Fundamental Accounting Principles, Questions And Verified
Answers With Rationales|100% Accurate Answers | Already
Graded A+
Sometimes companies must estimate ending inventory. Review the reasons given
below for estimating inventory and choose all of the correct responses. - ans --The
store was flooded.
Guns R Us overstated its ending inventory in the current year by $5,000. The
company incorrectly reported $100,000 of net income. Explain the consequences
of this error on the current period's income statement. - ans -Cost of goods sold
will be too low by $5,000.
The journal entry for a sale on account under the periodic inventory system
includes: - ans -a debit to accounts receivable and a credit to sales
Recall the four inventory costing methods used to assign costs to inventory and
cost of goods sold under the periodic inventory system. - ans -Last-in, first-out
Specific identification
Weighted average
First-in, first-out
Explain what lower of cost or market means in regards to reporting merchandise
inventory on the balance sheet. - ans -Inventory should be reported at the current
market value of replacing it when lower than cost.
One identical unit is purchased on each of the following three dates and at the
respective costs: June 1 at $10 June 2 at $15 July 4 at $20 The company sells two -
ans -
Which of the following statements correctly explains what the inventory turnover
ratio assesses. - ans -The inventory turnover ratio assesses how quickly a
company is selling its merchandise, so that it can generate cash to pay debts.
There are advantages to using each of the four inventory costing methods.
Identify the statements below that are correct regarding these advantages. - ans -
-Weighted average tends to smooth out erratic changes in costs.
, -FIFO assigns an amount to inventory on the balance sheet that approximates its
current cost
Sparky's incorrectly included inventory that was on consignment in its ending
inventory count. Consequently, the ending inventory was overstated on the
balance sheet. Explain how this error will affect this year's income statement. -
ans --This year's cost of goods sold will be too low.
-This year's net income will be too high.
All of the following are safeguards for inventory except: - ans -Preventing risk
Explain the inventory and cost of goods sold relationship by selecting the correct
formula below. - ans -Beginning inventory + Net purchases - Ending inventory =
Cost of goods sold.
-Fire destroyed the inventory warehouse.
-Interim financial statements need to be prepared.
Which of the statements below explain why LCM is used? - ans --LCM allows
companies to recognize a loss in value of an asset in the period the loss occurs.
-Accounting principles require conservatism when reporting financial information.
-Companies never want to report inventory on a balance sheet that is higher than
replacement cost.
-Assets are not shown at an inflated value on the balance sheet, but rather at
lower of cost or replacement cost.
Which of the following statements is correct regarding goods in transit? - ans -
Goods shipped FOB shipping point will be included in the buyer's inventory.
Identify the safeguards that companies implement to protect their inventory. -
ans -Restrict access to inventory.Match inventory received with purchase
Answers With Rationales|100% Accurate Answers | Already
Graded A+
Sometimes companies must estimate ending inventory. Review the reasons given
below for estimating inventory and choose all of the correct responses. - ans --The
store was flooded.
Guns R Us overstated its ending inventory in the current year by $5,000. The
company incorrectly reported $100,000 of net income. Explain the consequences
of this error on the current period's income statement. - ans -Cost of goods sold
will be too low by $5,000.
The journal entry for a sale on account under the periodic inventory system
includes: - ans -a debit to accounts receivable and a credit to sales
Recall the four inventory costing methods used to assign costs to inventory and
cost of goods sold under the periodic inventory system. - ans -Last-in, first-out
Specific identification
Weighted average
First-in, first-out
Explain what lower of cost or market means in regards to reporting merchandise
inventory on the balance sheet. - ans -Inventory should be reported at the current
market value of replacing it when lower than cost.
One identical unit is purchased on each of the following three dates and at the
respective costs: June 1 at $10 June 2 at $15 July 4 at $20 The company sells two -
ans -
Which of the following statements correctly explains what the inventory turnover
ratio assesses. - ans -The inventory turnover ratio assesses how quickly a
company is selling its merchandise, so that it can generate cash to pay debts.
There are advantages to using each of the four inventory costing methods.
Identify the statements below that are correct regarding these advantages. - ans -
-Weighted average tends to smooth out erratic changes in costs.
, -FIFO assigns an amount to inventory on the balance sheet that approximates its
current cost
Sparky's incorrectly included inventory that was on consignment in its ending
inventory count. Consequently, the ending inventory was overstated on the
balance sheet. Explain how this error will affect this year's income statement. -
ans --This year's cost of goods sold will be too low.
-This year's net income will be too high.
All of the following are safeguards for inventory except: - ans -Preventing risk
Explain the inventory and cost of goods sold relationship by selecting the correct
formula below. - ans -Beginning inventory + Net purchases - Ending inventory =
Cost of goods sold.
-Fire destroyed the inventory warehouse.
-Interim financial statements need to be prepared.
Which of the statements below explain why LCM is used? - ans --LCM allows
companies to recognize a loss in value of an asset in the period the loss occurs.
-Accounting principles require conservatism when reporting financial information.
-Companies never want to report inventory on a balance sheet that is higher than
replacement cost.
-Assets are not shown at an inflated value on the balance sheet, but rather at
lower of cost or replacement cost.
Which of the following statements is correct regarding goods in transit? - ans -
Goods shipped FOB shipping point will be included in the buyer's inventory.
Identify the safeguards that companies implement to protect their inventory. -
ans -Restrict access to inventory.Match inventory received with purchase
