Q: Which of the following equations correctly represents the cost-of-goods-sold (COGS) model?

$$\text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory}$$

Q: A retailer purchases 10 units at $$10 each, 25 units at 14 $$each, and 25 units at $18 each. If 40 units are sold, what is the cost assigned to cost of goods sold under the FIFO method?

$$(10 \times 10) + (25 \times 14) + (5 \times 18) = 100 + 350 + 90 = 540$$

Question 1

Which of the following best describes the difference between inventory and supplies in financial accounting?

Accepted Answer

Inventory is an asset with future economic benefit because it will be sold for cash, while supplies are used internally and not intended for resale.

Question 2

A company using a perpetual inventory system purchases $$20,000 of inventory on account and later sells 8$$,000 of inventory for $12,000 cash. Which journal entry correctly records the reduction of inventory?

Accepted Answer

Debit Cost of Goods Sold $$8,000; Credit Inventory 8$$,000

Question 3

Which of the following equations correctly represents the cost-of-goods-sold (COGS) model?

Accepted Answer

$$	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory}$$

Question 4

Under the lower-of-cost-or-market (LCM) rule, how should inventory be reported on the balance sheet?

Accepted Answer

At the lower of historical cost or market value, where market value is generally net realizable value

Question 5

A retailer purchases 10 units at $$10 each, 25 units at 14 $$each, and 25 units at $18 each. If 40 units are sold, what is the cost assigned to cost of goods sold under the FIFO method?

Accepted Answer

$$(10 	imes 10) + (25 	imes 14) + (5 	imes 18) = 100 + 350 + 90 = 540$$

Question 6

Which inventory costing method is most likely to result in the lowest taxable income when inventory costs are rising?

Accepted Answer

LIFO

Question 7

If a company’s beginning inventory is $$4,000, purchases are 16$$,000, and cost of goods sold is $15,000, what is the ending inventory?

Accepted Answer

$$\4$$,000 + \$$16,000 - \15$$,000 = \$$5,000$$

Question 8

Which of the following is NOT included in the cost of inventory under U.S. GAAP?

Accepted Answer

Freight-out costs

Question 9

A company has net sales of $$88,500 and cost of goods sold of 28$$,500. What is the gross profit percentage (rounded)?

Accepted Answer

$$\frac{88,500 - 28,500}{88,500} = 68\%$$

Question 10

Which of the following statements about consigned goods is correct?

Accepted Answer

Goods out on consignment are included in the seller’s inventory.

Question 11

If a company’s inventory turnover ratio increases, what does this most likely indicate?

Accepted Answer

The company is selling inventory more quickly.

Question 12

Which of the following is a reason why LIFO is not permitted under IFRS?

Accepted Answer

IFRS only allows FIFO and average-cost methods for inventory.

Question 13

A company’s beginning inventory is $$10,500, purchases are 28$$,000, freight-in is $$2,000, and ending inventory is 12$$,000. What is the cost of goods sold?

Accepted Answer

$$10,500 + 28,000 + 2,000 - 12,000 = 28,500$$

Question 14

Which of the following best describes the impact of ESG (Environmental, Social, and Governance) factors on inventory valuation?

Accepted Answer

ESG factors can materially affect the market value of inventory, potentially requiring write-downs if demand declines.

Question 15

Which of the following is a key advantage of the perpetual inventory system over the periodic inventory system?

Accepted Answer

It provides real-time inventory balances and cost of goods sold information.

Question 16

Which of the following is the correct formula for gross profit percentage?

Accepted Answer

$$	ext{Gross Profit Percentage} = \frac{	ext{Gross Profit}}{	ext{Sales}}$$

Question 17

Which of the following is true regarding inventory errors under U.S. GAAP?

Accepted Answer

Inventory write-downs can never be reversed.

Question 18

A company using the average-cost method has 60 units available for sale at a total cost of $900. If 40 units are sold, what is the cost assigned to cost of goods sold?

Accepted Answer

$$\frac{900}{60} 	imes 40 = 600$$

Question 19

Which of the following best describes the use of the XLOOKUP function in Excel for inventory analysis?

Accepted Answer

It is used to retrieve inventory information from a reference file based on identifiers such as SKU or UPC.

Inventory and Cost of Goods Sold: Financial Accounting Study Notes (Ch. 6)

Guida di studio - Domande di pratica

Study guide - Flashcard