Question 1

The lower of cost or market rule requires a business to report inventory at original cost or its current replacement cost,whichever is lower.

Accepted Answer

A) True 
 B)False

Question 2

The inventory valuation method which tends to smooth out periodic fluctuations in cost is:

Accepted Answer

A)  the LIFO method 
B)  the weighted average cost method 
C)  the FIFO method 
D)  the specific identification method 
A)  the LIFO method 
B)  the weighted average cost method 
C)  the FIFO method 
D)  the specific identification method

Question 3

The use of the FIFO method of inventory valuation results in a matching of current inventory costs against current sales revenue.

Accepted Answer

A) True 
 B)False

Question 4

In the ____________________ method of inventory valuation,inventory cost is determined by multiplying the number of units in inventory by a unit cost,which is calculated by dividing the cost of goods available for sale by the units of merchandise available for sale.

Accepted Answer

The answer of In the ____________________ method of inventory valuation,inventory...

Question 5

What is inventory shrink? How may inventory shrink come about?

Accepted Answer

Shrink is the difference between the rec

Question 6

Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?

Accepted Answer

A)  the retail method 
B)  the average cost method 
C)  the gross profit method 
D)  the lower of cost or market method 
A)  the retail method 
B)  the average cost method 
C)  the gross profit method 
D)  the lower of cost or market method

Question 7

In periods of rising prices,use of the ____________________ method of inventory valuation results in the lowest inventory cost on the balance sheet.

Accepted Answer

The answer of In periods of rising prices,use of the...

Question 8

The lower the ending inventory valuation,the ____________________ the reported net income.

Accepted Answer

The answer of The lower the ending inventory valuation,the ____________________...

Question 9

In a period of rising prices,the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

Accepted Answer

A) True 
 B)False

Question 10

The Lower of Cost or Market rule is based on which accounting principle?

Accepted Answer

A)  conservatism 
B)  revenue recognition 
C)  matching 
D)  full disclosure 
A)  conservatism 
B)  revenue recognition 
C)  matching 
D)  full disclosure

Question 11

In order to apply the matching concept,inventory costing methods,once selected,cannot be changed to an alternative method.

Accepted Answer

A) True 
 B)False

Question 12

The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.

Accepted Answer

A) True 
 B)False

Question 13

The price a business would pay for its inventory is

Accepted Answer

A)  assessed value. 
B)  sales price. 
C)  replacement cost. 
D)  discount price. 
A)  assessed value. 
B)  sales price. 
C)  replacement cost. 
D)  discount price.

Question 14

The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.

Accepted Answer

A) True 
 B)False

Question 15

Distinguish between periodic inventory,perpetual inventory,and physical inventory.

Accepted Answer

Periodic inventory is based on the actua

Question 16

Which of the following is NOT a way to apply the lower of cost or market rule?

Accepted Answer

A)  by item 
B)  by size 
C)  in total 
D)  by group 
A)  by item 
B)  by size 
C)  in total 
D)  by group

Question 17

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000.Early in the year,8,000 units were purchased at $6 each.Using LIFO,what is the value of the ending inventory of 2,000 units?

Accepted Answer

A)  $12,000 
B)  $10,000 
C)  $8,000 
D)  $24,000 
A)  $12,000 
B)  $10,000 
C)  $8,000 
D)  $24,000

Question 18

Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.

Accepted Answer

A) True 
 B)False

Question 19

In periods of rising prices,the LIFO method of inventory valuation gives a lower taxable income and thus provides a tax advantage.

Accepted Answer

A) True 
 B)False

Question 20

The use of the FIFO method of inventory valuation

Accepted Answer

A)  results in a matching of current inventory costs against sales revenue. 
B)  results in the most current costs in ending inventory. 
C)  results in a lowest reported net income in a time of rising prices. 
D)  results in a highest reported net income in a time of falling prices. 
A)  results in a matching of current inventory costs against sales revenue. 
B)  results in the most current costs in ending inventory. 
C)  results in a lowest reported net income in a time of rising prices. 
D)  results in a highest reported net income in a time of falling prices.

Exam 17: Merchandise Inventory

The lower of cost or market rule requires a business to report inventory at original cost or its current replacement cost,whichever is lower.

The inventory valuation method which tends to smooth out periodic fluctuations in cost is:

The use of the FIFO method of inventory valuation results in a matching of current inventory costs against current sales revenue.

In the ____________________ method of inventory valuation,inventory cost is determined by multiplying the number of units in inventory by a unit cost,which is calculated by dividing the cost of goods available for sale by the units of merchandise available for sale.

What is inventory shrink? How may inventory shrink come about?

Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?

In periods of rising prices,use of the ____________________ method of inventory valuation results in the lowest inventory cost on the balance sheet.

The lower the ending inventory valuation,the ____________________ the reported net income.

In a period of rising prices,the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

The Lower of Cost or Market rule is based on which accounting principle?

In order to apply the matching concept,inventory costing methods,once selected,cannot be changed to an alternative method.

The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.

The price a business would pay for its inventory is

The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.

Distinguish between periodic inventory,perpetual inventory,and physical inventory.

Which of the following is NOT a way to apply the lower of cost or market rule?

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000.Early in the year,8,000 units were purchased at $6 each.Using LIFO,what is the value of the ending inventory of 2,000 units?

Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.

In periods of rising prices,the LIFO method of inventory valuation gives a lower taxable income and thus provides a tax advantage.

The use of the FIFO method of inventory valuation

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Property, Plant, and Equipment

Accounting for Partnerships

Corporations: Formation and Capital Stock Transactions

Corporate Earnings and Capital Transactions

Long-Term Bonds

Financial Statement Analyses

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

Cost-Revenue Analysis for Decision Making

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