Inventory Account In Its General Ledger F8

27 Questions | Total Attempts: 250

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Inventory Account In Its General Ledger F8 - Quiz

Questions and Answers
  • 1. 
    Prior to the computer age, virtually all companies:
    • A. 

      All of these answers are correct.

    • B. 

      Kept detailed inventory records manually

    • C. 

      Used the periodic inventory system

    • D. 

      Used the perpetual inventory system

  • 2. 
    The type of firm that will have an Inventory account in its general ledger is a:
    • A. 

      Law firm

    • B. 

      Merchandising firm

    • C. 

      Manufacturing firm

    • D. 

      Merchandising, manufacturing, or hybrid firm

  • 3. 
    Superstar Sports Supplies has purchased 1,800 basketballs this period. During the period it sold 2,000 basketballs. A physical count at the end of the month reveals that Superstar has 500 basketballs still on hand. How many basketballs did Superstar have at the beginning of the current month?
    • A. 

      700

    • B. 

      3,500

    • C. 

      300

    • D. 

      1,300

  • 4. 
    An inventory system where the inventory calculation and cost of goods sold are determined only at the end of the period for the income statement is:
    • A. 

      Periodic system

    • B. 

      Process system

    • C. 

      Planned system

    • D. 

      Perpetual system

  • 5. 
    The physical flow of merchandise where a company rotates its stock by selling the oldest merchandise before newer merchandise is called:
    • A. 

      First-in, first-out

    • B. 

      Last-in, first-out

    • C. 

      An averaging of inventory

    • D. 

      Last-in, still-here

  • 6. 
    Which statement regarding freight costs below is correct?
    • A. 

      Freight paid to ship merchandise in is considered part of the cost of goods sold.

    • B. 

      Freight paid to ship merchandise out to customers is considered part of selling expense.

    • C. 

      Freight paid to ship merchandise in is considered part of selling expense.

    • D. 

      Answers a and b are both correct.

  • 7. 
    • A. 

      $327

    • B. 

      $330

    • C. 

      $225

    • D. 

      $390

  • 8. 
    The average inventory holding period in days is computed by:
    • A. 

      Cost of goods sold divided by average inventory

    • B. 

      Net income divided by average inventory

    • C. 

      365 divided by (the cost of goods sold divided by average inventory)

    • D. 

      Average inventory divided by total assets

  • 9. 
    Superstar Sports Supplies has started the period with 600 baseballs. During the period it purchased 2,000 additional baseballs. A physical count at the end of the month reveals that Superstar has 500 baseballs still on hand. How many baseballs did Superstar sell during the current month?
    • A. 

      1,900

    • B. 

      500

    • C. 

      2,100

    • D. 

      2,000

  • 10. 
    A company purchases a computer for use in its own business. The computer should be considered:
    • A. 

      A potential liability

    • B. 

      Merchandise inventory

    • C. 

      A depreciable asset

    • D. 

      Office supplies

  • 11. 
    The stock of items a company holds for resale to other companies or the general public is called:
    • A. 

      Products

    • B. 

      Stock in trade

    • C. 

      Goods

    • D. 

      Inventory

  • 12. 
    When prices are increasing, using FIFO results in:
    • A. 

      Lower net income

    • B. 

      Higher net income

    • C. 

      Lower ending inventory

    • D. 

      Higher retail prices to customers

  • 13. 
    A buyer that regularly takes advantage of 2/10, n/30 payment terms will earn on an annual return of:
    • A. 

      36.5%

    • B. 

      24%

    • C. 

      2%

    • D. 

      73%

  • 14. 
    During a time of rising prices, more of the total cost of inventory is shown on the income statement as an expense when a company uses the:
    • A. 

      Average cost method

    • B. 

      FIFO method

    • C. 

      LIFO method

    • D. 

      None of these answers is correct.

  • 15. 
    Under the perpetual inventory system, the inventory amounts shown on accounting records in units and dollars are called:
    • A. 

      Book inventory

    • B. 

      Ledger inventory

    • C. 

      Perpetual inventory

    • D. 

      Actual inventory

  • 16. 
    Ending inventory is computed by:
    • A. 

      Beginning inventory plus purchases

    • B. 

      Ending inventory plus purchases

    • C. 

      Beginning inventory plus ending inventory

    • D. 

      Goods available for sale less cost of goods sold

  • 17. 
    Cost of goods available is equal to:
    • A. 

      Ending Inventory + Purchases

    • B. 

      Beginning inventory + Cost of goods sold

    • C. 

      Purchases + Cost of goods sold

    • D. 

      Cost of goods sold + Ending inventory

  • 18. 
    A company purchases a computer for resale. The computer should be considered:
    • A. 

      A depreciable asset

    • B. 

      Merchandise inventory

    • C. 

      Office supplies

    • D. 

      A potential liability

  • 19. 
    With regard to the statement of cash flows, payments for the purchase of inventory should be considered a(n):
    • A. 

      Operating activity

    • B. 

      Financing activity

    • C. 

      Investing activity

    • D. 

      None of these answers is correct.

  • 20. 
    Ending inventory is part of which accounting element?
    • A. 

      Liability

    • B. 

      Revenue

    • C. 

      Equity

    • D. 

      Asset

  • 21. 
    Superstar Sports Supplies has started the period with 800 soccer balls. During the period it sold 2,000 soccer balls. A physical count at the end of the month reveals that Superstar has 600 soccer balls still on hand. How many soccer balls did Superstar purchase during the current month?
    • A. 

      2,200

    • B. 

      1,800

    • C. 

      600

    • D. 

      1,400

  • 22. 
    • A. 

      $605

    • B. 

      $602

    • C. 

      $665

    • D. 

      $500

  • 23. 
    The cost flow method that is typically used by companies that sell airplanes, antiques, or boats is known as the:
    • A. 

      Average cost method

    • B. 

      LIFO method

    • C. 

      Specific identification method

    • D. 

      FIFO method

  • 24. 
    A high inventory turnover rate:
    • A. 

      Indicates the company may have problems with theft, damage, or spoilage of its inventory

    • B. 

      Is bad for the company

    • C. 

      Indicates the wrong merchandise is being purchased for resale

    • D. 

      Is good for the company as long as customer satisfaction is not compromised

  • 25. 
    A liquid propane (LP) gas distributor keeps its supply of LP gas in large 10,000-gallon tanks. When it receives a new shipment of LP gas, it mixes the new product together with the existing product in the tanks. This situation illustrates the physical flow of merchandise known as:
    • A. 

      Last-in, first-out

    • B. 

      Last-in-still here

    • C. 

      First-in, first-out

    • D. 

      An averaging of inventory amounts

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