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WorksheetsACCOUNTING FOR INVENTORIES
Total questions: 37
Worksheet time: 5mins
In a manufacturing business, inventory that is ready for sale is called
raw materials inventory.
work in process inventory.
finished goods inventory.
store supplies inventory.
Beginning inventory plus the cost of goods purchased equals
cost of goods sold.
cost of goods available for sale.
net purchases.
total goods purchased.
Cost of goods sold is computed from the following equation:
beginning inventory – cost of goods purchased + ending inventory.
sales – cost of goods purchased + beginning inventory – ending inventory.
sales + gross profit – ending inventory + beginning inventory.
beginning inventory + cost of goods purchased – ending inventory.
The LIFO inventory method assumes that the cost of the latest units purchased are
the last to be allocated to cost of goods sold.
the first to be allocated to ending inventory.
the first to be allocated to cost of goods sold.
not allocated to cost of goods sold or ending inventory.
In perpetual inventory system
the balance is adjusted at the end of the accounting period
the balance of goods is constantly moving
the ending inventory is only updated when the physical inventory is conducted
is suitable for a small business
The inventory system that does NOT update the Inventory account automatically at the time of each purchase or sales is the _______________ system.
periodic
perpetual
Which of the items would be included as the inventory of the business?
Printer for office use
Delivery vans to deliver baking equipment
Cookies in the office pantry
Baking equipment for resale
The inventory of a business will increase when there are :
sales and sales returns
purchase and purchase returns
sales and purchase returns
purchase and sales returns
In perpetual inventory system, what entries are made to record purchase returns.
debit accounts payable ; credit purchase returns
debit purchase returns; credit accounts payable
debit inventory ; credit accounts payable
debit accounts payable; credit inventory
The inventory of a business will decrease when there are :
sales and sales returns
purchase and purchase returns
sales and purchase returns
purchase and sales returns
The cost of goods sold is determine and recorded when purchases and sales occur. This statement refer to
Periodic inventory system
Perpetual inventory system
Physical stock count will be made at the end of each accounting period to enable the determination of cost of goods sold. This statement is suitable for
Periodic inventory system
Perpetual inventory system
Inventory record will be updated continuously after each purchase or sale, these is an advantages of
Periodic inventory system
Perpetual inventory system
Inventory record will be updated monthly, quarterly or at the end of each accounting period. This statement suitable to explain
Periodic inventory system
Perpetual inventory system
Which inventory system is suitable to be used for the businesses with the high volume of products and with the several outlets.
Periodic inventory system
Perpetual inventory system
Which inventory system is suitable to be used for the small businesses with the low volume of products.
Periodic inventory system
Perpetual inventory system
Which of the following inventory costing method will value the ending inventory costs, closest to the current market value.
FIRST-IN, FIRST-OUT (FIFO)
LAST-IN, FIRST-OUT (LIFO)
WEIGHTED-AVERAGE
Which of the following inventory costing method will produce the lower profit during the inflation period.
FIRST-IN, FIRST-OUT (FIFO)
LAST-IN, FIRST-OUT (LIFO)
WEIGHTED-AVERAGE
Which of the following inventory costing method will produce the higher net profit during the inflation period.
FIRST-IN, FIRST-OUT (FIFO)
LAST-IN, FIRST-OUT (LIFO)
WEIGHTED-AVERAGE
Which of the following is suitable to explain the effects on inventory valuation on profit?
Ending inventory costs high → COGS high → Gross profit low
Ending inventory costs high → COGS low → Gross profit high
Ending inventory costs low → COGS low → Gross profit high
Ending inventory costs low → COGS high → Gross profit high
Ending inventory costs high → COGS low → Gross profit low
Which of the following inventory costing method will show the same ending inventory value for both inventory system?
FIRST-IN, FIRST-OUT (FIFO)
LAST-IN, FIRST-OUT (LIFO)
WEIGHTED-AVERAGE
In perpetual inventory system, what entries are made to record purchases of merchandise on account.
debit accounts payable ; credit purchases
debit purchases; credit accounts payable
debit inventory ; credit accounts payable
debit accounts payable; credit inventory
In periodic inventory system, what entries are made to record purchase returns.
debit accounts payable ; credit purchase returns
debit purchase returns; credit accounts payable
debit inventory ; credit accounts payable
debit accounts payable; credit inventory
In periodic inventory system, what entries are made to record purchases of merchandise on account.
debit accounts payable ; credit purchases
debit purchases; credit accounts payable
debit inventory ; credit accounts payable
debit accounts payable; credit inventory
In perpetual inventory system, what entries are made to record sales returns.
debit cost of goods sold ; credit inventory
debit sales returns; credit accounts receivable
debit inventory ; credit cost of goods sold
debit inventory; credit accounts receivable
debit sales returns; credit cost of goods sold
In periodic inventory system, what entries are made to record sales returns.
debit cost of goods sold ; credit inventory
debit sales returns; credit accounts receivable
debit inventory ; credit cost of goods sold
debit inventory; credit accounts receivable
debit sales returns; credit cost of goods sold
In perpetual inventory system, what entries are made to record sales of merchandise on accounts.
debit cost of goods sold ; credit inventory
debit accounts receivable; credit sales
debit inventory ; credit cost of goods sold
debit accounts receivable; credit inventory
debit sales; credit cost of goods sold
Which of the following best defines inventory?
Goods held for resale in the normal course of business
Cash and cash equivalents
Non-current assets used in operations
Prepaid expenses
Which inventory method assumes the earliest goods purchased are the first sold?
FIFO
LIFO
Weighted Average
Specific Identification
Which inventory method results in lower cost of goods sold when prices are rising?
FIFO
LIFO
Weighted Average
Specific Identification
Under periodic system, cost of goods sold is calculated as:
Beginning inventory + Purchases + Ending inventory
B. Purchases – Ending inventory
Beginning inventory + Purchases – Ending inventory
Beginning inventory – Purchases + Ending inventory
Under perpetual inventory system:
Inventory balance is updated continuously
Inventory is updated
No record of COGS
Suitable only for small businesses
Which system requires a physical count to determine COGS?
Perpetual
Periodic
Weighted Average
FIFO
In a perpetual system, the journal entry for sale of goods includes:
Dr Sales, Cr Cash
Dr Cash, Cr Sales
Dr Cost of Goods Sold, Cr Inventory
Dr Cost of Goods Sold, Cr Inventory
Dr Cash, Cr Sales
Physical stocktaking is performed to:
Calculate depreciation
Verify actual stock with records
Compute revenue
Determine liabilities
Which of the following is an advantage of perpetual system?
Less record keeping
More accurate inventory control
Lower cost
No need for computers
Which method gives lowest ending inventory when prices are rising?
FIFO
LIFO
Weighted Average
Specific Identification
