1. Which of the following statements is true?
a.The cost of goods available for sale consists of ending inventory and purchases.
b.An error in assigning inventory costs to the ending inventory balance does not affect the cost of goods sold for the same period.
c.Ending inventory costs represent amounts to be expensed in future periods when the inventory is sold.
d.Cost of goods sold represents unexpired inventory costs.
2. Home Depot counted its some of its inventory twice As a result, its cost of goods sold would be
a.overstated.
b.understated.
c.this mistake had no effect on operating expenses.
3. If a company understates its ending inventory balance for 2000 by $12,500, what are the effects on its net income for 2000 and 2001?
|
Effect on 2000 Net Income
|
Effect on 2001 Net Income
|
|
A. Overstated $12,500
|
Understated $12,500
|
|
B. Understated $12,500
|
Overstated $12,500
|
|
C. Understated $12,500
|
No effect
|
|
D. No effect
|
Overstated $12,500
|
4. Which inventory costing method assigns the cost of the most recent items purchased to the ending inventory balance?
a.specific identification
b.weighted average cost
c.FIFO
d.LIFO
Use the data below to answer the questions that follow. Assume that the company uses the periodic inventory system.
|
March 1
|
On hand, 150 units @ $5.50 each
|
$ 825.00
|
|
March 5
|
Purchased 300 units @ $5.22 each
|
1,566.00
|
|
March 14
|
Purchased 125 units @ $4.96 each
|
620.00
|
|
|
Total cost of goods available for sale
|
$3,011.00
|
|
March 31
|
On hand, 220 units
|
|
5. If the company uses the FIFO inventory, the cost of goods sold for March would be
a.$ 1,895.10
b.$ 1,952.50
c.$ 1,820.60
d.$ 1,858.97