Question : 81. Louise Company reported the following income statement information for Year : 1225841

81. Louise Company reported the following income statement information for Year 1 and Year 2:

The beginning inventory balance for Year 1 is correct. The ending inventory balance for Year 2 is also correct. However, the ending inventory figure for Year 1 was overstated by $20,000. Given this information, the correct gross profit figures for Year 1 and Year 2 would be: 

A. $129,000 for Year 1 and $256,000 for Year 2.

B. $281,000 for Year 1 and $274,000 for Year 2.

C. $129,000 for Year 1 and $276,000 for Year 2.

D. $169,000 for Year 1 and $236,000 for Year 2.

E. $169,000 for Year 1 and $276,000 for Year 2.

82. An overstatement of ending inventory will cause 

A. An overstatement of assets and equity on the balance sheet.

B. An understatement of assets and equity on the balance sheet.

C. An overstatement of assets and an understatement of equity on the balance sheet.

D. An understatement of assets and an overstatement of equity on the balance sheet.

E. No effect on the balance sheet.

83. The inventory turnover ratio: 

A. Is used to analyze profitability.

B. Is used to measure solvency.

C. Reveals how many times a company turns over (sells) its merchandise inventory.

D. Validates the acid-test ratio.

E. Calculation depends on the company’s inventory valuation method.

84. Days’ sales in inventory: 

A. Is also called days’ stock on hand.

B. Focuses on average inventory rather than ending inventory.

C. Is used to measure solvency.

D. Is calculated by dividing cost of goods sold by ending inventory.

E. Is a substitute for the acid-test ratio.

85. The inventory turnover ratio is calculated as: 

A. Cost of goods sold divided by average merchandise inventory.

B. Sales divided by cost of goods sold.

C. Ending inventory divided by cost of goods sold.

D. Cost of goods sold divided by ending inventory.

E. Cost of goods sold divided by ending inventory times 365.

86. Days’ sales in inventory is calculated as: 

A. Ending inventory divided by cost of goods sold.

B. Cost of goods sold divided by ending inventory.

C. Ending inventory divided by cost of goods sold times 365.

D. Cost of goods sold divided by ending inventory times 365.

E. Ending inventory times cost of goods sold.

87. Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals: 

A. 0.21.

B. 4.51.

C. 4.79.

D. 76.1 days.

E. 80.9 days.

88. Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory turnover of $1,965 million. Its days’ sales in inventory equals: 

A. 0.21.

B. 4.51.

C. 4.79.

D. 76.1 days.

E. 80.9.days.

89. Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except: 

A. LIFO method.

B. FIFO method.

C. Specific identification method.

D. Weighted average method.

E. Retail method.

90. Management decisions in accounting for inventory cost include all of the following except: 

A. Costing method.

B. Inventory system (perpetual or periodic).

C. Customer demand for inventory.

D. Use of market values or other estimates.

E. Items included in inventory and their costs.