Question 1

All of the following statements are true regarding the LIFO reserve except:

Accepted Answer

A) Companies using LIFO are required to report the LIFO reserve. 
B) The equation (LIFO inventory - LIFO reserve = FIFO inventory) adjusts the inventory balance from LIFO to FIFO. 
C) The financial statement differences of using LIFO normally increase the longer a company uses LIFO. 
D) Current ratios and the inventory turnover can be significantly affected if a company has material LIFO reserves. 
A) Companies using LIFO are required to report the LIFO reserve. 
B) The equation (LIFO inventory - LIFO reserve = FIFO inventory) adjusts the inventory balance from LIFO to FIFO. 
C) The financial statement differences of using LIFO normally increase the longer a company uses LIFO. 
D) Current ratios and the inventory turnover can be significantly affected if a company has material LIFO reserves.

Question 2

Echo Sound Company just began business and made the following four inventory purchases in June:   A physical count of merchandise inventory on June 30 reveals that there are 210 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 average cost method. 
D) not determinable. 
A) the FIFO method. 
B) the LIFO method. 
C) the average cost method. 
D) not determinable.

Question 3

Goods held on consignment are

Accepted Answer

A) never owned by the consignee. 
B) included in the consignee's ending inventory. 
C) kept for sale on the premises of the consignor. 
D) included as part of no one's ending inventory. 
A) never owned by the consignee. 
B) included in the consignee's ending inventory. 
C) kept for sale on the premises of the consignor. 
D) included as part of no one's ending inventory.

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

Quiet Phones Company has the following inventory data:   A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand.Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Accepted Answer

A) $930. 
B) $990. 
C) $2,010. 
D) $2,070. 
A) $930. 
B) $990. 
C) $2,010. 
D) $2,070.

Question 6

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Accepted Answer

A) True 
 B)False

Question 7

Goods in transit shipped FOB shipping point should be included in the buyer's ending inventory.

Accepted Answer

A) True 
 B)False

Question 8

The LIFO inventory method tends to smooth out the peaks and valleys of a business cycle.

Accepted Answer

A) True 
 B)False

Question 9

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

Accepted Answer

A) the ending LIFO reserve is added to LIFO cost of goods sold. 
B) the ending LIFO reserve is subtracted from LIFO cost of goods sold. 
C) an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. 
D) a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold. 
A) the ending LIFO reserve is added to LIFO cost of goods sold. 
B) the ending LIFO reserve is subtracted from LIFO cost of goods sold. 
C) an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. 
D) a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold.

Question 10

The factor which determines whether or not goods should be included in a physical count of inventory is

Accepted Answer

A) physical possession. 
B) legal title. 
C) management's judgment. 
D) whether or not the purchase price has been paid. 
A) physical possession. 
B) legal title. 
C) management's judgment. 
D) whether or not the purchase price has been paid.

Question 11

Dobler Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows:   An end of the month (1/31/2022) inventory showed that 240 units were on hand.If the company uses LIFO, what is the value of the ending inventory?

Accepted Answer

A) $1,264 
B) $1,200 
C) $1,302 
D) $1,920 
A) $1,264 
B) $1,200 
C) $1,302 
D) $1,920

Question 12

The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale.

Accepted Answer

A) True 
 B)False

Question 13

Which statement is false?

Accepted Answer

A) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. 
B) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. 
C) An inventory count is generally more accurate when goods are not being sold or received during the counting. 
D) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period. 
A) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. 
B) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. 
C) An inventory count is generally more accurate when goods are not being sold or received during the counting. 
D) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.

Question 14

After the physical inventory is completed,

Accepted Answer

A) quantities are listed on inventory summary sheets. 
B) quantities are entered into various general ledger inventory accounts. 
C) the accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets. 
D) unit costs are determined by dividing the quantities on the summary sheets by the total inventory costs. 
A) quantities are listed on inventory summary sheets. 
B) quantities are entered into various general ledger inventory accounts. 
C) the accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets. 
D) unit costs are determined by dividing the quantities on the summary sheets by the total inventory costs.

Question 15

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Accepted Answer

A) cost of goods sold of the companies will be identical. 
B) cost of goods purchased during the year will be identical. 
C) ending inventory of the companies will be identical. 
D) net income of the companies will be identical. 
A) cost of goods sold of the companies will be identical. 
B) cost of goods purchased during the year will be identical. 
C) ending inventory of the companies will be identical. 
D) net income of the companies will be identical.

Question 16

Which of the following terms best describes the assumption made in applying the four inventory methods?

Accepted Answer

A) Goods flow 
B) Cost flow 
C) Asset flow 
D) Physical flow 
A) Goods flow 
B) Cost flow 
C) Asset flow 
D) Physical flow

Question 17

An employee assigned to counting computer monitors in boxes should

Accepted Answer

A) estimate the number if there is a large quantity to be counted. 
B) read each box and rely on the box description for the contents. 
C) determine that the box contains a monitor. 
D) rely on the warehouse records of the number of computer monitors. 
A) estimate the number if there is a large quantity to be counted. 
B) read each box and rely on the box description for the contents. 
C) determine that the box contains a monitor. 
D) rely on the warehouse records of the number of computer monitors.

Question 18

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination
(2) FOB shipping point
And purchases made
(3) FOB destination
(4) FOB shipping point.
Which items should be included in Tidwell's inventory at December 31?

Accepted Answer

A) (2) and (3) 
B) (1) and (4) 
C) (1) and (3) 
D) (2) and (4) 
A) (2) and (3) 
B) (1) and (4) 
C) (1) and (3) 
D) (2) and (4)

Question 19

The manager of Weiser is given a bonus based on net income before taxes.The net income after taxes is $59,500 for FIFO and $49,000 for LIFO.The tax rate is 30%.The bonus rate is 20%.How much higher is the manager's bonus if FIFO is adopted instead of LIFO?

Accepted Answer

A) $15,000 
B) $21,000 
C) $3,000 
D) $10,500 
A) $15,000 
B) $21,000 
C) $3,000 
D) $10,500

Question 20

Dobler Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows:   An end of the month (1/31/2022) inventory showed that 240 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) $1,782 
B) $1,818 
C) $3,600 
D) $2,400 
A) $1,782 
B) $1,818 
C) $3,600 
D) $2,400

All of the following statements are true regarding the LIFO reserve except:

Echo Sound Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.The inventory method which results in the highest gross profit for June is

Goods held on consignment are

The term "FOB" denotes

Quiet Phones Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand.Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Goods in transit shipped FOB shipping point should be included in the buyer's ending inventory.

The LIFO inventory method tends to smooth out the peaks and valleys of a business cycle.

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

The factor which determines whether or not goods should be included in a physical count of inventory is

Dobler Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows: An end of the month (1/31/2022) inventory showed that 240 units were on hand.If the company uses LIFO, what is the value of the ending inventory?

The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale.

Which statement is false?

After the physical inventory is completed,

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Which of the following terms best describes the assumption made in applying the four inventory methods?

An employee assigned to counting computer monitors in boxes should

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point And purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31?

The manager of Weiser is given a bonus based on net income before taxes.The net income after taxes is $59,500 for FIFO and $49,000 for LIFO.The tax rate is 30%.The bonus rate is 20%.How much higher is the manager's bonus if FIFO is adopted instead of LIFO?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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Exam 6: Reporting and Analyzing Inventory

All of the following statements are true regarding the LIFO reserve except:

Echo Sound Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.The inventory method which results in the highest gross profit for June is

Goods held on consignment are

The term "FOB" denotes

Quiet Phones Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand.Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Goods in transit shipped FOB shipping point should be included in the buyer's ending inventory.

The LIFO inventory method tends to smooth out the peaks and valleys of a business cycle.

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

The factor which determines whether or not goods should be included in a physical count of inventory is

Dobler Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows: An end of the month (1/31/2022) inventory showed that 240 units were on hand.If the company uses LIFO, what is the value of the ending inventory?

The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale.

Which statement is false?

After the physical inventory is completed,

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the

Which of the following terms best describes the assumption made in applying the four inventory methods?

An employee assigned to counting computer monitors in boxes should

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point And purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31?

The manager of Weiser is given a bonus based on net income before taxes.The net income after taxes is $59,500 for FIFO and $49,000 for LIFO.The tax rate is 30%.The bonus rate is 20%.How much higher is the manager's bonus if FIFO is adopted instead of LIFO?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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