The document presents multiple choice questions and answers related to inventory valuation and the gross profit and retail methods. It covers various inventory calculation methods, financial principles, journal entries, and impacts of inventory errors. Additionally, it emphasizes key concepts in accounting pertaining to inventory management and financial reporting.

1. 1I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
INVENTORY VALUATION, GROSS PROFIT METHOD AND RETAIL METHOD
MUTIPLE CHOICE
1. RCA Company has inventory and sales data for portableDVD players areas follows:
June 1 Inventory 25 units atP 4 100
June 6 Sales 16 units
June 13 Purchased 18 units atP 4 200
June 18 Sales 12 units
June 22 Purchased 4 units
June 30 Sales 8 units atP 4 300
If the inventory was valued at FIFO assumption of perpetual inventory system. What is the
inventory balanceatJune 30?
A. 80 800 B. 82 300 C. 81 500 D. 80 600
2. Sakimoto Co. has a record followingdata of inventory which is the company uses retail method.
Date Cost Retail
April 1, 2008 Inventory P 167 710 P 270 500
April 1- 30 Purchases (net) 651 000 1 050 000
April 1 -30 Sales (net) 975 000
What is the amount of ending inventory at April 30,2008?
A. 214 210 B. 215 312 C. 224 520 D. 210 240
The followinginformation is availablefor Tonnette Company for the current year.
Net Sales 3 600 000
Freight In 90 000
PurchaseDiscounts 50 000
Ending Inventory 240 000
3. The gross margin is 40%of sales.Whatis the cost of goods sold?
A. 1 160 000 B. 1 920 000 C. 2 400 000 D. 2 440 000
4. The cost of goods availablefor salewas:
A. 1 680 000 B. 1 920 000 C. 2 400 000 D. 2 440 000
NAME: __________________________________________________ YR ANDSEC :

2. 2I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
5. Stephanie Co. is a wholesaler of photographic products.The activity for the inventory of camera sellers
duringSeptember is shown below :
Units Unit cost
September 1 Inventory 20000 36.00
September 7 Purchased 30000 37.00
September 12 Sold 36000
September 21 Purchased 50000 37.88
September 22 Sold 38000
September 29 Purchased 16000 38.11
If Stephanie Co. uses the periodic average cost method to accountfor inventory, what is the ending
inventory on September 30?
A. 1 534 000 B. 1 569 120 C. 1 587 360 D. 1 594 640
6. The worksheet consisted of five pairs of debitand creditcolumns.The amount of one item appeared in
both the creditcolumn of the income statement section and the debit column of the statement of
financial position section.Whatis theitem?
A. Net income for the period
B. Beginning Inventory
C. Cost of Goods Sold
D. Net loss for the period
7. Revenue is generally recognized when a saleoccurs.This statement describes the:
A. Consistency.
B. MatchingPrinciple.
C. Revenue recognition principle.
D. Relevance characteristic.
8. If the beginninginventory for 2010 is overstated, the effects of this error on cost of goods sold for 2010,
net income for 2010,and assets atDecember 31, 2010,respectively, are:
A. Overstatement, Understatement, Overstatement.
B. Overstatement, Understatement, No effect.
C. Understatement, Overstatement, Overstatement.
D. Understatement, Overstatement, No effect.
9. In a period of risingprices,theinventory method which tends to give the highest reported inventory is :
A. FIFO B. Average Method C. Specific Identification D. LIFO

3. 3I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
10. Dell company provided the followinginformation for the current year:
What is the cost of goods sold for the current year?
A. 4 650 000 B. 4 750 000 C. 5 050 000 D. 5 850 000
11. Gianna Company reported the followinginformation for the current year.
What is the amount of gross sales for the current year?
A. 7 750 000 B. 4 750 000 C. 5 050 000 D. 9 125 000
12. Too much inventory on hand
A. Reduces solvency
B. Increases the costto safeguard the assets
C. Increases the losses dueto price declines
D. All of the above.
13. The notification accompanyinga check that indicates the specific invoicebeingpaid is called a:
A. Remittance Advice
B. Voucher
C. Debit Memorandum
D. Credit Memorandum
14. BerkshireBoutique sold tuxedo worth 500 000 to customer. The customer paid with their credit card and
the processingfee payableto the credit card company is `1.5%. What is the entry for that transaction?
A. Cash (dr.) 492 500 Credit Card Expense (dr.) 7 500 Sales (cr.) 500 000
B. Cash (dr.) 492 500 Credit Card Receivable(dr.) 7 500 Sales (cr.) 500 000
C. Cash (dr.) 500 000 Credit card Payable(cr.) 7 500 Sales (cr.) 492 500
D. Cash (dr.) 500 000 Credit card Expense (cr.) 7 500 Sales (cr.) 492 500
15. If the costof an item of inventory is P 60 and the current replacement costis P 65, the amount included
in inventory accordingto the lower of cost or market is:
A. P 5 B. P 60 C. P 65 D. P 125
Purchases 5 300 000
PurchaseDiscounts 100 000
Beginning Inventory 1 600 000
Ending Inventory 2 150 000
Freight Out 400 000
Beginning Inventory 2 000 000
Purchases 7 500 000
PurchaseReturns and Allowances 500 000
Ending Inventory 2 800 000
Sales Returns and Allowances 750 000
Gross Profitrate on Sales 20%

4. 4I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
16. The method of computing inventory that uses records of the sellingpricesof the merchandiseis called:
A. Retail method B. Last-in,First-out C. First-in,first-out D. Average cost
17. Beginning inventory, purchases and sales data for tennis rackets areas follows:
Assumingthe business maintain a perpetualinventory system, calculatethe costof merchandisesold and
ending inventory under LIFO assumption:
A. Cost of merchandisesold 491;Ending Inventory 90
B. Cost of merchandisesold 120;Ending Inventory 461
C. Cost of merchandisesold 461;Ending Inventory 120
D. Cost of merchandisesold 90; Ending Inventory 491
18. Financial statements must be prepared at least:
A. Annually B. Quarterly C. Semi-annually D. Every two years
19. Under a periodic inventory system, closingentries will include:
A. Dr. Sales,Purchasereturns and allowances,Purchases Discounts
B. Cr. Purchases,Sales Discounts,Sales Returns and Allowances
C. Adjust Merchandiseinventory accountto match physical counted inventory.
D. All are correct.
20. The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory
A. Jan 1 Inventory 250
Accounts Payable250
B. Jan 1 Officesupplies 250
Accounts Payable250
C. Jan 1 Purchases 250
Accounts Payable250
D. Jan 1 Purchases 250
Accounts Receivable250
21. Which of the followingspecial journals would beused in an accounting systems for merchandising?
A. Inventory Journal,Accounts ReceivableJournal,Accounts PayableJournal,Cash Journal
B. Sales Journal,Purchases Journal,Cash Disbursements Journal,Cash Receipts Journal
C. Sales Journal and Purchases Journal only
D. Sales Journal,Inventory Journal,Cash Disbursements Journal,Cash Receipts Journal
Feb 3 Inventory 12 units @ P 15
11 Purchases 13 units @ P 17
14 Sales 18 units
21 Purchases 9 units @ P 20
25 Sales 10 units

5. 5I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
22. Duringa period of fallingprices,which of the followinginventory methods generally results in the lowest
balancesheet amount for inventory.
A. Average method
B. LIFO method
C. FIFO method
D. Cannot tell without more information
23. A company will mostlikely usean estimated method of estimating inventory when:
A. The company decides not to do a physical inventory.
B. A natural disaster has destroyed most of their inventory.
C. The company has not kept up with their inventory records.
D. Trying to determine the amount of theft that has taken place.
24. Which of the followingis notcharacteristic of inventory?
A. An assetheld for salein the ordinary courseof business.
B. An assetin the process of production for sale.
C. An assetin the form of materials or supplies to be consumed in the production process or in the
rendering of services.
D. An assetheld for use in the production or supply of goods or service.
25. Which term represents the deduction from the invoiceprice of purchased goods granted by suppliers for
early payment?
A. Cash Discount B. Sales Discount C. Trade Discount D. Purchasediscount
26. The inventories of a serviceprovider may simply bedescribed as:
A. Work in progress B. Unbilled Services C. Billed Services D. Services Inventory
27. Inventories are costusing:
A. FIFO B. Average Method C. LIFO D. Either FIFO or Average Method
28. Which of the followinginventory method reports most closely the current costof inventory?
A. FIFO B. Average Method C. LIFO D. Specific Identification
29. The specific identification method of inventory costing:
A. Eliminates all opportunity for profitmanipulation.
B. Matches areflow of recorded costs with the physical flowof goods.
C. Can be used only with a perpetual inventory system.
D. Is not essential to comply on GAAP.
30. Which will notrequire an estimate method of estimating inventory?
A. Inventory destroyed by typhoon.
B. Proof of the reasonableaccuracy of the physical inventory.
C. Interim financial statements areprepared.
D. Determination of the ending inventory to be reported in the balancesheet at year-end.

6. 6I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
31. Converse Company provided the followingdata for the current year.
What is the gross profitrate on costfor the current year?
A. 25% B. 33 1/3 % C. 75% D. 66 2/3 %
32. Vixx Company had an inventory items that should be not included in ending inventory.
A. Goods were purchased from JICC Company at FOB shippingpoint.
B. Goods on consignment to Exotronics Retail shop.
C. Inventory received on consignment from Villman Co.
D. Inventory delivered to customers at FOB destination.
33. Mr. Pogi Co. debited an expenses accountfor the purchaseof equipment. This error:
A. Overstated net income.
B. Understated net income.
C. Either a. or b, depending on the circumstances
D. Had no effect on net income.
34. Acad Co. sells its merchandiseat a gross profit of 30%. The followingfigures areamong those pertaining
to Acad’s operations for six months ended June 30, 2014:
On June 30, 2014,Acad’s entire inventory was destroyed by fire. The estimated costof this destroyed
inventory was:
A. 4 800 000
B. 2 800 000
C. 1 600 000
D. 800 000
35. Nguyen Company purchased noodles for selling,the invoicefor P 84 500 includes P 4 500 freight and
terms 3/15 n/30. Merchandisein the amount of P 12 000 was returned due to expiration,and the balance
of the invoicewas paid within the discountperiod.How much cash was disbursed by Nguyen in full
settlement of the account?
A. P 84 500 B. P 70 460 C. P 72 500 D. P 77 000
Sales 6 200 000
Sales Return 200 000
Beginning Inventory 1 000 000
Purchases 5 500 000
Freight in 250 000
Purchases Return and Allowance 130 000
PurchaseDiscount 20 000
Ending Inventory 2 100 000
Net Sales 8 000 000
Beginning Inventory 2 000 000
Net Purchases 5 200 000

7. 7I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
36. The difference between financial statements of serviceand merchandisebusiness isan asset account:
A. MerchandiseInventory C. Costof Goods Sold
B. Sales D. Allowancefor UncollectibleAccounts
37. Measuringthe company’s profitability:
A. Current Ratio
B. Inventory Turnover
C. Rate of Return on Net Sales
D. Accounts ReceivableTurnover
38. Indicates saleability of inventory:
A. Rate of Return of Net Sales
B. Inventory Turnover
C. Doomsday Ratio
D. Accounts ReceivableTurnover
39. Roland Music Electronics Co.has data for sold electric piano for the si months that is ended on June 30,
2010:
Determine the estimated costof June 30, 2010 inventory that the company maintains a gross profit rate
of 25% on cost of goods sold. The balanceof inventory for June 30, 2010 is:
A. 210 000 B. 73 000 C. 215 000 D. 75 000
40. Assume the Roland Music reported that 30% of inventory were stolen by employees which is detected
through physical counting. The cost of missinginventory is:
A. 63 000 B. 21 900 C. 64 500 D. 22 500
ANG ACCOUNTING STUDENT AY HINDI SUSUKO!!
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#CPAinTRANSIT
Inventory, Jan 1, 2010 P 500 000
Purchases 2 000 000
PurchaseReturns 3 000 000
PurchaseDiscounts 80 000
Ending Inventory 5 000
Sales Returns 60 000
Sales Discount 4 000

8. 8I7INVENTORY VALUATION AND GROSS PROFIT AND RETAIL METHOD
CORRECT ANSWER:
1. D
2. A
3. D
4. B
5. B
6. D
7. C
8. A
9. D
10. A
11. B
12. C
13. B
14. A
15. B
16. A
17. C
18. B
19. C
20. C
21. B
22. B
23. C
24. D
25. D
26. D
27. D
28. C
29. A
30. B
31. B
32. C
33. B
34. B
35. A
36. A
37. C
38. B
39. B
40. B