Chapter 8 - Test Bank - Pada tanggal 10 Mei 2015, Cosmo Co. menandatangani kontrak untuk mengirimkan PDF

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Pada tanggal 10 Mei 2015, Cosmo Co. menandatangani kontrak untuk mengirimkan produk ke Greig Inc. pada tanggal 15 Juni 2015. Greig setuju untuk membayar harga kontrak penuh sebesar €2.000 pada tanggal 15 Juli 2015. Biaya barang adalah €1,300. Cosmo mengirimkan produk ke Greig pada 15 Juni 2015, dan ...

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CHAPTER 8 VALUATION OF INVENTORIES: A COST-BASIS APPROACH IFRS questions are available at the end of this chapter.

TRUE-FALSE—Conceptual Answer T F F F T T F T F T T F F T T F F T F T

No.

Description

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Work-in-process inventory. Merchandising and manufacturing inventory accounts. Perpetual inventory system. Determining when title passes. Inventory errors. Overstatement of purchases and ending inventory. Period vs. product costs. Reporting Purchase Discounts Lost. Cost flow assumption. FIFO periodic vs. perpetual system. Purchase commitments. Using LIFO for reporting purposes. LIFO liquidation. LIFO liquidations. Dollar-value LIFO Dollar-value LIFO method. LIFO-FIFO comparison. LIFO conformity rule. Selection of inventory method. Appropriateness of LIFO.

MULTIPLE CHOICE—Conceptual Answer c b b a c a d b b c d b a 8-2

No.

Description

21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33.

Identify manufacturer inventory similar to merchandise inventory. Classification of raw materials. Accounts included in inventory. Reason inventories are included in net income computation. Characteristic of perpetual inventory system. Reporting consignment inventory in balance sheet. Reporting goods in transit purchased f.o.b. destination. Effect of inventory error on net income. Effect of goods in transit on the current ratio. Description of consigned inventory. Entries under perpetual inventory system. Classification of goods in transit. Classification of goods in transit.

Test Bank for Intermediate Accounting, Fourteenth Edition

MULTIPLE CHOICE—Conceptual (cont.)

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Answer d d a b c b b d b a a d b c d d a b d b d a a c a d b a b a b a b a b c d d c b c a d c d d a

No.

Description

34. 35. 36. 37. S 38. P 39. P 40. S 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. S 59. P 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. S 80.

Identify inventory ownership. Identify a product financing arrangement. Identify ownership under product financing arrangement. Classification of goods on consignment. Valuation of inventories. Classification of beginning inventory. Effect of beginning inventory overstated. Effect of understating purchases. Effect of recording merchandise on consignment. Effect of ending inventory overvaluation. Effect of inventory errors on income. Effect of understating purchases and ending inventory. Effect of beginning inventory overstatement. Identification of a product cost. Identification of a period cost. Method used to record cash discounts. Identification of inventory costs. Identification of product costs. Determine product costs. Interest capitalization in manufacturing inventory. Determine cost of purchased inventory, using net method. Determine cost of purchased inventory, using gross method. Recording inventory purchases at gross or net amounts. Recording inventory purchases at gross or net amounts. Nature of trade discounts. Identifying inventoriable costs. Method approximating current cost. Average cost inventory valuation. Weighted-average inventory method. Nature of FIFO valuation of inventory. Flow of costs in a manufacturing situation. FIFO and decreasing prices. FIFO and increasing prices. FIFO and increasing prices. FIFO and LIFO inventory assumptions. LIFO and increasing prices. Knowledge of inventory valuation methods. Periodic and perpetual inventory methods. Appropriateness of specific identification method. FIFO and rising prices. LIFO and falling prices. LIFO reserve definition. LIFO reserve account classification. Identify LIFO liquidation. Obtaining price index under dollar-value LIFO. Description of LIFO layer. Dollar-value LIFO method.

Valuation of Inventories: A Cost-Basis Approach

MULTIPLE CHOICE—Conceptual (cont.) Answer a d c P S

No.

Description

81. 82. 83.

Identifying advantages of LIFO. LIFO for tax purposes and external reporting. LIFO advantages.

S

These questions also appear in the Problem-Solving Survival Guide. These questions also appear in the Study Guide.

MULTIPLE CHOICE—Computational Answer c c d d d c b c d a a d d d b d b d a a c d b c b c b a d c d d c c c b b c 8-4

No. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121.

Description Classification as inventory. Classification as inventory. Perpetual inventory method. Perpetual inventory method. Calculate ending inventory. Calculate ending inventory. Calculate total assets and net income. Calculate total assets and net income. Effect of inventory and depreciation errors on income. Effect of inventory and depreciation errors on retained earnings. Effect of inventory errors on working capital. Calculate cost of goods available for sale. Accounting for a purchase return (net method). Adjust Accounts Payable using the net method. Calculate ending inventory using weighted-average. Calculate ending inventory using moving average. Calculate ending inventory using LIFO. Calculate cost of goods sold using FIFO. Effect of using LIFO or FIFO. Perpetual inventory—LIFO valuation. Perpetual inventory—LIFO valuation. Perpetual inventory—FIFO valuation. Perpetual inventory—average cost valuation. Cost flow assumptions. Cost flow assumptions. Calculate units in ending inventory. Calculate cost of goods sold. Calculate cost of goods sold using average cost. Calculate ending inventory using average cost. Calculate ending inventory using FIFO. Calculate cost of goods sold using FIFO. Calculate ending inventory using LIFO. Calculate cost of goods sold using LIFO. LIFO reserve. LIFO reserve. LIFO liquidation. LIFO liquidation Dollar-value LIFO.

Test Bank for Intermediate Accounting, Fourteenth Edition

8-3

M U Answer b c b c c a b b d a c

LTIPLE CHOICE—Computational (cont.) No. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132.

Description Dollar-value LIFO. Dollar-value LIFO. Dollar-value LIFO. Calculate ending inventory using dollar-value LIFO. Calculate ending inventory using dollar-value LIFO. Calculate ending inventory using dollar-value LIFO. Calculate price index using double extension method. Calculate ending inventory using dollar-value LIFO. Calculate ending inventory using dollar-value LIFO. Calculate ending inventory using dollar-value LIFO. Calculate ending inventory using dollar-value LIFO.

MULTIPLE CHOICE—CPA Adapted Answer d a c d b d a b c c a c c a b

No. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147.

Description Calculate ending inventory using dollar-value LIFO. Identification of inventory costs. Determine cost of purchased inventory. Determine cost of sales. Calculate Accounts Payable at year end. Calculate Accounts Payable at year end. Calculate Accounts Payable at year end. Determine cost of purchased inventory. Determine cost of purchased inventory. Calculate unit cost using moving-average method. Periodic and perpetual inventory methods. FIFO and LIFO with increasing prices. Calculate ending inventory using LIFO. Dollar-value LIFO and the double extension approach. Calculate ending inventory using dollar-value LIFO.

EXERCISES Item E8-148 E8-149 E8-150 E8-151 E8-152 E8-153 E8-154 E8-155 E8-156

Description Recording purchases at net amounts. Recording purchases at net amounts. Comparison of FIFO and LIFO. FIFO and LIFO inventory methods. FIFO and LIFO periodic inventory methods. Perpetual LIFO. Perpetual LIFO and periodic FIFO. Analysis of gross profit. Dollar-value LIFO. Valuation of Inventories: A Cost-Basis Approach

PROBLEMS Item P8-157 P8-158

Description Inventory cut-off. Analysis of errors.

8-5

P8-159 P8-160 P8-161 P8-162

Accounting for purchase discounts. Inventory methods. Dollar-value LIFO. Dollar-value LIFO.

CHAPTER LEARNING OBJECTIVES 1.

Identify major classifications of inventory.

2.

Distinguish between perpetual and periodic inventory systems.

3.

Identify the effects of inventory errors on the financial statements.

4.

Understand the items to include as inventory cost.

5.

Describe and compare the cost flow assumptions used to account for inventories.

6.

Explain the significance and use of a LIFO reserve.

7.

Understand the effect of LIFO liquidations.

8.

Explain the dollar-value LIFO method.

9.

Identify the major advantages and disadvantages of LIFO.

10. 8-6

Understand why companies select given inventory methods. Test Bank for Intermediate Accounting, Fourteenth Edition

SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS I t e m

T y pe I t e m

T y pe I t e m

T y pe I t e m

T y pe I t e m

T y pe I t e m

T y pe I t e m

T y pe MC

1.

TF

2.

TF

21.

Learning Objective 1 MC 22. MC 23.

MC

84.

MC

3. 4. 24. 25. 26.

TF TF MC MC MC

27. 28. 29. 30. 31.

MC MC MC MC MC

32. 33. 34. 35. 36.

Learning Objective 2 37. MC 88. MC S 38. MC 89. MC P 39. MC 134. MC 86. MC MC 135. 87. MC MC 136.

MC MC MC MC MC

137. 138. 139. 157.

MC MC MC P

44. 45. 46.

Learning Objective 3 MC 90. MC 93. MC 91. MC 94. MC 92. MC 158.

MC MC P

53. 54. 55. 56.

Learning Objective 4 MC 96. 57. MC 58. MC MC 97. S 59. MC 137. MC 95. MC 140. MC

MC MC MC MC

141. 148. 149. 159.

MC E E P

5. 6. P 40. 7. 8. 47. 48.

TF TF MC TF TF MC MC

S

41. 42. 43. 49. 50. 51. 52.

MC MC MC MC MC MC MC

Learning Objective 5

85.

9. 10. P 60. 61. 62. 63. 64.

TF TF MC MC MC MC MC

65. 66. 67. 68. 69. 70. 71.

MC MC MC MC MC MC MC

72. 73. 74. 98. 99. 100. 101.

MC MC MC MC MC MC MC

102. 103. 104. 105. 106. 107. 108.

MC MC MC MC MC MC MC

109. 110. 111. 112. 113. 114. 115.

MC MC MC MC MC MC MC

116. 142. 143. 144. 145. 150. 151.

MC MC MC MC MC E E

11.

TF

12.

TF

75.

13.

TF

14.

TF

77.

Learning Objective 6 MC 76. MC 117. Learning Objective 7 MC 119. MC 120.

124. 125. 126. 127.

Learning Objective 8 MC 128. MC 132. 133. MC 129. MC 130. MC 146. MC MC 131. MC 147.

MC MC MC MC

81.

Learning Objective 9 MC 82. MC 83.

MC

150.

Learning Objective 10 E

S

15. 16. 78. 79.

TF TF MC MC

80. 121. 122. 123.

MC MC MC MC

17.

TF

18.

TF

19. Note:

TF

20.

TF

S

TF = True-False MC = Multiple Choice E = Exercise P = Problem

MC

118.

MC

MC

155.

E

156. 161. 162.

E P P

152. 153. 154. 160.

E E E P

Valuation of Inventories: A Cost-Basis Approach

8-7

TRUE FALSE—Conceptual 1.

A manufacturing concern would report the cost of units only partially processed as inventory in the balance sheet.

2.

Both merchandising and manufacturing companies normally have multiple inventory accounts.

3.

When using a perpetual inventory system, freight charges on goods purchased are debited to Freight-In.

4.

If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier.

5.

If ending inventory is understated, then net income is understated.

6.

If both purchases and ending inventory are overstated by the same amount, net income is not affected.

7.

Freight charges on goods purchased are considered a period cost and therefore are not part of the cost of the inventory.

8.

Purchase Discounts Lost is a financial expense and is reported in the “other expenses and losses” section of the income statement.

9.

The cost flow assumption adopted must be consistent with the physical movement of the goods.

10.

In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

11.

The change in the LIFO Reserve from one period to the next is recorded as an adjustment to Cost of Goods Sold.

12.

Many companies use LIFO for both tax and internal reporting purposes.

13.

LIFO liquidation often distorts net income, but usually leads to substantial tax savings.

14.

LIFO liquidations can occur frequently when using a specific-goods approach.

15.

Dollar-value LIFO techniques help protect LIFO layers from erosion.

16.

The dollar-value LIFO method measures any increases and decreases in a pool in terms of total dollar value and physical quantity of the goods.

17.

A disadvantage of LIFO is that it does not match more recent costs against current revenues as well as FIFO.

18.

The LIFO conformity rule requires that if a company uses LIFO for tax purposes, it must also use LIFO for financial accounting purposes.

8-8

Test Bank for Intermediate Accounting, Fourteenth Edition

19.

Use of LIFO provides a tax benefit in an industry where unit costs tend to decrease as production increases.

20.

LIFO is inappropriate where unit costs tend to decrease as production increases.

True False Answers—Conceptual Item 1. 2. 3. 4. 5.

Ans. T F F F T

Item 6. 7. 8. 9. 10.

Ans. T F T F T

Item 11. 12. 13. 14. 15.

Ans. T F F T T

Item 16. 17. 18. 19. 20.

Ans. F F T F T

MULTIPLE CHOICE—Conceptual 21.

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer? a. Raw materials. b. Work-in-process. c. Finished goods. d. Supplies.

22.

Where should raw materials be classified on the balance sheet? a. Prepaid expenses. b. Inventory. c. Equipment. d. Not on the balance sheet.

23.

Which of the following accounts is not reported in inventory? a. Raw materials. b. Equipment. c. Finished goods. d. Supplies.

24.

Why are inventories included in the computation of net income? a. To determine cost of goods sold. b. To determine sales revenue. c. To determine merchandise returns. d. Inventories are not included in the computation of net income.

25.

Which of the following is a characteristic of a perpetual inventory system? a. Inventory purchases are debited to a Purchases account. b. Inventory records are not kept for every item. c. Cost of goods sold is recorded with each sale. d. Cost of goods sold is determined as the amount of purchases less the change in inventory.

Valuation of Inventories: A Cost-Basis Approach

8-9

26.

How is a significant amount of consignment inventory reported in the balance sheet? a. The inventory is reported separately on the consignor's balance sheet. b. The inventory is combined with other inventory on the consignor's balance sheet. c. The inventory is reported separately on the consignee's balance sheet. d. The inventory is combined with other inventory on the consignee's balance sheet.

27.

Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? a. Accounts payable. b. Inventory. c. Equipment. d. Not on the balance sheet.

28.

If a company uses the periodic inventory system, what is the impact on net income of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate net income. b. Understate net income. c. No effect on net income. d. Not sufficient information to determine effect on net income.

29.

If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate the current ratio. b. Understate the current ratio. c. No effect on the current ratio. d. Not sufficient information to determine effect on the current ratio.

30.

What is consigned inventory? a. Goods that are shipped, but title transfers to the receiver. b. Goods that are sold, but payment is not required until the goods are sold. c. Goods that are shipped, but title remains with the shipper. d. Goods that have been segregated for shipment to a customer.

31.

When using a perpetual inventory system, a. no Purchases account is used. b. a Cost of Goods Sold account is used. c. two entries are required to record a sale. d. all of these.

32.

Goods in transit which are shipped f.o.b. shipping point should be a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these.

33.

Goods in transit which are shipped f.o.b. destination should be a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these.

8 - 10 34.

Test Bank for Intermediate Accounting, Fourteenth Edition Which of the following items should be included in a company's inventory at the balance sheet date? a. Goods in transit which were purchased f.o.b. destination. b. Goods received from another company for sale on consignment. c. Goods sold to a customer which are being held for the customer to call for at his or her convenience. d. None of these.

Use the following information for questions 35 and 36. During 2012 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2013. Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne. In 2013 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan. 35.

This transaction is known as a(n) a. consignment. b. installment sale. c. assignment for the benefit of creditors. d. product financing arrangement.

36.

On whose books should the cost of the inventory appear at the December 31, 2012 balance sheet date? a. Carne Corporation b. Nolan Corporation c. Norwalk Bank d. Nolan Corporati...