Question

Goods on consignment belong to the

A	consignor.

B

customer.

C	consignee.

D

supplier.

The first-in, first-out (FIFO) cost formula assumes:

A	the newest goods purchased are the first ones sold.

B	the oldest goods purchased will remain in inventory longest.

C	the oldest goods purchased are the last ones sold.

D	the oldest goods purchased are the first ones sold.

When using first-in, first-out (FIFO):

A	management uses average costs to assign to the balance sheet and the income statement.

B	identical costs go to the balance sheet and the income statement.

C	older costs go to the income statement; newer costs go to the balance sheet.

D	older costs go to the balance sheet; newer costs go to the income statement.

A company purchases 20 units of Product X for $10 each and then 30 units for $12 each. The company then sells 25 units of Product X at a $20 selling price per unit. Assuming the company uses the FIFO cost formula, cost of goods sold is:

A

$260.

B

$300.

C

$200.

D $250.

A company purchases 30 units of Product Q for $10 each and then 20 units for $15 each. The company then sells 20 units of Product Q at a $30 selling price per unit. Assuming the company uses the FIFO cost formula, ending inventory is:

A

$360.

B

$300.

C

$400.

D $300.

A company purchases 20 units of Product Y for $10 each and then 30 units for $12 each. Assuming the company uses the weighted average cost formula, the weighted average unit cost after the second purchase is

A

$11.00.

B

$12.00.

C

$11.20.

D $10.00.

Barnes’ Software purchases 10 units of microchips for $10, 50 units for $15 each, and 20 units for $20 each on March 1, 13, and 20, respectively. Assuming the company uses the weighted average cost formula under a perpetual system, if Barnes’ sells 25 microchips on March 18 what is the cost of goods sold on this sale?

A

$475.00

B

$390.75

C

$354.25

D $325.00

Which of the following inventory cost flow assumptions is not acceptable for Canadian GAAP?

A	Specific identification.

B	All of these answers are acceptable.

C	Weighted-average method.

D FIFO.

Assuming falling inventory prices, which inventory cost flow assumption results in reporting the higher net income?

A

FIFO.

B	Specific identification.

C	Weighted average.

D None of these.

If the ending inventory is overstated

A	assets will be understated and owner’s equity will be overstated.

B	assets will be overstated and owner’s equity will be understated.

C	assets will be overstated and owner’s equity will be overstated.

D assets will be understated and owner’s equity will be understated.

If the ending inventory for Year 1 was understated by $400, cost of goods sold in Year 2 will be

A

correct.

B	understated by $400.

C	understated by $800.

D overstated by $400.

Net realizable value is:

A	calculated for inventory in total.

B	the historical cost.

C	the selling price less any costs required to make the goods ready for sale.

D the current replacement value.

When the net realizable value of inventory is lower than its cost, the required journal entry will include a:

A	credit to cost of goods sold.

B	debit to cost of goods sold.

C	debit to merchandise inventory.

D	credit to cash.

Answer 1

1) A consignor. [ Because Consignment occurs when goods are sent by their owner (the consignor) to an agent (the consignee), who undertakes to sell the goods. The consignor continues to own the goods until they are sold]

2) D the oldest goods purchased are the first ones sold. [ As the name says First In - First Out ]

3) C older costs go to the income statement; newer costs go to the balance sheet. [ Because cost of goods sold is based on old costs and closing inventory is from the latest purchases]

4) A$260. [ $10 * 20 + $12 * 5 ]

5) C$400 [ $10 * 10 + $15 * 20 ]

As per policy maximum questions have been answered, please ask the remaining questions seperately.