information.
  • Question 8

1 out of 1 points

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.
Selected Answer: True

 

Response Feedback: Correct! LIFO assigns the last cost of purchases, or the most recent costs, to units that are the first to be sold. Many proponents of LIFO claim this is the best matching of current price to current costs, thereby using the matching principle to support the use of LIFO.
  • Question 9

1 out of 1 points

A company has the following per unit original costs and replacement costs for its inventory:
Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $6.50
Part C: 160 units with a cost of $3, and replacement cost of $2.50

Under the Lower of Cost or Market (LCM) method, the total value of this company’s ending inventory is _____.
Selected Answer: $1,075.00 or $1,112.50, depending on whether LCM is applied to individual items or to the inventory as a whole

 

Response Feedback: Correct! Under the LCM method, the total value of this company’s ending inventory is $1,075.00 or $1,112.50, depending on whether LCM is applied to individual items or to the inventory as a whole.
  • Question 10

1 out of 1 points

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company’s current inventory consists of 200 units purchased at $16 per unit. The replacement cost has now fallen to $13 per unit. Calculate the value of this company’s inventory at the Lower of Cost or Market (LCM).
Selected Answer: $2,600

 

Response Feedback: Correct! 200 units @ $13 per unit = $2,600. LCM means that inventory is cost at either entrance value (or purchase cost) or replacement value (which is an accounting calculation for market value). In this example, replacement cost is lower than purchase cost; therefore, the inventory units are cost at the replacement value of $13 each.

 

  • Question 1

1 out of 1 points

Acme uses a weighted average perpetual inventory system. Examine the following.
August 2              10 units were purchased at $12 per unit
August 18            15 units were purchased at $15 per unit
August 29            20 units were sold
August 31            14 units were purchased at $16 per unit

What is the per-unit value of ending inventory on August 31?
Selected Answer: $15.42

 

Response Feedback: Correct! $15.42/unit is the per-unit value of ending inventory on August 31.
  • Question 2

1 out of 1 points

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.
Selected Answer: True

 

Response Feedback: Correct! This question relates to goods in transit. Ownership of goods in transit depends on who pays for the shipping. With FOB destination, title or ownership of the goods passes from the seller to the buyer at the destination, because the seller pays for shipping. In this case, the buyer of the goods is responsible for paying the shipping charges, which must be included as an addition to inventory costs.
  • Question 3

1 out of 1 points

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using FIFO.

Date                      Activities                                              Units Acquired at Cost                   Units Sold at Retail
May 1                    Beginning Inventory                        150 units @ $10
May 5                    Purchase                                             220 units @ $12
May 10                 Sold                                                                                                              140 units @ $20
May 15                 Purchase                                              100 units @ $13
May 24                 Sold                                                                                                                150 units @ $21
Selected Answer: $2,260

 

Response Feedback: Correct! The cost assigned to ending inventory using FIFO is $2,260.
  • Question 4

1 out of 1 points

Use the following information for Razor Company to compute inventory turnover for 2013:

  2013 2012
Net sales $647,5000 $582,000
Cost of goods sold 388,500 360,840
Ending inventory 77,700 79,380
Selected Answer: 4.95

 

Response Feedback: Correct! In this problem, the calculation is Inventory Turnover = $388,500/[($77,700 + $79,380)/2] and Inventory Turnover = $388,500/$78,540 = 4.95.
  • Question 5

1 out of 1 points

A company has the following per unit original costs and replacement costs for its inventory:
Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $6.50
Part C: 160 units with a cost of $3, and replacement cost of $2.50

Under the Lower of Cost or Market (LCM) method, the total value of this company’s ending inventory is _____.
Selected Answer: $1,075.00 or $1,112.50, depending on whether LCM is applied to individual items or to the inventory as a whole

 

Response Feedback: Correct! Under the LCM method, the total value of this company’s ending inventory is $1,075.00 or $1,112.50, depending on whether LCM is applied to individual items or to the inventory as a whole.
  • Question 6

1 out of 1 points

A company has an inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchases 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?
Selected Answer: $124

 

Response Feedback: Correct! The formula for this FIFO problem is: ($10 * 10) + ($12 * 2) = $124.
  • Question 7

1 out of 1 points

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would _____.
Selected Answer: record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold

 

Response Feedback: Correct! Under the perpetual inventory system, in addition to making the entry to record a sale, a company would record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold.
  • Question 8

1 out of 1 points

Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between ______.
Selected Answer: ending inventory and cost of goods sold

 

Response Feedback: Correct! The basic inventory formula is: beginning inventory + transferred in = transferred out + ending inventory.
  • Question 9

1 out of 1 points

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

Date                      Activities                                              Units Acquired at Cost                   Units Sold at Retail
May 1                    Beginning Inventory                        150 units @ $10
May 5                    Purchase                                             220 units @ $12
May 10                 Sold                                                                                                                      140 units @ $20
May 15                 Purchase                                              100 units @ $13
May 24                 Sold                                                                                                                       150 units @ $21
Selected Answer: $1,860

 

Response Feedback: Correct! The cost assigned to ending inventory using LIFO is $1,860.
  • Question 10

1 out of 1 points

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.
Selected Answer: True

 

Response Feedback: Correct! LIFO assigns the last cost of purchases, or the most recent costs, to units that are the first to be sold. Many proponents of LIFO claim this is the best matching of current price to current costs, thereby using the matching principle to support the use of LIFO.

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