Question 1

Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices?

Accepted Answer

A) FIFO periodic 
B) LIFO periodic 
C) FIFO perpetual 
D) moving average 
A) FIFO periodic 
B) LIFO periodic 
C) FIFO perpetual 
D) moving average

Question 2

Which one of the following types of costs is most likely to be included in determining the cost of inventory?

Accepted Answer

A) freight-in costs 
B) freight-out costs 
C) interest cost for amounts borrowed to finance the purchase of inventory 
D) marketing costs 
A) freight-in costs 
B) freight-out costs 
C) interest cost for amounts borrowed to finance the purchase of inventory 
D) marketing costs

Question 3

Using the following letters to represent items:

P = Purchases (net)
C = Cost of goods sold
B = Beginning inventory
E = Ending inventory
Which equation is correct?

Accepted Answer

A) B - C + P = E 
B) B - E = C + P 
C) P - E = B + C 
D) B = C - E + P 
A) B - C + P = E 
B) B - E = C + P 
C) P - E = B + C 
D) B = C - E + P

Question 4

Exhibit 8-5 Sully Provisions Co.switched from FIFO to LIFO on January 1, 2010, for external reporting and income tax purposes, while retaining FIFO for internal reports.On that date, the FIFO inventory equaled $360, 000.The ensuing three-year period resulted in the following:
$\begin{array}{lll}
&\text { Inventory }&\text { Cost }\
\text {Date}&\text {Year-End Costs}&\text {Index}\
\text { December } 31,2010 & \$ 438,000 & 1.05 \
\text { December 31, } 2011 & 460,000 & 1.15 \
\text { December 31. } 2012 & 520,000 & 1.25
\end{array}$
 
-Refer to Exhibit 8-5.The ending inventory at December 31, 2012, using the dollar-value LIFO method would be

Accepted Answer

A) $422, 000 
B) $402, 000 
C) $426, 000 
D) $420, 400 
A) $422, 000 
B) $402, 000 
C) $426, 000 
D) $420, 400

Question 5

Which one of the following types of costs should be included in the cost of a manufactured inventory?

Accepted Answer

A) abnormal spoilage 
B) production supervisory salaries 
C) interest costs 
D) selling costs 
A) abnormal spoilage 
B) production supervisory salaries 
C) interest costs 
D) selling costs

Question 6

Which one of the following is not an advantage of using the FIFO cost flow assumption?

Accepted Answer

A) produces lowest net income in periods of rising prices 
B) provides a relevant ending inventory value 
C) is not as susceptible to profit manipulation by management 
D) does not produce unusual results when inventory liquidation occurs 
A) produces lowest net income in periods of rising prices 
B) provides a relevant ending inventory value 
C) is not as susceptible to profit manipulation by management 
D) does not produce unusual results when inventory liquidation occurs

Question 7

Exhibit 8-5 Sully Provisions Co.switched from FIFO to LIFO on January 1, 2010, for external reporting and income tax purposes, while retaining FIFO for internal reports.On that date, the FIFO inventory equaled $360, 000.The ensuing three-year period resulted in the following:
$\begin{array}{lll}
&\text { Inventory }&\text { Cost }\
\text {Date}&\text {Year-End Costs}&\text {Index}\
\text { December } 31,2010 & \$ 438,000 & 1.05 \
\text { December 31, } 2011 & 460,000 & 1.15 \
\text { December 31. } 2012 & 520,000 & 1.25
\end{array}$

- Refer to Exhibit 8-5.The ending inventory at December 31, 2011, using the dollar-value LIFO method would be

Accepted Answer

A) $400, 000 
B) $402, 000 
C) $406, 000 
D) $424, 000 
A) $400, 000 
B) $402, 000 
C) $406, 000 
D) $424, 000

Question 8

The Elston Company uses a periodic inventory system.Relevant inventory information for the year follows: $\begin{array}{llr}
1 / 1 & \text { Beginning inventory } & 20 \text { units@ } \$ 170 \text { per unit } \
5 / 23 & \text { Purchased } & 20 \text { units@ } \$ 125 \text { per unit} \
11 / 5 & \text { Purchased } & 400 \text { units@ } \$ 160 \text { per unit } \
11 / 18 & \text { Purchased } & 100 \text { units@ } \$ 175 \text { per unit }
\end{array}$  At year-end, 50 units remain in inventory.What is the cost of the ending inventory on a LIFO basis?

Accepted Answer

A) $7, 500 
B) $7, 100 
C) $8, 750 
D) $8, 450 
A) $7, 500 
B) $7, 100 
C) $8, 750 
D) $8, 450

Question 9

Barber Company produces and sells only one product.The company began the year with inventory balances as follows: Raw Materials $51, 700, Goods in Process $12, 000, and Finished Goods $123, 500.During the year, the following activity occurred:
 $\begin{array}{lc}
\text { Raw material purchases } & \$ 32,500 \
\text { Direct labor } & 77,700 \
\text { Inclirect labor } & 38,000 \
\text { Office rent } & 24,000 \
\text { Factory rent } & 120,000 \
\text { Depreciation-Office machinery } & 15,000 \
\text { Depreciation-Equipment } & 25,000 \
\text { Applied manufacturing overhead } & 300,000 \
\text { Factory insurance } & 20,000 \
\text { Raw materials used } & 40,000 \
\text { Miscellaneous manufacturing overhead } & 94,600 \
\text { Cost of goods manufactured } & 421,000 \
\text { Cost of goods sold } & 405,800
\end{array}$
 Required:
Determine the ending balances for Raw Materials, Goods in Process, and Finished Goods.

Accepted Answer

None

Question 10

Exhibit 8-3 Davilo Co.had the following inventory activity during April:
$\begin{array}{lll}
&&\text { Units }\
& \text { Unit }&\text{cost}\
\text { Beginning inventory } & 100 & \$ 8 \
\text { Purchase (April 3) } & 60 & 12 \
\text { Sale (April 10) } & 80 & \
\text { Purchase (April 18) } & 50 & 15 \
\text { Purchase (April 23) } & 80 & 18 \
\text { Sale (April 28) } & 100 &
\end{array}$
 
-Refer to Exhibit 8-3.Assuming Davilo uses a periodic LIFO cost flow assumption, ending inventory at April 30 would be

Accepted Answer

A) $ 880 
B) $ 920 
C) $1, 090 
D) $1, 890 
A) $ 880 
B) $ 920 
C) $1, 090 
D) $1, 890

Question 11

A listing of the Montez Company's inventory items at the end of 2010 totals $95, 000.Included in this amount are the following items: $\text { Merchandise in transit as of } 12 / 31 / 2010 \text { purchased FOB }$
$\begin{array}{ll}
\text { shipping point } & \$ 6,800 \
\text { Goods held by Montez as consignee from Nirvana } & 5,000 \
\text { Goods out on consignment, at cost plus } 50 \% \text { markup on cost } & 6,000
\end{array}$
 What is the dollar amount of Montez's 2010 ending inventory that should be reported on the balance sheet?

Accepted Answer

A) $83, 100 
B) $86, 200 
C) $87, 900 
D) $88, 000 
A) $83, 100 
B) $86, 200 
C) $87, 900 
D) $88, 000

Question 12

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar value LIFO is the

Accepted Answer

A) inventory-pool method 
B) double-extension method 
C) weighted-average method 
D) link-chain method 
A) inventory-pool method 
B) double-extension method 
C) weighted-average method 
D) link-chain method

Question 13

Cabinets-R-Us uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes.At the end of 2010, the following information was obtained from the inventory records:
 $\begin{array}{lll}
&2009&2010\
\text { Ending inventory, FIFO } & \$ 56,000 & \$ 66,250 \
\text { Ending inventory, LIFO } & 46,500 & 55,000
\end{array}$ Required:
Prepare the necessary entry to convert to LIFO at the end of 2010.

Accepted Answer

None

Question 14

Mouton uses the moving average flow assumption.On July 1, there were 180 units on hand and the total inventory cost was $900.On July 10, 40 more units were purchased at a cost of $6 apiece.Sales included 20 units on July 3 and 60 units on July 17.What was the total cost of goods sold recorded for the units sold on July 17?

Accepted Answer

A) $728 
B) $330 
C) $100 
D) $312 
A) $728 
B) $330 
C) $100 
D) $312

Question 15

In interim reporting, a LIFO liquidation requires the company to forecast the year-end

Accepted Answer

A) cost of goods sold 
B) ending inventory 
C) LIFO reserve 
D) tax liability 
A) cost of goods sold 
B) ending inventory 
C) LIFO reserve 
D) tax liability

Question 16

Which one of the following is not a disadvantage of the specific identification method of inventory costing?

Accepted Answer

A) It allows manipulation of profits. 
B) It does not match expenses against revenues. 
C) It is too expensive to use in complex manufacturing situations. 
D) It is only practical where units are costly and easily distinguishable. 
A) It allows manipulation of profits. 
B) It does not match expenses against revenues. 
C) It is too expensive to use in complex manufacturing situations. 
D) It is only practical where units are costly and easily distinguishable.

Question 17

Which one of the following is not an advantage of LIFO?

Accepted Answer

A) In periods of rising prices, less income taxes are paid. 
B) In periods of rising prices, less holding gains are reported in net income. 
C) Record keeping and financial statement preparation are easier. 
D) Conservative income statements and balance sheet disclosures result from rising prices. 
A) In periods of rising prices, less income taxes are paid. 
B) In periods of rising prices, less holding gains are reported in net income. 
C) Record keeping and financial statement preparation are easier. 
D) Conservative income statements and balance sheet disclosures result from rising prices.

Question 18

The IFRS disallow the use of LIFO for external financial reporting.Assume a U.S.based company has been using LIFO for financial and tax reporting but now wants to prepare IFRS conforming financial statements to enable its stock to be traded on one of the European stock exchanges.
Required:
 a. Describe the adjustments that the US.-based company must make to its accounting records to conform with IFRS. 
b. What choices of invent ony accounting metho ds would be available to the U.S. company uncler IFRS?

Accepted Answer

The answer of The IFRS disallow the use of LIFO...

Question 19

Exhibit 8-3 Davilo Co.had the following inventory activity during April:
$\begin{array}{lll}&&\text { Unit }\&\text { Units }&\text { Cost }\
\text { Beginning inventory } & 100 & \$ 8 \
\text { Purchase (Apri1 3) } & 60 & 12 \
\text { Sale (April 10) } & 80 & \
\text { Purchase (Apri1 18) } & 50 &15  \
\text { Purchase (Apri1 23) } & 80 &18  \
\text { Sale (Apri 28) } & 100 &
\end{array}$
- Refer to Exhibit 8-3.Assuming Davilo uses a perpetual LIFO cost flow assumption, ending inventory at April 30 would be

Accepted Answer

A) $ 880 
B) $ 920 
C) $1, 090 
D) $1, 890 
A) $ 880 
B) $ 920 
C) $1, 090 
D) $1, 890

Question 20

Black Company determined its December 31, 2010 inventory to be $1, 000, 000 based on a physical count priced at cost.It then determined the following additional information: Merchandise costing $90, 000, was shipped FOB shipping point from a vendor on December 30, 2010.This merchandise was received and recorded on January 5, 2011.
Goods costing $120, 000 were staged on the shipping dock and excluded from inventory although shipment was not made until January 4, 2011.The goods were billed to the customer FOB shipping point on December 30, 2010.
What is Black's ending inventory for its December 31, 2010 balance sheet?

Accepted Answer

A) $1, 000, 000 
B) $1, 090, 000 
C) $1, 120, 000 
D) $1, 210, 000 
A) $1, 000, 000 
B) $1, 090, 000 
C) $1, 120, 000 
D) $1, 210, 000

Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices?

Which one of the following types of costs is most likely to be included in determining the cost of inventory?

Using the following letters to represent items: P = Purchases (net) C = Cost of goods sold B = Beginning inventory E = Ending inventory Which equation is correct?

Which one of the following types of costs should be included in the cost of a manufactured inventory?

Which one of the following is not an advantage of using the FIFO cost flow assumption?

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar value LIFO is the

In interim reporting, a LIFO liquidation requires the company to forecast the year-end

Which one of the following is not a disadvantage of the specific identification method of inventory costing?

Which one of the following is not an advantage of LIFO?

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Special Valuation Issues

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 8: Inventories: Cost Measurement and Flow Assumptions

Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices?

Which one of the following types of costs is most likely to be included in determining the cost of inventory?

Using the following letters to represent items: P = Purchases (net) C = Cost of goods sold B = Beginning inventory E = Ending inventory Which equation is correct?

Which one of the following types of costs should be included in the cost of a manufactured inventory?

Which one of the following is not an advantage of using the FIFO cost flow assumption?

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar value LIFO is the

In interim reporting, a LIFO liquidation requires the company to forecast the year-end

Which one of the following is not a disadvantage of the specific identification method of inventory costing?

Which one of the following is not an advantage of LIFO?

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Special Valuation Issues

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters