Question 1

Which of the following statements is true regarding inventory cost flow assumptions?

Accepted Answer

A)  A company may use more than one costing method concurrently. 
B)  A company must comply with the method specified by industry standards. 
C)  A company must use the same method for domestic and foreign operations. 
D)  A company may never change its inventory costing method once it has chosen a method. 
A)  A company may use more than one costing method concurrently. 
B)  A company must comply with the method specified by industry standards. 
C)  A company must use the same method for domestic and foreign operations. 
D)  A company may never change its inventory costing method once it has chosen a method.

Question 2

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's inventory turnover ratio in 2010 was

Accepted Answer

A)  9.4 times. 
B)  8.3 times. 
C)  7.3 times. 
D)  6.0 times. 
A)  9.4 times. 
B)  8.3 times. 
C)  7.3 times. 
D)  6.0 times.

Question 3

Under generally accepted accounting principles, management has the choice of physically counting inventory on hand at the end of the year or using the gross profit method to estimate the ending inventory.

Accepted Answer

A) True 
 B)False

Question 4

Merchandise inventory is

Accepted Answer

A)  reported under the classification of Property, Plant, and Equipment on the balance sheet. 
B)  often reported as a miscellaneous expense on the income statement. 
C)  reported as a current asset on the balance sheet. 
D)  generally valued at the price for which the goods can be sold. 
A)  reported under the classification of Property, Plant, and Equipment on the balance sheet. 
B)  often reported as a miscellaneous expense on the income statement. 
C)  reported as a current asset on the balance sheet. 
D)  generally valued at the price for which the goods can be sold.

Question 5

Zimmer Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of May:   
Instructions
Prepare a schedule to show cost of goods sold and the value of the ending inventory for the month of May.

Accepted Answer

The answer of Zimmer Company uses the perpetual inventory system...

Question 6

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Accepted Answer

A)  The cost of beginning inventory and the cost of ending inventory 
B)  The cost of ending inventory and the cost of goods purchased during the year 
C)  The cost of beginning inventory and the cost of goods purchased during the year 
D)  The difference between the costs of goods purchased and the cost of goods sold during the year 
A)  The cost of beginning inventory and the cost of ending inventory 
B)  The cost of ending inventory and the cost of goods purchased during the year 
C)  The cost of beginning inventory and the cost of goods purchased during the year 
D)  The difference between the costs of goods purchased and the cost of goods sold during the year

Question 7

The accountant at Paige Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $5,460. The LIFO method will result in income before taxes of $4,935. What is the difference in tax that would be paid between the two methods?

Accepted Answer

A)  $525. 
B)  $225. 
C)  $158. 
D)  Cannot be determined from the information provided. 
A)  $525. 
B)  $225. 
C)  $158. 
D)  Cannot be determined from the information provided.

Question 8

Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale.

Accepted Answer

A) True 
 B)False

Question 9

If a company uses the FIFO cost assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 10

The lower-of-cost-or-market (LCM) basis may be 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 11

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

Accepted Answer

A) True 
 B)False

Question 12

Holliday Company's inventory records show the following data:   A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $12 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. What is the difference in taxes if LIFO rather than FIFO is used?

Accepted Answer

A)  $800 additional taxes 
B)  $3,200 tax savings 
C)  $4,000 tax savings 
D)  $4,000 additional taxes 
A)  $800 additional taxes 
B)  $3,200 tax savings 
C)  $4,000 tax savings 
D)  $4,000 additional taxes

Question 13

Rudolf Diesel Company's inventory records show the following data:   A physical inventory on December 31 shows 3,000 units on hand. Under the FIFO method, the December 31 inventory is

Accepted Answer

A)  $21,000. 
B)  $21,750. 
C)  $24,000. 
D)  $27,000. 
A)  $21,000. 
B)  $21,750. 
C)  $24,000. 
D)  $27,000.

Question 14

Of the following companies, which one would not likely employ the specific identification method for inventory costing?

Accepted Answer

A)  Music store specializing in organ sales 
B)  Farm implement dealership 
C)  Antique shop 
D)  Hardware store 
A)  Music store specializing in organ sales 
B)  Farm implement dealership 
C)  Antique shop 
D)  Hardware store

Question 15

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 16

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's days in inventory in 2010 was
A 38.8 days.
B) 44.0 days.
C) 50.0 days.
D) 60.8 days.

Accepted Answer

The answer of The following information was available for Hoover...

Question 17

The cost of goods available for sale is allocated between

Accepted Answer

A)  beginning inventory and ending inventory. 
B)  beginning inventory and cost of goods on hand. 
C)  ending inventory and cost of goods sold. 
D)  beginning inventory and cost of goods purchased. 
A)  beginning inventory and ending inventory. 
B)  beginning inventory and cost of goods on hand. 
C)  ending inventory and cost of goods sold. 
D)  beginning inventory and cost of goods purchased.

Question 18

Items waiting to be used in production are considered to be

Accepted Answer

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

Question 19

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows:   An end of the month (1/31/10) inventory showed that 120 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

Accepted Answer

A)  $520 
B)  $600 
C)  $656 
D)  $1,480 
A)  $520 
B)  $600 
C)  $656 
D)  $1,480

Question 20

Hoyt Company's inventory records show the following data for the month of September:   
A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

Accepted Answer

Ending inventory of 200 units:

Exam 6: Inventories

Which of the following statements is true regarding inventory cost flow assumptions?

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's inventory turnover ratio in 2010 was

Under generally accepted accounting principles, management has the choice of physically counting inventory on hand at the end of the year or using the gross profit method to estimate the ending inventory.

Merchandise inventory is

Zimmer Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of May: Instructions Prepare a schedule to show cost of goods sold and the value of the ending inventory for the month of May.

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale.

If a company uses the FIFO cost assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

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

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

Rudolf Diesel Company's inventory records show the following data: A physical inventory on December 31 shows 3,000 units on hand. Under the FIFO method, the December 31 inventory is

Of the following companies, which one would not likely employ the specific identification method for inventory costing?

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

The following information was available for Hoover Company at December 31, 2010: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $660,000; and sales $900,000. Hoover's days in inventory in 2010 was A 38.8 days. B) 44.0 days. C) 50.0 days. D) 60.8 days.

The cost of goods available for sale is allocated between

Items waiting to be used in production are considered to be

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows: An end of the month (1/31/10) inventory showed that 120 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

Hoyt Company's inventory records show the following data for the month of September: A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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