Accounting Accounting, Quizzes of Accounting

Download Accounting Accounting and more Quizzes Accounting in PDF only on Docsity!

c. Estimate of inventory destroyed by fire or other casualty d. Rough test of the validity of an inventory cost determined under either periodic or perpetual system. ¢c. There is no beginning inventory because it is the first year of operation d. The gross profit percentage applicable to goods in ending inventory is different from the percentage applicable to goods sold during 6. The use of the gross profit method assumes a. The amount of gross profit is the same as in prior years. b. Sales and cost of goods sold have not changed from previous years. c. Inventory values not increased from previous: years. d. The relationship between selling price and cost of goods sold is similar to prior years. Answer. a. The amount of gross profit is the same as_ icLorior years, 7. The gross profit method of estimating inventory would not be useful when a. A periodic system is use and inventories are required for interim statements. b. Inventories have been destroyed or lost by fire, theft or other casualty and the ‘specific data required for inventory valuation are not available. c. There is a significant change in product being sold d The relationship between gross profit and sales remain stable over time 8. The gross profit method of inventory valuation is not valid when a. There is substantial increase in the quantity of inventory during the year. b. There is substantial increase in the cost of inventory during the year. c. The gross margin percentage changes significantly during the year. d. JA ending inventory i destroyed by fire before it 9. The gross profit method of inventory valuation is invalid when a. A portion of inventory is destroyed b. There is a substantial increase in inventory during the year. 10.Which of the following statements is not valid about ‘the gross profit method? a. It may be used by auditors b. Itis an acceptable accounting procedure c. It may be used to estimate inventory for interim statements d. It may be used to estimate inventory for annual statements. Answer dit May be used to estimate inventory for annual statements. Problem 20-1 Multiple choice 4. Which will not require an estimate of inventory? a. Inventory destroyed by typhoon: : b. Proof of the reasonable accuracy of the physical inventory c. Interim financial statements are prepared d. Determination of the ending inventory to be reported in the statement of financial Position at year-end Answer. c. Interim financial statements are. prepared 2. How is the gross profit method used as it relates to inventory valuation? a. To verify the accuracy of the perpetual inventory record. b. To verify the accuracy of the physical inventory. c. To estimate cost of goods sold. d. To provide an inventory value under FIFO Answer. c To estimate cost of goods sold. 3. Which of the following is not a basic assumption of the gross profit method? a. The beginning verry Blu purchases equal total goods fo be accounted for. b. ‘Goods not sold must be hand c. The sales reduced to cost basis when deducted from the sum of the beginning inventory and purchases would result to inventory on hand d. The amount of purchases and amount of sales: remain relatively unchanged from the eomnarahle nrevinwe nearing