Question 1

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Accepted Answer

A) Average cost method 
B) LIFO method 
C) FIFO method 
D) Need more information to answer 
A) Average cost method 
B) LIFO method 
C) FIFO method 
D) Need more information to answer

Question 2

Redeker Company had the following records: $\begin{array}{lll}&2017&2016\
\text { Ending inventory } & \$ 32,650 & \$ 30,490 \
\text { Cost of qoods sold } & 213,600 & 209,040
\end{array}$ What is Redeker's inventory turnover for 2017? (rounded)

Accepted Answer

A) 6.8 times 
B) 7.0 times 
C) 6.6 times 
D) 6.5 times 
A) 6.8 times 
B) 7.0 times 
C) 6.6 times 
D) 6.5 times

Question 3

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Accepted Answer

A) True 
 B)False

Question 4

Days in inventory is calculated by dividing 365 days by

Accepted Answer

A) average inventory. 
B) beginning inventory. 
C) ending inventory. 
D) the inventory turnover. 
A) average inventory. 
B) beginning inventory. 
C) ending inventory. 
D) the inventory turnover.

Question 5

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using?

Accepted Answer

A) LIFO 
B) Average 
C) FIFO 
D) No inventory costing method directly affects the current ratio. 
A) LIFO 
B) Average 
C) FIFO 
D) No inventory costing method directly affects the current ratio.

Question 6

Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2017 are as follows: $\begin{array}{llrr}&\text { Units }&\text { Per unit price }&\text { Total }\
\text { Balance, } 1 / 1 / 2017 & 300 & \$ 5.00 & \$ 1.500 \
\text { Purchase, } 1 / 15 / 2017 & 150 & 5.30 & 795 \
\text { Purchase, } 1 / 28 / 2017 & 150 & 5.50 & 825
\end{array}$ An end of the month (1/31/2017) inventory showed that 240 units were on hand. How many units did the company sell during January 2017?

Accepted Answer

A) 90 
B) 240 
C) 300 
D) 360 
A) 90 
B) 240 
C) 300 
D) 360

Question 7

Computers have made the periodic inventory system more popular and easier to apply.

Accepted Answer

A) True 
 B)False

Question 8

The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as the

Accepted Answer

A) FIFO reserve. 
B) inventory reserve. 
C) LIFO reserve. 
D) periodic reserve. 
A) FIFO reserve. 
B) inventory reserve. 
C) LIFO reserve. 
D) periodic reserve.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

Accepted Answer

A) To check the accuracy of the perpetual inventory records 
B) To determine cost of goods sold for the accounting period 
C) To compute inventory ratios 
D) All are a purpose of taking a physical inventory when a perpetual inventory system is used. 
A) To check the accuracy of the perpetual inventory records 
B) To determine cost of goods sold for the accounting period 
C) To compute inventory ratios 
D) All are a purpose of taking a physical inventory when a perpetual inventory system is used.

Question 11

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 12

An overstatement of ending inventory in one period results in

Accepted Answer

A) no effect on net income of the next period. 
B) an overstatement of net income of the next period. 
C) an understatement of net income of the next period. 
D) an overstatement of the ending inventory of the next period. 
A) no effect on net income of the next period. 
B) an overstatement of net income of the next period. 
C) an understatement of net income of the next period. 
D) an overstatement of the ending inventory of the next period.

Question 13

Nelson Corporation sells three different products. The following information is available on December 31: $$\begin{array} { | c | c | c | c | } 
\hline \text { Inventory Item } & \text { Units } & \text { Cost per unit } & \text { Market value per unit } \
\hline X & 300 & \$ 4.00 & \$ 3.50 \
\hline Y & 600 & \$ 2.00 & \$ 1.50 \
\hline Z & 1,500 & \$ 3.00 & \$ 4.00 \
\hline
\end{array}$$ When applying the lower of cost or market rule to each item, what will Nelson's total ending inventory balance be?

Accepted Answer

A) $6,900 
B) $6,450 
C) $7,950 
D) $6,600 
A) $6,900 
B) $6,450 
C) $7,950 
D) $6,600

Question 14

Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods?

Accepted Answer

A) FIFO reserve 
B) Inventory turnover 
C) LIFO reserve 
D) Current replacement cost 
A) FIFO reserve 
B) Inventory turnover 
C) LIFO reserve 
D) Current replacement cost

Question 15

The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

Accepted Answer

A) LIFO 
B) Average Cost 
C) FIFO 
D) Physical inventory method 
A) LIFO 
B) Average Cost 
C) FIFO 
D) Physical inventory method

Question 16

Under the LCM basis, market is defined as selling price, not current replacement cost.

Accepted Answer

A) True 
 B)False

Question 17

A problem with the specific identification method is that

Accepted Answer

A) inventories can be reported at actual costs. 
B) management can manipulate income. 
C) matching is not achieved. 
D) the lower of cost or market basis cannot be applied. 
A) inventories can be reported at actual costs. 
B) management can manipulate income. 
C) matching is not achieved. 
D) the lower of cost or market basis cannot be applied.

Question 18

Quark Inc. just began business and made the following four inventory purchases in June: $\begin{array}{lrlr}
\text { June } & 1 & 150 \text { units } & \$ 990 \
\text { June } & 10 & 200 \text { units } & 1,344 \
\text { June } & 15 & 200 \text { units } & 1,368 \
\text { June } & 28 & 150 \text { units } & 1,062\&&&\$4,764
\end{array}$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Accepted Answer

A) $1,326. 
B) $1,320. 
C) $1,404. 
D) $1,416. 
A) $1,326. 
B) $1,320. 
C) $1,404. 
D) $1,416.

Question 19

Radical Radials Company has the following inventory data: $$\begin{array} { r l r r } 
\text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \
7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \
22 & \text { Purchases } & 15 \text { units at } \$ 22 & { 330 }\&&& { \$ 3,000 }
\end{array}$$ 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 ending inventory for July is

Accepted Answer

A) $930 
B) $912 
C) $960 
D) $1,056. 
A) $930 
B) $912 
C) $960 
D) $1,056.

Question 20

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Accepted Answer

A) True 
 B)False

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Redeker Company had the following records: 2017 2016 Ending inventory \ 32,650 \ 30,490 Cost of qoods sold 213,600 209,040 What is Redeker's inventory turnover for 2017? (rounded)

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Days in inventory is calculated by dividing 365 days by

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using?

Computers have made the periodic inventory system more popular and easier to apply.

The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as the

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

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

An employee assigned to counting computer monitors in boxes should

An overstatement of ending inventory in one period results in

Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods?

The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

Under the LCM basis, market is defined as selling price, not current replacement cost.

A problem with the specific identification method is that

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

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

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 5: Reporting and Analyzing Inventory

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Redeker Company had the following records: 2017 2016 Ending inventory \ 32,650 \ 30,490 Cost of qoods sold 213,600 209,040 What is Redeker's inventory turnover for 2017? (rounded)

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Days in inventory is calculated by dividing 365 days by

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using?

Computers have made the periodic inventory system more popular and easier to apply.

The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as the

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

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

An employee assigned to counting computer monitors in boxes should

An overstatement of ending inventory in one period results in

Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods?

The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

Under the LCM basis, market is defined as selling price, not current replacement cost.

A problem with the specific identification method is that

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

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

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters