True/False Indicate whether the statement is true or
false.
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1.
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A perpetual inventory maintains a continuous record of merchandise inventory
increases and decreases.
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2.
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A business may fail if it does not have enough inventory on hand, but will not
fail if it has an excess of inventory.
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3.
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The cost of items in inventory involves both the price paid to vendors for the
merchandise and the costs involved in getting the goods to the place of business and ready for
sale.
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4.
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Each year, the business uses the inventory costing method that results in the
most favorable net income.
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5.
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The consignor is the owner of the goods on consignment and is responsible for
selling the goods.
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6.
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The unit of measurement concept states that the unit price should be used to
record inventory cost when merchandise is purchased.
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7.
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If ending inventory is understated, merchandise inventory on the balance sheet
will be overstated.
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8.
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If the average number of days' sales in merchandise inventory is 40 days,
the merchandise turnover ratio (rounded to the nearest 0.1) is 9.1.
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9.
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A low merchandise inventory turnover ratio usually indicates a high return on
investment.
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10.
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Typically, a business counts as part of its inventory all goods for sale legally
owned by the business.
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Multiple Choice Identify the choice that best completes the
statement or answers the question.
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1.
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A completed form authorizing a seller to deliver goods with payment to be made
later is called a(n) ____.
A. | stock ledger | C. | stock record | B. | purchase order | D. | invoice |
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2.
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The costing method that uses the price of merchandise purchased last to
calculate the cost of merchandise sold first is called ____.
A. | first-in, first-out | C. | last-in, first-out | B. | lower of cost or market | D. | weighted
average |
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3.
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The number of times the average amount of merchandise inventory is sold during a
specific period of time is called the ____.
A. | average number of days' sales in merchandise inventory | B. | average sales
turnover ratio | C. | inventory sales period ratio | D. | merchandise inventory turnover
ratio |
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4.
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Goods that are given to a business to sell but for which title remains with the
vendor, are called a(n) ____.
A. | consignment | C. | sale | B. | purchase | D. | consignee |
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5.
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The costing method that uses the lower of cost or market price to calculate the
cost of ending merchandise inventory is called ____.
A. | first-in, first-out | C. | last-in, first-out | B. | lower of cost or market | D. | weighted
average |
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The following selected data is taken from the inventory records of Edwards, Inc:
Inventory item S10 had 1,200 units at a unit price of $17.00 in inventory on January 1. The first
purchase during the year was for 1,400 units at $18.00. The second purchase was for 1,400 units at
$19.00. The December 31 inventory consisted of 1,800 units.
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6.
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Refer to the Edwards Inc. Inventory Item S10 Scenario. The total cost of the
ending inventory using weighted-average is ____.
A. | $31,200 | C. | $32,490 | B. | $32,400 | D. | $33,800 |
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7.
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The inventory method that uses the average cost of beginning inventory plus
merchandise purchased during a fiscal period to calculate the cost of merchandise sold is called
____.
A. | first-in, first-out | C. | last-in, first-out | B. | lower of cost or market | D. | weighted
average |
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8.
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The method of estimating inventory by using a percentage based on both cost and
retail prices is called ____.
A. | gross profit | C. | percentage | B. | periodic inventory | D. | retail |
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9.
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A file of stock records for all merchandise on hand is called a(n) ____.
A. | accounts payable ledger | C. | merchandise
ledger | B. | stock ledger | D. | inventory record |
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10.
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The period of time needed to sell an average amount of merchandise inventory is
called the ____.
A. | average number of days' sales in merchandise inventory | B. | average sales
turnover ratio | C. | merchandise inventory turnover ratio | D. | merchandise sold
ratio |
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11.
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The person or business that receives goods on consignment is called the
____.
A. | consignment buyer | C. | consignor | B. | consignee | D. | owner |
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The following selected data is taken from the inventory records of Edwards, Inc:
Inventory item T35 had 1,600 units at a unit price of $14.00 in inventory on January 1. The first
purchase during the year was for 1,000 units at $15.00. The second purchase was for 1,000 units at
$18.00. The December 31 inventory consisted of 1,200 units. The market price is $15.00.
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12.
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Refer to the Edwards Inc. Inventory Item T35 Scenario. The weighted-average unit
price is ____.
A. | $14.50 | C. | $15.67 | B. | $15.39 | D. | $16.00 |
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13.
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If the cost of ending merchandise inventory is understated, the cost of
merchandise sold will be ____.
A. | understated | C. | not affected | B. | overstated | D. | undetermined |
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14.
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The weighted-average inventory costing method is based on the assumption that
each item in ending inventory has a cost equal to the ____.
A. | beginning price paid for similar items | B. | ending price paid for similar
items | C. | average price paid for similar items | D. | average price for all inventory
items |
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15.
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The shipping terms that indicate that title to the goods passes to the buyer
when the goods are received by the buyer is ____.
A. | FOB shipping point | C. | FOB buyer | B. | FOB destination | D. | FOB seller |
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