Question 1

Which of the following statements is correct when inventory unit costs are increasing?

Accepted Answer

A)  LIFO's ending inventory will be the largest among the inventory costing methods. 
B)  FIFO's gross profit will be the lowest among the inventory costing methods. 
C) Inventory turnover will be the largest when the LIFO inventory method is used. 
D) Use of the LIFO method will result in lower cash flows due to an increased cost of goods solD.LIFO has the largest cost of goods sold and the lowest ending inventory and therefore the largest inventory turnover ratio. 
A)  LIFO's ending inventory will be the largest among the inventory costing methods. 
B)  FIFO's gross profit will be the lowest among the inventory costing methods. 
C) Inventory turnover will be the largest when the LIFO inventory method is used. 
D) Use of the LIFO method will result in lower cash flows due to an increased cost of goods solD.LIFO has the largest cost of goods sold and the lowest ending inventory and therefore the largest inventory turnover ratio.

Question 2

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

Accepted Answer

A) True 
 B)False

Question 3

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Accepted Answer

A) True 
 B)False

Question 4

RJ Corporation has provided the following information about one of its inventory items: $\begin{array}{clrr}\text { Date }&\text { Transaction } &\text { Number of Units }&\text { Cost per Unit }\\hline
1 / 1 & \text { Beginning Inventory } & 400 & \$ 3,200 \
6 / 6 & \text { Purchase } & 800 & \$ 3,600 \
9 / 10 & \text { Purchase } & 1,200 & \$ 4,000 \
11 / 15 & \text { Purchase } & 800 & \$ 4,200
\end{array}$ During the year, RJ sold 3,000 units. What was cost of goods sold using the average cost flow assumption under a periodic inventory system?

Accepted Answer

A)  $11,680,000. 
B)  $11,590,000. 
C) $11,480,000. 
D) $11,550,000. 
A)  $11,680,000. 
B)  $11,590,000. 
C) $11,480,000. 
D) $11,550,000.

Which of the following statements is correct when inventory unit costs are increasing?

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

Which of the following statements is correct when inventory unit costs are increasing?

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters