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Exam 7: Inventory

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Question 41

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The following amounts are always known under which inventory costing system? Current inventory      Cost of goods sold          Inventory shrinkage

A) Periodic               Periodic                            Perpetual
B) Perpetual              Perpetual                          Periodic
C) Perpetual              Perpetual                          Perpetual
D) Periodic               Periodic                            Periodic

E) All of the above
F) A) and B)

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Question 42

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The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

A) True
B) False

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Question 43

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The Finished Goods account collects all the costs incurred as a product is being made.

The major difference between the periodic and perpetual inventory systems is that inventory must be physically counted in the periodic system to determine ending inventory.

Which of the following cost formulas would be most appropriate when the inventory units are unique or costly?

Which of the following would most likely use a periodic inventory system?

Which of the following should be included in the cost of inventory?

Inventory turnover and days to sell inventory

Which of the following statements about the weighted-average cost formula is true?

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

A small local convenience store is opening in your neighborhood.Inventory is limited and keeping initial start-up costs low is a priority.What type of inventory system would you recommend?

Use the following information for questions below A company had the following inventory activity during April: $\begin{array}{l}\text { }\\\begin{array} { l l l l l} &&\text {units }&\text { unit cost}&\text { total cost}\\\text { beginning}&\text {inventory }&800&\$10.00&\$8,000\\\text { purchase}&\text {april 6 }&1,400&11.00&15,400\\\text {sale }&\text {april }&(1,500) \\\text {purchase }&\text {april 17}&900&10.50&9,450\\\text {sale }&\text {april 24 }&(900) \\\end{array}\end{array}$ -If the company is using a perpetual system and the FIFO cost formula,what is the cost of goods sold closest to?

Physical inventory counts are

The cost-to-sales ratio is a method used to estimate inventory instead of performing a physical count.

Very high turnovers

In 2020 Borger Industries had beginning inventory of $106,000,purchases of $1,126,500,ending inventory of $116,000,accounts payable of $49,605,and sales of $2,147,250.Inventory turnover for 2017 was closest to

Under the FIFO inventory formula,the cost of ending inventory and cost of goods sold will be the same under both the perpetual and periodic inventory systems.

Use of the FIFO cost formula means that

Effective inventory management would have one person place the order for new inventory,a second person check it against the purchase order when it arrives,and a third person record the receipt of inventory in the accounting records.The purpose of this system is

Perpetual inventory systems are incapable of identifying inventory shrinkage.