Acct Test Bank #8- Merchandise Inventory

When a company purchases merchandise inventory, it increases the Cost of Goods Sold account in the journal entry.

• True

• False

Merchandise Inventory is a revenue account.

• True

• False

An alternative to the perpetual inventory system is the periodic inventory system.

• True

• False

What type of account is Cost of Goods Sold?

• Asset

• Liability

• Revenue

• Expense

Match each item to its best definition.

• Merchandise Inventory

• An expense account that increases when merchandise inventory is sold

• Periodic inventory system

• Merchandise figures constantly kept up to date

• Perpetual Inventory

• Asset account that represents the cost of goods a business intends to sell

• Cost of Goods Sold

• Merchandise figures updated at the end of the period

The FIFO method can be used by a company that employs the perpetual inventory system but not one that uses the periodic inventory system.

• True

• False

Ribeiro Company uses the FIFO method. Using the information provided, what is the merchandise inventory cost of the 44 units remaining in inventory at the end of the month? Beginning of the month: 70 units of Product each costing 31.00 ea. Week 1 purchased 34 units for $32.00 each. Week 2: Buys 50 units at $33.00 each. Sold 110 units during the month.

• $1364

• $1500

• $1452

• $85

Allard Corporation uses the LIFO method. Using the information provided, what is the COGS sold for the inventory sold during the month? Beginning of the month: 30 units of Product, each costing $14.00. Week 1: purchased 12 units for $15.00 ea. Week 2: Purchased 20 units for $16.00 ea and sold 62 Units during the month at $32 each.

• $1440

• $1984

• $920

• $520

For Product 27B, your warehouse has 300 units that cost $3000 and 100 units that cost $1,100. What is the average cost per unit for Product 27B?

• $10.00

• $10.25

• $10.75

• $11.00

Match each inventory valuation method to its best description.

• LIFO method

• Assumes the most recent inventory to enter the warehouse is the first inventory to leave it

• FIFO method

• Assumes the last inventory purchased is the first inventory to be sold

• Average cost method

• An inventory valuation technique that assigns costs to goods sold and remaining inventory by calculating an average cost per unit, calculated as total cost of goods available for sale divided by total units availabl