TEST BANK FOR Inventories and Cost of Goods Sold CHAPTER 5 LATEST EXAM 2026/22027 UPDATED VERSION WITH A CORRECT ANSWERS.

TEST BANK FOR Inventories and Cost of Goods Sold CHAPTER 5
LATEST EXAM 2026/22027 UPDATED VERSION WITH A
CORRECT ANSWERS.
True / False

1. The three forms or states in the development of inventory for a manufacturer are direct materials, direct labor, and
finished goods.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-01 - LO: 05-01
KEYWORDS: Bloom's: Remembering

2. The three distinct types of cost to a manufacturer are direct materials, direct labor, and
manufacturing overhead.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-01 - LO: 05-01
KEYWORDS: Bloom's: Remembering

3. Gross margin as a percentage of sales is a common analytical tool for service companies.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-02 - LO: 05-02
KEYWORDS: Bloom's: Remembering

4. Sales revenue is an inflow of assets.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-02 - LO: 05-02
KEYWORDS: Bloom's: Remembering

5. If a customer returns merchandise which has already been paid for, the retailer may give either a cash refund or a credit
on account.
a. True
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,Chapter 5: Inventories and Cost of Goods Sold
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-02 - LO: 05-02
KEYWORDS: Bloom's: Applying

6. Sales Returns and Allowances is a contra-asset account.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-02 - LO: 05-02
KEYWORDS: Bloom's: Remembering

7. Credit terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of
the date of the invoice.
a. True
b. False

ANSWER: True
DIFFICULTY: Moderate
LEARNING OBJECTIVES: FACC.PONO.13.05-02 - LO: 05-02
KEYWORDS: Bloom's: Understanding

8. On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or
gross profit.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

9. Like sales revenue, cost of goods sold represents an inflow of assets.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

,Chapter 5: Inventories and Cost of Goods Sold
10. Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Remembering




© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

, Chapter 5: Inventories and Cost of Goods Sold
11. If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made
to correct the error.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

12. Net purchases equal purchases less purchase return, allowances, and discounts plus transportation-in.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

13. Cost of goods sold is the difference between costs available for sale and beginning inventory.
a. True
b. False

ANSWER: False
DIFFICULTY: Moderate
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

14. With the periodic inventory system, the inventory account is updated after each sale or purchase.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
KEYWORDS: Bloom's: Understanding

15. Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of
goods sold.
a. True
b. False

ANSWER: True
DIFFICULTY: Moderate
LEARNING OBJECTIVES: FACC.PONO.13.05-03 - LO: 05-03
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.