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Garrit Limited's income statement reported the following for the year ended Dec 31,2016: Garrit Limited's income statement reported the following for the year ended Dec 31,2016: Which is the correct statement about the income statement? A) Mark-up on selling price is $573,000. B) Mark-up on cost is 53.75%. C) Gross margin percentage is 20.32%. D) Mark-up on the selling price is $308,000. Which is the correct statement about the income statement?


A) Mark-up on selling price is $573,000.
B) Mark-up on cost is 53.75%.
C) Gross margin percentage is 20.32%.
D) Mark-up on the selling price is $308,000.

E) A) and D)
F) C) and D)

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Which statement is not correct about the perpetual inventory system for inventory management?


A) This system keeps track of additions to and withdrawals from inventory.
B) It is not necessary to conduct an inventory count if the perpetual system is used.
C) This method produces timely information for management.
D) With this method,the company knows the inventory on hand and the related cost of goods sold at any point in time.

E) B) and D)
F) None of the above

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Which statement is correct about overhead?


A) Fixed overhead is capitalized under absorption costing.
B) Fixed overhead is capitalized under variable costing.
C) Variable overhead is always expensed.
D) Selling costs are part of fixed overhead.

E) All of the above
F) A) and B)

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What issues arise on the subsequent measurement of inventory?


A) Determining which expenditures to capitalize into the "inventory" account.
B) Determining which expenditures to expense into the "cost of goods sold" account.
C) Determining how much of the costs recognized in inventory should be expensed in the year.
D) Determining the appropriate valuation of inventories that remain on hand.

E) All of the above
F) B) and D)

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Which of the following is a potential journal entry required after the inventory count under the periodic inventory system?


A) Which of the following is a potential journal entry required after the inventory count under the periodic inventory system? A) B) C) D)
B) Which of the following is a potential journal entry required after the inventory count under the periodic inventory system? A) B) C) D)
C) Which of the following is a potential journal entry required after the inventory count under the periodic inventory system? A) B) C) D)
D) Which of the following is a potential journal entry required after the inventory count under the periodic inventory system? A) B) C) D)

E) None of the above
F) A) and B)

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Which statement best explains the gross margin method?


A) A method for estimating cost of goods sold by applying an average gross margin to the amount of sales recorded in a period.
B) A method that assigns costs to inventories and cost of sales based on actual costs of each item.
C) A method of estimating the cost of ending inventory by applying an average sales margin to the retail price of products.
D) This method is least appropriate for inventory items that are not distinguishable from one another.

E) B) and D)
F) A) and D)

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Explain the meaning of product costs and period costs.Discuss which costs should be included in the cost of inventories.

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•Product costs are those that should be ...

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SimBis Enterprises incurred the following costs to produce and sell its inventory in 2016: SimBis Enterprises incurred the following costs to produce and sell its inventory in 2016: SimBis also noted that the following errors were made in recording transactions in 2016 (note that these errors only affect part (d)of this question): Required: a)Determine the cost of inventory under the absorption costing method. b)Determine the cost of inventory under the variable costing method. c)Explain how management could potentially manipulate net income by using absorption costing.What can an analyst or investor do to check if income has been manipulated through the use of absorption costing? d)Assume that,before any corrections,gross margin was $500,000 and ending retained earnings was $750,000.Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2016. SimBis also noted that the following errors were made in recording transactions in 2016 (note that these errors only affect part (d)of this question): SimBis Enterprises incurred the following costs to produce and sell its inventory in 2016: SimBis also noted that the following errors were made in recording transactions in 2016 (note that these errors only affect part (d)of this question): Required: a)Determine the cost of inventory under the absorption costing method. b)Determine the cost of inventory under the variable costing method. c)Explain how management could potentially manipulate net income by using absorption costing.What can an analyst or investor do to check if income has been manipulated through the use of absorption costing? d)Assume that,before any corrections,gross margin was $500,000 and ending retained earnings was $750,000.Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2016. Required: a)Determine the cost of inventory under the absorption costing method. b)Determine the cost of inventory under the variable costing method. c)Explain how management could potentially manipulate net income by using absorption costing.What can an analyst or investor do to check if income has been manipulated through the use of absorption costing? d)Assume that,before any corrections,gross margin was $500,000 and ending retained earnings was $750,000.Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2016.

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a)and b)
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c)Under absorption costing a...

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Which goods in transit would be recorded in inventory at year end?


A) Goods purchased with terms F.O.B.destination point that were received after year end.
B) Goods purchased with terms F.O.B.shipping point that were received after year end.
C) Goods sold F.O.B.shipping point that were shipped two weeks before year end.
D) Goods returned for credit,with terms F.O.B.destination point,received two days after year end.

E) C) and D)
F) B) and D)

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Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2016 financial reporting?


A) Retained earnings is overstated by $1,000.
B) No effect on inventory value on the balance sheet.
C) No effect on retained earnings.
D) Inventory is understated on the balance sheet.

E) C) and D)
F) B) and C)

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What issues arise on the initial recognition and measurement of inventory?


A) Determining which expenditures to capitalize into the "inventory" account.
B) Determining which expenditures to expense into the "cost of goods sold" account.
C) Determining how much of the costs recognized in inventory should be expensed in the year.
D) Determining the appropriate valuation of inventories that remain on hand.

E) A) and B)
F) B) and C)

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Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?


A) Gross margin is overstated by $1,000.
B) Cost of sales is overstated by $1,000.
C) Ending inventory is understated by $1,000.
D) No effect on beginning inventory.

E) All of the above
F) A) and C)

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Give some examples of how manufacturing companies can manipulate earnings through its production process.What should an auditor or financial statement user do to detect this type of manipulation?

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For manufacturing companies,producing mo...

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A particular production process requires two types of raw materials to produce the end product.Each unit of finished product requires three units of raw material A and 2 units of raw material B,plus processing costs of $35.The following provides information on inventories at fiscal 2015 year-end: A particular production process requires two types of raw materials to produce the end product.Each unit of finished product requires three units of raw material A and 2 units of raw material B,plus processing costs of $35.The following provides information on inventories at fiscal 2015 year-end: Required: a.Evaluate these inventories to determine the amount of write-down,if any. b.If the entry required in part (a)is not made in fiscal 2015,what is the effect on i)2015 and 2016 inventory on the balance sheet ii)2015 and 2016 cost of goods sold iii)2015 and 2016 net income iv)2015 and 2016 retained earnings Required: a.Evaluate these inventories to determine the amount of write-down,if any. b.If the entry required in part (a)is not made in fiscal 2015,what is the effect on i)2015 and 2016 inventory on the balance sheet ii)2015 and 2016 cost of goods sold iii)2015 and 2016 net income iv)2015 and 2016 retained earnings

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a.The finished product's NRV < cost.Ther...

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What definition is used for "market" under IFRS and ASPE?


A) The amount it would cost to repurchase an item of inventory.
B) The lowest amount that can be obtained from the sale of inventory.
C) The amount required to be paid to replace an item of inventory.
D) The amount that can be obtained from selling the inventory less selling costs.

E) A) and B)
F) None of the above

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Sarabjit Inc.produced the following information for December,2016: Sarabjit Inc.produced the following information for December,2016: Required: NOTE THAT EACH REQUIREMENT IS INDEPENDENT OF THE OTHERS. a)Determine if any of the transactions near year-end should be included in the December 31,2016 inventory balance. b)Determine if there is any impairment of inventory at December 31,2016. c)Determine the cost of goods sold for December 2016. d)The company has a historical gross margin of 25%.If sales were $400,000,what should ending inventory be at December 31,2016? Required: NOTE THAT EACH REQUIREMENT IS INDEPENDENT OF THE OTHERS. a)Determine if any of the transactions near year-end should be included in the December 31,2016 inventory balance. b)Determine if there is any impairment of inventory at December 31,2016. c)Determine the cost of goods sold for December 2016. d)The company has a historical gross margin of 25%.If sales were $400,000,what should ending inventory be at December 31,2016?

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a)Determine if any of the transactions n...

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The following information was taken from the inventory records of Penelope Ltd.: The following information was taken from the inventory records of Penelope Ltd.: What would be the gross margin,assuming that the weighted-average method is used in a periodic inventory system? A) $310 B) $875 C) $935 D) $1,810 What would be the gross margin,assuming that the weighted-average method is used in a periodic inventory system?


A) $310
B) $875
C) $935
D) $1,810

E) A) and B)
F) A) and C)

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What costs are not included in the cost of inventories?


A) Raw materials.
B) Labour used to make the finished product.
C) Costs to deliver raw materials to the company.
D) Costs to ship goods to customers.

E) All of the above
F) A) and B)

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Use the chart provided below to determine the impact if a company forgets to include $3,500 of inventory that was shipped FOB shipping point on December 25,2017 but was still in transit at year end.The purchase invoice was processed in fiscal 2018. Use the chart provided below to determine the impact if a company forgets to include $3,500 of inventory that was shipped FOB shipping point on December 25,2017 but was still in transit at year end.The purchase invoice was processed in fiscal 2018.

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A retailer has a standard mark-up of 50% on invoiced cost.At the year end,200 out of 5,000 products had been discounted by 20% of retail price. Required: Calculate the estimated costs as a percentage of retail price,separately for regular and discounted products.

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