True/False
Indicate whether the
statement is true or false.
|
|
|
1.
|
Merchandise inventory on hand is typically the largest asset of a merchandising
business.
|
|
|
2.
|
The cost of merchandise inventory is reported only on the income
statement.
|
|
|
3.
|
Many businesses fail because too much or too little merchandise inventory is
kept on hand.
|
|
|
4.
|
Merchandise inventory that is smaller than needed may decrease net
income.
|
|
|
5.
|
When a business frequently orders small quantities of an item, the price paid is
often more per unit than when merchandise is ordered in large quantities.
|
|
|
6.
|
A perpetual inventory is also known as a book inventory.
|
|
|
7.
|
A merchandise inventory determined by counting, weighing, or measuring items of
merchandise on hand is a periodic inventory.
|
|
|
8.
|
Merchandise inventory determined by keeping a continuous record of increases,
decreases, and balance on hand is a physical inventory.
|
|
|
9.
|
To assure an accurate and complete count, a business will often be closed during
the periodic inventory.
|
|
|
10.
|
A periodic inventory is usually taken each week.
|
|
|
11.
|
Businesses frequently establish their fiscal period to end when inventory is at
a minimum because it takes less time to count a smaller inventory.
|
|
|
12.
|
A form used during a periodic inventory to record information about each item of
merchandise on hand is an inventory record.
|
|
|
13.
|
A form used to show kind of merchandise, quantity received, quantity sold, and
balance on hand is a stock record.
|
|
|
14.
|
A file of stock records for all merchandise on hand is a stock ledger.
|
|
|
15.
|
A perpetual inventory system provides only fiscal period information about the
quantity of merchandise on hand.
|
|
|
16.
|
The unit price of an item is included in the UPC code of an inventory
item.
|
|
|
17.
|
Lifo is an abbreviation for last-out, first-in.
|
|
|
18.
|
Using the price of merchandise purchased last to calculate the cost of
merchandise sold first is the lifo method.
|
|
|
19.
|
The ending inventory and cost of merchandise sold are calculated using the same
unit price under the weighted-average inventory method.
|
|
|
20.
|
Estimating inventory by using the previous years' percentage of gross
profit on operations is the gross profit method.
|
|
|
21.
|
The cost of merchandise sold can be calculated by subtracting the cost of
merchandise available for sale from the cost of ending inventory.
|
|
|
22.
|
Businesses that need an ending inventory amount for preparing monthly income
statements should take a physical inventory to obtain the amount for each month.
|
|
|
23.
|
The primary reason for using the same inventory costing method each fiscal
period is to provide financial statements that can be compared with statements of other fiscal
periods.
|
|
|
24.
|
In a year in which merchandise prices have increased but retail selling prices
have been cut because of increased competition, the previous year's gross profit percentage
should probably be adjusted before using it in the gross profit method of estimating
inventory.
|
|
|
25.
|
A perpetual inventory system provides day-to-day information about the quality
of merchandise on hand.
|
|
|
26.
|
Some cash registers use optical scanners to read the UPC codes marked on
products.
|
|
|
27.
|
First in, first-out is a method used to determine the quantity of each type of
merchandise on hand.
|
|
|
28.
|
The gross profit method makes it possible to prepare monthly income statements
without taking a periodic inventory.
|
|
|
29.
|
Net income of a business can be decreased by maintaining a merchandise inventory
that is larger than needed.
|
|
|
30.
|
A minimum inventory balance is the amount of merchandise that will typically
last until ordered merchandise can be received from vendors.
|
Multiple Choice
Identify the
choice that best completes the statement or answers the question.
|
|
|
31.
|
Merchandise inventory that is smaller than needed ____.
a. | may increase net income | c. | may decrease net
income | b. | will not have an effect on net income | d. | none of the
above |
|
|
|
32.
|
A merchandise inventory determined by counting, weighing, or measuring items of
merchandise on hand is a ____.
a. | periodic inventory | b. | perpetual inventory | c. | gross profit method
of estimating inventory | d. | weighted-average inventory costing
method |
|
|
|
33.
|
A merchandise inventory determined by keeping a continuous record of increases,
decreases, and balance on hand is a ____.
a. | periodic inventory | b. | perpetual inventory | c. | gross profit method
of estimating inventory | d. | weighted-average inventory costing
method |
|
|
|
34.
|
"Taking an inventory" is characteristic of the ____.
a. | periodic method | c. | gross profit method | b. | perpetual method | d. | weighted-average
method |
|
|
|
35.
|
A periodic inventory normally is taken ____.
a. | at the end of every month | b. | quarterly | c. | at the end of a
fiscal period | d. | only when a stock shortage is suspected |
|
|
|
36.
|
A form used to show the kind of merchandise, quantity received, quantity sold,
and balance on hand is ____.
a. | an inventory record | c. | a stock ledger | b. | a stock record | d. | none of the
above |
|
|
|
37.
|
A separate stock record is prepared ____.
a. | for each shipment received | c. | for each kind of merchandise on
hand | b. | for each sale of merchandise | d. | when prices increase or
decrease |
|
|
|
38.
|
A file of stock records for all merchandise on hand is a ____.
a. | periodic inventory | c. | stock record | b. | perpetual inventory | d. | stock ledger |
|
|
|
39.
|
Stock records do not reflect ____.
a. | the cost of the merchandise | b. | increases in quantity on
hand | c. | decreases in quantity on hand | d. | the balance on hand after each increase or
decrease is recorded |
|
|
|
40.
|
When using the perpetual inventory method, ____.
a. | periodic inventories are never taken | b. | day-to-day information about the quantity of
merchandise on hand is not available | c. | it is not necessary to show the minimum balance
on stock records | d. | it is customary to take a periodic inventory at least once a fiscal
period |
|
|
|
41.
|
Using the price of merchandise purchased first to calculate the cost of
merchandise sold first is the ____.
a. | fifo method | c. | gross profit method | b. | lifo method | d. | weighted-average
method |
|
|
|
42.
|
The value of ending inventory using the fifo method for merchandise that has a
beginning inventory of 20 units @ $5.00 each, purchases during the year of ten units @ $6.00 each,
and ending inventory of 12 units is ____.
a. | $60.00 | c. | $70.00 | b. | $62.00 | d. | $72.00 |
|
|
|
43.
|
Using the price of merchandise purchased last to calculate the cost of
merchandise sold first is the ____.
a. | fifo method | c. | gross profit method | b. | lifo method | d. | weighted-average
method |
|
|
|
44.
|
The value of ending inventory using the lifo method for merchandise that has a
beginning inventory of 20 units @ $5.00 each, purchases during the year of 10 units @ $6.00 each, and
ending inventory of 12 units is ____.
a. | $60.00 | c. | $70.00 | b. | $62.00 | d. | $72.00 |
|
|
|
45.
|
Using the average cost of beginning inventory plus merchandise purchased during
a fiscal period to calculate the cost of merchandise sold is the ____.
a. | fifo method | c. | gross profit method | b. | lifo method | d. | weighted-average
method |
|
|
|
46.
|
The value of ending inventory using the weighted-average method for an inventory
of total purchases of $1,000.00 for 100 units and ending inventory of 12 units is ____.
a. | $60.00 | c. | $70.00 | b. | $62.00 | d. | $120.00 |
|
|
|
47.
|
During a period of rising prices, the cost of merchandise sold will be
____.
a. | lowest using the lifo method | b. | lowest using the fifo
method | c. | lowest using the weighted-average method | d. | the same using
either fifo or lifo method |
|
|
|
48.
|
Using the same inventory method for all fiscal periods is an application of the
accounting concept ____.
a. | Historical Cost | c. | Consistent Reporting | b. | Accounting Cycle | d. | Objective
Evidence |
|
|
|
49.
|
Estimating inventory by using the previous years' percentage of gross
profit on operations is the ____ method of estimating inventory.
a. | fifo | c. | gross profit | b. | lifo | d. | weighted-average |
|
|
|
50.
|
Using the gross profit method to estimate merchandise inventory is ____.
a. | the most accurate method of valuing inventory | b. | not completely
accurate | c. | not accurate enough to be used on a monthly income statement | d. | none of the
above |
|
|
|
51.
|
Calculating an accurate inventory cost to assure that gross profit and net
income are reported correctly on the income statement is an application of the accounting concept
____.
a. | Consistent Reporting | c. | Adequate Disclosure | b. | Perpetual Inventory | d. | none of the
above |
|
|
|
52.
|
When the fifo method is used, cost of merchandise sold is valued at ____.
a. | the average price | c. | the earliest price | b. | the most recent price | d. | none of the
above |
|
|
|
53.
|
When the fifo method is used, ending inventory units are priced at ____.
a. | the average price | c. | the most recent price | b. | the earliest
price | d. | none of the
above |
|
|
|
54.
|
When the lifo method is used, cost of merchandise sold is priced at ____.
a. | the average price | c. | the most recent price | b. | the earliest
price | d. | none of the
above |
|
|
|
55.
|
The weighted-average method is based on the assumption that the cost of
merchandise sold should be calculated using the ____.
a. | average price per unit of beginning inventory | b. | average price of
ending inventory | c. | average price of beginning inventory plus purchases during the fiscal
period | d. | average price of ending inventory plus purchases during the fiscal
period |
|