Question 1

In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.

Accepted Answer

A) True 
 B)False

Question 2

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows:   An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

Accepted Answer

A) $800 
B) $832 
C) $848 
D) $868 
A) $800 
B) $832 
C) $848 
D) $868

Question 3

The specific identification method

Accepted Answer

A) cannot be used under GAAP. 
B) cannot be used under IFRS. 
C) must be used under IFRS if the inventory items can be specifically identified. 
D) must be used under IFRS if it would result in the lowest net income. 
A) cannot be used under GAAP. 
B) cannot be used under IFRS. 
C) must be used under IFRS if the inventory items can be specifically identified. 
D) must be used under IFRS if it would result in the lowest net income.

Question 4

The term "FOB" denotes

Accepted Answer

A) free on board. 
B) freight on board. 
C) free only (to) buyer. 
D) freight charge on buyer. 
A) free on board. 
B) freight on board. 
C) free only (to) buyer. 
D) freight charge on buyer.

Question 5

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except

Accepted Answer

A) to check the accuracy of the records. 
B) to determine the amount of wasted raw materials. 
C) to determine losses due to employee theft. 
D) to determine ownership of the goods. 
A) to check the accuracy of the records. 
B) to determine the amount of wasted raw materials. 
C) to determine losses due to employee theft. 
D) to determine ownership of the goods.

Question 6

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; Second purchase $76; Third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

Accepted Answer

A) $56. 
B) $60. 
C) $62. 
D) $68. 
A) $56. 
B) $60. 
C) $62. 
D) $68.

Question 7

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Accepted Answer

A) True 
 B)False

Question 8

A company just starting business made the following four inventory purchases in June:   A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is

Accepted Answer

A) the FIFO method. 
B) the LIFO method. 
C) the weighted average unit cost method. 
D) not determinable. 
A) the FIFO method. 
B) the LIFO method. 
C) the weighted average unit cost method. 
D) not determinable.

Question 9

The consistent application of an inventory costing method is essential for

Accepted Answer

A) conservatism. 
B) accuracy. 
C) comparability. 
D) efficiency. 
A) conservatism. 
B) accuracy. 
C) comparability. 
D) efficiency.

Question 10

Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date, each computer has a current replacement cost of $400. What value should Switzer, Inc., have for the computers at the end of the year?

Accepted Answer

A) $2,400. 
B) $3,200. 
C) $4,800. 
D) $7,200. 
A) $2,400. 
B) $3,200. 
C) $4,800. 
D) $7,200.

Question 11

An auto manufacturer would classify vehicles in various stages of production as

Accepted Answer

A) finished goods. 
B) merchandise inventory. 
C) raw materials. 
D) work in process. 
A) finished goods. 
B) merchandise inventory. 
C) raw materials. 
D) work in process.

Question 12

In a period of rising prices, the costs allocated to ending inventory may be understated in the

Accepted Answer

A) average-cost method. 
B) FIFO method. 
C) gross profit method. 
D) LIFO method. 
A) average-cost method. 
B) FIFO method. 
C) gross profit method. 
D) LIFO method.

Question 13

Under the gross profit method, each of the following items are estimated except for the

Accepted Answer

A) cost of ending inventory. 
B) cost of goods sold. 
C) cost of goods purchased. 
D) gross profit. 
A) cost of ending inventory. 
B) cost of goods sold. 
C) cost of goods purchased. 
D) gross profit.

Question 14

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows:   An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

Accepted Answer

A) $1,120 
B) $1,188 
C) $1,532 
D) $1,600 
A) $1,120 
B) $1,188 
C) $1,532 
D) $1,600

Question 15

Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and sales during the month of January were as follows:   Partridge does not maintain perpetual inventory records. According to a physical count, 365 units were on hand at January 31. The cost of the inventory at January 31, under the FIFO method is:

Accepted Answer

A) $3,285. 
B) $3,650. 
C) $3,900. 
D) $4,015. 
A) $3,285. 
B) $3,650. 
C) $3,900. 
D) $4,015.

Question 16

The lower-of-cost-or-market (LCM) basis may be used with all of the following methods except

Accepted Answer

A) average cost. 
B) FIFO. 
C) LIFO. 
D) The LCM basis may be used with all of these. 
A) average cost. 
B) FIFO. 
C) LIFO. 
D) The LCM basis may be used with all of these.

Question 17

Overstating ending inventory will overstate all of the following except

Accepted Answer

A) assets. 
B) cost of goods sold. 
C) net income. 
D) stockholder's equity. 
A) assets. 
B) cost of goods sold. 
C) net income. 
D) stockholder's equity.

Question 18

The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.

Accepted Answer

A) True 
 B)False

Question 19

The convergence issue that will be most difficult to resolve in the area of inventory accounting is:

Accepted Answer

A) FIFO. 
B) LIFO. 
C) ownership of goods. 
D) costs to include in inventory. 
A) FIFO. 
B) LIFO. 
C) ownership of goods. 
D) costs to include in inventory.

Question 20

Eneri Company's inventory records show the following data:   A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. Under the LIFO method, cost of goods sold is

Accepted Answer

A) $28,000. 
B) $169,200. 
C) $173,040. 
D) $178,000. 
A) $28,000. 
B) $169,200. 
C) $173,040. 
D) $178,000.

In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows: An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

The specific identification method

The term "FOB" denotes

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; Second purchase $76; Third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is

The consistent application of an inventory costing method is essential for

An auto manufacturer would classify vehicles in various stages of production as

In a period of rising prices, the costs allocated to ending inventory may be understated in the

Under the gross profit method, each of the following items are estimated except for the

The lower-of-cost-or-market (LCM) basis may be used with all of the following methods except

Overstating ending inventory will overstate all of the following except

The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.

The convergence issue that will be most difficult to resolve in the area of inventory accounting is:

Eneri Company's inventory records show the following data: A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. Under the LIFO method, cost of goods sold is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 6: Inventories

In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows: An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

The specific identification method

The term "FOB" denotes

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; Second purchase $76; Third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is

The consistent application of an inventory costing method is essential for

An auto manufacturer would classify vehicles in various stages of production as

In a period of rising prices, the costs allocated to ending inventory may be understated in the

Under the gross profit method, each of the following items are estimated except for the

The lower-of-cost-or-market (LCM) basis may be used with all of the following methods except

Overstating ending inventory will overstate all of the following except

The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.

The convergence issue that will be most difficult to resolve in the area of inventory accounting is:

Eneri Company's inventory records show the following data: A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. Under the LIFO method, cost of goods sold is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters