NATS 1670 COMPREHENSIVE EXAM
BUNDLE 2026 QUESTIONS WITH VERIFIED
CORRECT SOLUTIONS
⩥ Which of the following statements is true?
Manufacturing overhead costs are product costs.
Interest costs for routine inventories are product costs.
The cost of financing is a product cost.
Selling costs are product costs. Answer: Manufacturing overhead costs
are product costs.
Manufacturing overhead costs are considered product costs because they
are directly connected with bringing the goods to the buyer's place of
business and converting such goods to a salable condition.Selling costs,
interest costs and the cost of financing are considered period costs.
⩥ At the Preston Company, purchases are recorded at net amounts. On
August 5, $40,000 worth of merchandise was purchased on account for
terms of 2/10, n/30 and recorded for $40,000. $3,000 of this
merchandise was returned, and the account was credited for $3,000.
To reflect the net amount, accounts payable should be adjusted by
,$740.
$860.
$0.
$800. Answer: $740.
$40,000 - $3,000 = $37,000. $37,000 X .02 = $740
⩥ The Corton Company uses a periodic inventory system. For the month
of October, the beginning inventory consisted of 4,800 units that cost
$12 each. Two purchases were made in October, one for 2,000 units at
$13 each, and one for 8,000 units at $13.50 each. Additionally, Corton
sold 8,600 units during the month. If the FIFO method is used, the
ending inventory is
$75,800.
$74,400.
$80,292.
$83,700. Answer: $83,700.
(4,800 + 2,000 + 8,000) - 8,600 = 6,200 units in ending inventory x
$13.50 = $83,700
⩥ Which of the following is not a type of inventory system?
,modified perpetual inventory system
periodic inventory system
modified periodic inventory system
perpetual inventory system Answer: modified periodic inventory system
⩥ A firm realizes there was a misstatement of inventory. The current
ratio is understated and accounts payable is overstated. What does the
information tell you about the misstatement of inventory?
The firm understated it's purchases and inventory.
The firm did not actually misstate the inventory at all.
The firm overstated it's inventory, but not it's purchases
There is not enough information to tell. Answer: The firm understated
it's purchases and inventory.
Because the current ratio (current assets divided by current liabilities) is
understated and the accounts payable is overstated, this is an indication
that the firm did not record as a purchase certain goods that it owns and
did not count them in ending inventory.
⩥ JT Engineering paid $520,000 for land. It paid $65,000 to tear down a
building on the site and made $15,400 in salvage. Titles fees and
insurance cost JT $4,320. Architect's fees were $28,200. Construction
liability insurance cost $1,600 and the contractor was paid $1,520,000. A
, $4,620 assessment made by the city for pavement. What is JT's cost of
the building?
$1,549,800
$1,528,200
$1,521,600
$1,548,200 Answer: $1,549,800
Cost of building includes materials, labor, and overhead costs incurred
during construction and professional fees and building permits. So, JT's
cost of building is $28,200 + $1,600 + $1,520,000 = $1,549,800.
⩥ In June, a firm begins to capitalize interest costs related to
construction of a new asset. This tells us that the firm ________ in June.
A.) made its first expenditure related to the asset
B.) made its last expenditure related to the asset
C.) completed construction of the asset
D.) first decided to undertake the construction project Answer: A.) made
its first expenditure related to the asset
The company had its first expenditure related to the asset in June,
therefore, it should begin to capitalize the interest costs related to the
construction of a new asset in the same month. The interest costs should
BUNDLE 2026 QUESTIONS WITH VERIFIED
CORRECT SOLUTIONS
⩥ Which of the following statements is true?
Manufacturing overhead costs are product costs.
Interest costs for routine inventories are product costs.
The cost of financing is a product cost.
Selling costs are product costs. Answer: Manufacturing overhead costs
are product costs.
Manufacturing overhead costs are considered product costs because they
are directly connected with bringing the goods to the buyer's place of
business and converting such goods to a salable condition.Selling costs,
interest costs and the cost of financing are considered period costs.
⩥ At the Preston Company, purchases are recorded at net amounts. On
August 5, $40,000 worth of merchandise was purchased on account for
terms of 2/10, n/30 and recorded for $40,000. $3,000 of this
merchandise was returned, and the account was credited for $3,000.
To reflect the net amount, accounts payable should be adjusted by
,$740.
$860.
$0.
$800. Answer: $740.
$40,000 - $3,000 = $37,000. $37,000 X .02 = $740
⩥ The Corton Company uses a periodic inventory system. For the month
of October, the beginning inventory consisted of 4,800 units that cost
$12 each. Two purchases were made in October, one for 2,000 units at
$13 each, and one for 8,000 units at $13.50 each. Additionally, Corton
sold 8,600 units during the month. If the FIFO method is used, the
ending inventory is
$75,800.
$74,400.
$80,292.
$83,700. Answer: $83,700.
(4,800 + 2,000 + 8,000) - 8,600 = 6,200 units in ending inventory x
$13.50 = $83,700
⩥ Which of the following is not a type of inventory system?
,modified perpetual inventory system
periodic inventory system
modified periodic inventory system
perpetual inventory system Answer: modified periodic inventory system
⩥ A firm realizes there was a misstatement of inventory. The current
ratio is understated and accounts payable is overstated. What does the
information tell you about the misstatement of inventory?
The firm understated it's purchases and inventory.
The firm did not actually misstate the inventory at all.
The firm overstated it's inventory, but not it's purchases
There is not enough information to tell. Answer: The firm understated
it's purchases and inventory.
Because the current ratio (current assets divided by current liabilities) is
understated and the accounts payable is overstated, this is an indication
that the firm did not record as a purchase certain goods that it owns and
did not count them in ending inventory.
⩥ JT Engineering paid $520,000 for land. It paid $65,000 to tear down a
building on the site and made $15,400 in salvage. Titles fees and
insurance cost JT $4,320. Architect's fees were $28,200. Construction
liability insurance cost $1,600 and the contractor was paid $1,520,000. A
, $4,620 assessment made by the city for pavement. What is JT's cost of
the building?
$1,549,800
$1,528,200
$1,521,600
$1,548,200 Answer: $1,549,800
Cost of building includes materials, labor, and overhead costs incurred
during construction and professional fees and building permits. So, JT's
cost of building is $28,200 + $1,600 + $1,520,000 = $1,549,800.
⩥ In June, a firm begins to capitalize interest costs related to
construction of a new asset. This tells us that the firm ________ in June.
A.) made its first expenditure related to the asset
B.) made its last expenditure related to the asset
C.) completed construction of the asset
D.) first decided to undertake the construction project Answer: A.) made
its first expenditure related to the asset
The company had its first expenditure related to the asset in June,
therefore, it should begin to capitalize the interest costs related to the
construction of a new asset in the same month. The interest costs should
