1. Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is the inventory record for Product C124:
Date Received Sold Cost/Unit Balance
April 22 534 $6.58 $3,513.72
May 17 433 $6.70 $2,901.10
June 21 389 $6.76 $2,629.64
August 2 436 $6.44 $2,807.84
What is the average cost per unit after the receipt of the May 17 inventory (rounded to the nearest cent)?
A. $6.00
B. $6.63
C. $6.55
D. $7.40
2. Physical inventory counts must be done
A. regardless of method inventory.
B. when using bar-code scan technology.
C. when using the periodic method of inventory.
D. when using the perpetual method of inventory.
3. Under a perpetual inventory system, the account to which transportation charges on incoming merchandise is generally entered is
A. FOB shipping.
B. delivery expense.
C. inventory.
D. FOB destination.
4. Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company's internal control within the previous
A. nine months.
B. year.
C. six months.
D. 90 days.
5. Nick Company reports the following inventory information:
Inventory Number Inventory Quantity Unit Cost Unit Market Value
APD 4837 440 $51.29 $51.48
CPZ 2837 290 $76.59 $77.02
IXL 9291 310 $42.34 $42.47
EOD 1717 200 $22.19 $21.75
DKS 3088 180 $31.22 $31.17
What is the total value of the merchandise under LCM (lower-of-cost or market)?
A. $67,961.70
B. $68,113.30
C. $68,210.30
D. $67,864.70
6. To pay the least income tax possible in periods of rising inventory costs, the company should use which inventory costing method?
A. LIFO
B. FIFO
C. Average cost
D. Specific identification
7. Committing a fraud because the employee feels "I deserve a pay raise. The company owes this to me" is indicative of which part of the fraud triangle?
A. Realization
B. Perceived opportunity
C. Rationalization
D. Perceived pressure
8. Which of the following may not limit the effectiveness of internal control systems in an organization?
A. Understanding of policies and procedures
B. Duties not segregated
C. Poorly designed controls
D. Costs not worth benefits
9. When a company repays the seller for shipping costs on an FOB shipping transaction, which of the following is true?
A. The shipping costs don't affect the invoice cost.
B. A purchase discount cannot be taken when shipping charges are prepaid.
C. A purchase discount can still be taken on the gross amount of the invoice.
D. A purchase discount can still be taken net of the prepaid shipping charges.
10. A company's gross profit percentage decreases from 58% to 51%. What does this mean?
A. This means that net income will be lower.
B. This means that there will be a net loss.
C. We can't determine anything definite from the information given.
D. This means that net income will be higher.
11. Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000; and cost of goods sold is $77,000. The inventory turnover is
A. 1.95.
B. 2.99.
C. 1.53.
D. 1.83.
12. To overstate earnings, a company can
A. overstate expenses and overstate revenue.
B. understate unearned revenue and understate property, plant, and equipment.
C. understate expenses and understate revenue.
D. overstate receivables and understate payables.
13. A low gross profit percentage means that
A. general and administrative expenses are very high.
B. selling expenses are very low.
C. the cost of goods sold was relatively low.
D. the cost of goods sold was relatively high.
14. A company's current ratio increased from 1.23 to 1.45. What does this mean?
A. This means that current assets decreased and current liabilities decreased.
B. This means that current assets increased and current liabilities decreased.
C. There isn't enough information to explain the increase.
D. This means that current assets increased and current liabilities increased.
15. When a merchandiser sells on account, which of the following is not needed to record the transaction?
A. Accounts receivable
B. Inventory
C. Cost of goods sold
D. Cash
16. Casey Company's beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Total Cost of Inventory $980
Ending inventory is 14 units.
What is the ending inventory of Casey Company for 2012 using FIFO?
17. A drawback to using LIFO when inventory costs are rising is that the company reports lower net
income.
18. If current assets decrease and current liabilities increase, the current ratio….Decrease
19. In a balance sheet prepared in report form, liabilities must be listed after…Assets where current liabilities are listed first.
20. Which items may not limit the effectiveness of internal control systems in an organization?
A. Understanding of policies and procedures
