Quiz Inventory

Overstating ending inventory will overstate all of the following except

• assets

• cost of goods sold

• net income

• owner's equity

Understating beginning inventory will understate

• assets

• cost of goods sold

• net income

• owner's equity

A company understated its inventory by $10,000 at December 31, 2023. It did not correct the error in 2023 or 2024. As a result, its equity was:

• understated at December 31, 2023, and overstated at December 31, 2024

• understated at December 31, 2023, and properly stated at December 31, 2024

• overstated at December 31, 2023, and overstated at December 31, 2024

• understated at December 31, 2023, and understated at December 31, 2024

A newly established company buys three inventory items at the following prices: the first item costs €100, the second costs €120, and the third costs €110. If the company sells two units for a total of €350 using the FIFO (First-In, First-Out) method, what is the gross profit for that period?

• €130

• €150

• €120

• €140

A company purchased inventory in two batches: 150 units at $4.00 each, followed by 250 units at $5.50 each. What is the average cost per unit for the inventory?

• $4.75

• $5.00

• $5.25

• $5.5

Which inventory method is often impractical to use?

• Specific identification

• Average cost

• FIFO

• All of these answer choices are practical to use

Inventory details for the month of January for a company using a periodic inventory system are as follows:

• January 1 beginning balance: 400 units at $6.00

• January 15 purchase: 200 units at $6.30

• January 20 purchase: 200 units at $6.50
  At the end of the month, 240 units remain in inventory. If the company uses the FIFO method, what is the Cost of Goods Sold (COGS)?

• $3,260

• $3,580

• $3,620

• $3,700

A company that uses a periodic inventory system had the following inventory details for January:

• 400 units at $5.00 on January 1,

• 200 units at $5.30 on January 15,

• 200 units at $5.50 on January 20.
  If the company had 240 units left at the end of January, how many units were sold during the month?

• 560

• 640

• 720

• 800

A company has 5,000 units of Product A and 7,000 units of Product B in its inventory as of December 31. The details for each product are as follows:

• Product A: Historical cost $35, Net Realizable Value $30

• Product B: Historical cost $80, Net Realizable Value $85

What amount should the company report as ending inventory on its balance sheet for December 31 using the lower of cost or net realizable value (LCNRV)?

• $645,000.

• $665,000.

• $655,000.

• $675,000.

A company reported its ending inventory as $60,000, but it accidentally excluded $6,000 worth of inventory that was actually in stock. How will this error affect the company’s net income for the year?

• Net income will be understated by $6,000.

• Net income will be overstated by $6,000.

• Net income will remain unchanged.

• Net income will be understated by $10,000.