Question : Multiple Choice Questions 1.Portland Supplies Co. mistakenly excluded $3,000 of goods : 1253653

Multiple Choice Questions

1.Portland Supplies Co. mistakenly excluded $3,000 of goods from its December 31, 2010 physical inventory count. Its December 31, 2011 inventory amount was correct. As a result of this error,

a.2010 income is overstated by $3,000.

b.2010 ending inventory is overstated by $3,000.

c.2011 income is overstated by $3,000.

d.2011 cost of goods sold is overstated by $3,000.

2.Which one of the following expenditures should not be included in the cost of inventory?

a.Transportation-out

b.Purchase cost

c.Packaging cost

d.Transportation-in

3.Michael Manufacturers fraudulently overstated its December 31, 2010 and December 31, 2011 inventory by $3,000 and $6,000, respectively. As a result of these overstatements,

a.2010 income is overstated by $3,000 and 2011 income is overstated by $3,000.

b.2010 income is overstated by $3,000 and 2011 income is overstated by $6,000.

c.2010 income is overstated by $3,000 and 2011 income is accurate.

d.2010 and 2010 incomes are not affected.

4.Jackson Roper fraudulently overstated its December 31, 2010 inventory by $8,000. As a result of this overstatement,

a.the 2010 earnings per share is overstated.

b.the 2010 current ratio is understated.

c.the 2010 cost of goods sold amount is overstated.

d.net income is overstated for 2011, and net income for 2010 is correct.

5.If a company desires to increase its inventory, then it should:

a. sell more goods than it purchases during the period.

b. purchase more goods than it sells during the period.

c. purchase the same amount of goods that it sells.

d. increase its selling prices to a level that customers would not be willing to purchase.

6.Cagey Trading Inc. counted $2,000 of inventory twice during its December 31, 2010 physical inventory count.  Its December 31, 2011 inventory amount is correct. As a result of this error,

a.2010 ending inventory is overstated by $2,000.

b. 2010 income is understated by $2,000.

c. 2011 income is overstated by $2,000.

d.2011 cost of goods sold is understated by $2,000.

7.WashingtonCo. mistakenly omitted $4,000 of merchandise from its inventory on December 31, 2010. Its December 31, 2011, inventory is correct. As a result of this error,

a.earnings per share is overstated for 2010 and overstated for 2011.

b.total income for 2010 and 2011 combined is correct.

c.the current ratio is overstated on December 31, 2010 and is correct on December 31, 2011.

d.ending inventory is understated at December 31, 2011.

8.Parker Books purchased 200 books, paying $10 each. Parker paid the $40 shipping costs and $30 binding repair fees so that those books could be sold. How much is the cost of inventory?

a.$2,000

b.$2,040

c.$2,030

d.$2,070

9.A company deliberately and inappropriately included interest costs on its December 31 inventory. Which one of the following statements is true for the company’s December 31 financial statements?

a.Earnings per share is understated.

b.Inventory turnover ratio is understated.

c.The current ratio is understated.

d.Cost of goods sold is overstated.

10.Dole Produce Ltd. counted $700 of inventory twice in its December 31, 2010 inventory. On December 31, 2011, it mistakenly omitted $200 of merchandise from its inventory. As a result of these errors:

a.net income is overstated by $700 in 2010 and understated by $200 in 2011.

b.net income in understated by $700 in 2010 and overstated by $200 in 2011.

c.net income is overstated by $700 in 2010 and understated by $900 in 2011.

d.total net income for 2010 and 2011 is correct.