Multiple Choice Quiz

1. Emerson Furniture prepared the following schedule:

Cost Retail
Beginning merchandise inventory $40,000 $60,000
Purchases for November 80,000 140,000
Sales in November 180,000

Using the retail method for estimating the value of ending inventory,
the goods available for sale at cost and retail is

a. $40,000 and $200,000

b. $100,000 and $140,000
c. $120,000 and $200,000
d. $120,000 and $320,000

2. Exercise

Date Quantity Cost Total

Per Unit Cost
Jan 1, Beginning Inventory 100 $18.00 $1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 20.00 16,000.00
Nov 3, Purchase 500 21.00 10,500.00
Merchandise Available 1,800 $35,900.00

Five-hundred and twenty units are unsold. Using the LIFO

(periodic) method, the cost assigned to the ending merchandise
inventory is

a. $10,900
b. $11,368
c. $9,800
d. $9,360
 3. Exercise

Date Quantity Cost Total Cost

Per Unit
Jan 1, Beginning Inventory 100 $18.00 $1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 18.25 14,600.00
Nov 3, Purchase 500 20.40 10,200.00
Merchandise Available 1,800 $34,200.00

Five-hundred units are unsold. Using the periodic weighted average

method, the cost assigned to the ending merchandise inventory is

a. $10,200
b. $9,500
c. $9,800
d. $10,500

4. Exercise

Date Quantity Cost Total Cost

Per Unit
Jan 1, Beginning Inventory 100 $18.00 $1,800.00
Mar 4, Purchase 400 19.00 7,600.00
May 8, Purchase 800 20.00 16,000.00
Nov 3, Purchase 500 21.00 10,500.00
Merchandise Available 1,800 $35,900.00

Five-hundred and seventy units are unsold. Using the FIFO

(periodic) method, the cost assigned to the ending merchandise
inventory is

a. $10,800
b. $11,900
c. $11,970
d. $11,368
 5. Exercise

Beginning inventory 10 units @ $10 per unit

First purchase 35 units @ $11 per unit
Second purchase 40 units @ $12 per unit
Third purchase 15 units @ $13 per unit

If 83 units are sold, the value of the ending inventory under periodic
FIFO would be

a. $177
b. $905
c. $219
d. $204

6. Exercise

Beginning inventory 10 units @ $10 per unit

First purchase 35 units @ $11 per unit
First sale 20 units
Second purchase 40 units @ $12 per unit
Second sale 35 units
Third purchase 15 units @ $13 per unit

The value of the ending inventory using a perpetual inventory

system with the LIFO valuation method is

a. $485
b. $555
c. $520
d. $540
 7. Exercise

Beginning inventory 10 units @ $10 per unit

First purchase 35 units @ $11 per unit
First sale 20 units
Second purchase 40 units @ $12 per unit
Second sale 35 units
Third purchase 15 units @ $13 per unit

The value of the ending inventory using a perpetual inventory

system with the FIFO valuation method is

a. $555
b. $495
c. $520
d. $485

8. Inventory at the end of the current period was erroneously

understated. Which of the following is true as a result of the
understatement?

a. net income for the current year is overstated

b. the cost of goods sold for the current year is understated
c. capital at the end of the current year is overstated
d. net income at the end of the following year will be overstated

9. When perpetual inventory is maintained, the cost of goods

sold is recorded by a journal entry in which a credit is made to
the

a. Cost of Goods Sold account

b. Merchandise Inventory account
c. Accounts Receivable account
d. Purchases account
 10. Which journal entry is an indication that a perpetual
inventory system is being used?

a. Accounts Receivable, dr., $500; Sales, cr., $500

b. Merchandise Inventory, dr., $45,000; Income Summary, cr.,
$45,000
c. Cost of Goods Sold, dr., 30,000; Merchandise Inventory, cr.,
$30,000
d. Income Summary, dr., $24,000; Merchandise Inventory, cr.,
$24,000

11. Lipton Hardware prepared the following schedule of unit

costs and market prices for three items of merchandise
inventory.

Item Units Cost Market price

per unit per unit
A 1,000 $.50 $.55
B 2,000 .45 .30
C 1,500 .60 .75

Applying the lower of cost or market price rule, the total value of the
units would be reported as

a. $2,300.00
b. $2,000.00
c. $2,080.00
d. $2,580.00
 12. Harrison Hardware prepared the following schedule:

Cost Retail
Beginning merchandise inventory $40,000 $60,000
Purchases for November 100,000 140,000
Sales in November 180,000

Using the retail method for estimating the value of ending inventory,
the estimated ending merchandise inventory at cost is

a. $30,000
b. $180,000
c. $14,000
d. $20,000

13. Work-Days Clothing had beginning merchandise

inventory of $45,000. It made purchases of $80,000 and
recorded sales of $130,000 during November. Its estimated
gross profit on sales was 25%. On November 30, the store
was destroyed by fire. The merchandise inventory loss was

a. $27,500
b. $125,000
c. $97,500
d. $25,000

14. Beginning inventory totals $100,000 and ending

inventory totals $140,000. Net sales totals $400,000 and cost
of goods sold is $300,000. The merchandise turnover ratio
will be

a. 2.25
b. 2.50
c. 3.00
d. 4.50
15. Beginning inventory totals $100,000 and ending
inventory totals $140,000. Net sales totals $800,000 and cost
of goods sold is $600,000. The days' sales in inventory will be
(to the nearest hundredth).

a. $22.25
b. $32.50
c. $55.33
d. $85.17