Question 1

If both purchases and ending inventory are overstated by the same amount, net income is not affected.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?

Accepted Answer

A)  Raw materials. 
B)  Work-in-process. 
C)  Finished goods. 
D)  Supplies. 
A)  Raw materials. 
B)  Work-in-process. 
C)  Finished goods. 
D)  Supplies.

Question 3

The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation:

Accepted Answer

A)  moving-average. 
B)  weighted-average. 
C)  LIFO perpetual. 
D)  FIFO. 
A)  moving-average. 
B)  weighted-average. 
C)  LIFO perpetual. 
D)  FIFO.

Question 4

Opera Corp. uses the dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows:   What is the 2013 inventory balance using dollar-value LIFO?

Accepted Answer

A)  $390,000. 
B)  $371,424. 
C)  $736,362. 
D)  $810,000. 
A)  $390,000. 
B)  $371,424. 
C)  $736,362. 
D)  $810,000.

Question 5

Under what circumstances should a company with high rate of return on sales consider the inventory sold?

Accepted Answer

A)  When it can reasonably estimate the amount of returns 
B)  When the retailer gives a confirmation that the goods won't be returned 
C)  When the goods are sold on installment 
D)  When the payment for goods is received 
A)  When it can reasonably estimate the amount of returns 
B)  When the retailer gives a confirmation that the goods won't be returned 
C)  When the goods are sold on installment 
D)  When the payment for goods is received

Question 6

Dollar-value LIFO method.
Part A. Judd Company has a beginning inventory in year one of $700,000 and an ending inventory of $847,000. The price level has increased from 100 at the beginning of the year to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.
Part B. At the end of year two, Judd's inventory is $943,000 in terms of a price level of 115 which exists at the end of year two. Calculate the inventory at the end of year two continuing the use of the dollar-value LIFO method.

Accepted Answer

The answer of Dollar-value LIFO method.
Part A. Judd Company has...

Question 7

Use the following information for questions 56 and 57.
During 2014, which was the first year of operations, Oswald Company had merchandise purchases of $985,000 before cash discounts. All purchases were made on terms of 2/10, n/30. Three-fourths of the items purchased were paid for within 10 days of purchase. All of the goods available had been sold at year end.
-Which of the following recording procedures would result in the highest cost of goods sold for 2014?1. Recording purchases at gross amounts2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement

Accepted Answer

A)  1 
B)  2 
C)  Either 1 or 2 will result in the same cost of goods sold. 
D)  Cannot be determined from the information provided. 
A)  1 
B)  2 
C)  Either 1 or 2 will result in the same cost of goods sold. 
D)  Cannot be determined from the information provided.

Question 8

How should the following costs affect a retailer's inventory valuation?

Accepted Answer

The answer of How should the following costs affect a...

Question 9

Which inventory costing method most closely approximates current cost for each of the following:

Accepted Answer

The answer of Which inventory costing method most closely approximates...

Question 10

Use the following information for questions 125 through 127.
Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was $550,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:  
-What is the cost of the ending inventory at December 31, 2014 under dollar-value LIFO?

Accepted Answer

A)  $600,000. 
B)  $642,000. 
C)  $603,500. 
D)  $588,500. 
A)  $600,000. 
B)  $642,000. 
C)  $603,500. 
D)  $588,500.

Question 11

Feine Co. accepted delivery of merchandise which it purchased on account. As of December 31, Feine had recorded the transaction, but did not include the merchandise in its inventory. The effect of this on its financial statements for December 31 would be

Accepted Answer

A)  net income, current assets, and retained earnings were understated. 
B)  net income was correct and current assets were understated. 
C)  net income was understated and current liabilities were overstated. 
D)  net income was overstated and current assets were understated. 
A)  net income, current assets, and retained earnings were understated. 
B)  net income was correct and current assets were understated. 
C)  net income was understated and current liabilities were overstated. 
D)  net income was overstated and current assets were understated.

Question 12

Milford Company had 400 units of "Tank" in its inventory at a cost of $6 each. It purchased 600 more units of "Tank" at a cost of $9 each. Milford then sold 700 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by

Accepted Answer

A)  $ -0- 
B)  $300. 
C)  $600. 
D)  $900. 
A)  $ -0- 
B)  $300. 
C)  $600. 
D)  $900.

Question 13

Valuation of inventories requires the determination of all of the following except

Accepted Answer

A)  the costs to be included in inventory. 
B)  the physical goods to be included in inventory. 
C)  the cost of goods held on consign?ment from other companies. 
D)  the cost flow assumption to be adopted. 
A)  the costs to be included in inventory. 
B)  the physical goods to be included in inventory. 
C)  the cost of goods held on consign?ment from other companies. 
D)  the cost flow assumption to be adopted.

Question 14

Use the following information for questions 96 and 97.
Winsor Co. records purchases at net amounts. On May 5 Winsor purchased merchandise on account, $40,000, terms 2/10, n/30. Winsor returned $3,000 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid.
-By how much should the account payable be adjusted on May 31?

Accepted Answer

A)  $ 0. 
B)  $860. 
C)  $800. 
D)  $740. 
A)  $ 0. 
B)  $860. 
C)  $800. 
D)  $740.

Question 15

Which of the following methods is also referred as "parking transactions"?

Accepted Answer

A)  Consignment sales. 
B)  Sales on installment. 
C)  Sales with high rates of return. 
D)  Sales with buyback agreement. 
A)  Consignment sales. 
B)  Sales on installment. 
C)  Sales with high rates of return. 
D)  Sales with buyback agreement.

Question 16

Milford Company had 500 units of "Tank" in its inventory at a cost of $4 each. It purchased, for $2,800, 300 more units of "Tank". Milford then sold 400 units at a selling price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used by Milford

Accepted Answer

A)  is FIFO. 
B)  is LIFO. 
C)  is weighted average. 
D)  cannot be determined from the information given. 
A)  is FIFO. 
B)  is LIFO. 
C)  is weighted average. 
D)  cannot be determined from the information given.

Question 17

The LIFO conformity rule requires that if a company uses LIFO for tax purposes, it must also use LIFO for financial accounting purposes.

Accepted Answer

A) True 
 B)False

Question 18

Use the following information for questions 103 through 106.
Transactions for the month of June were:  
-Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Accepted Answer

A)  $8,192. 
B)  $8,476. 
C)  $8,580. 
D)  $8,644. 
A)  $8,192. 
B)  $8,476. 
C)  $8,580. 
D)  $8,644.

Question 19

Web World began using dollar-value LIFO for costing its inventory last year. The base year layer consists of $400,000. Assuming the current inventory at end of year prices equals $552,000 and the index for the current year is 1.10, what is the ending inventory using dollar-value LIFO?

Accepted Answer

A)  $552,000. 
B)  $512,000. 
C)  $501,818. 
D)  $607,200. 
A)  $552,000. 
B)  $512,000. 
C)  $501,818. 
D)  $607,200.

Question 20

The following information was derived from the 2014 accounting records of Perez Co.:   Perez's 2014 cost of sales was

Accepted Answer

A)  $520,000. 
B)  $550,000. 
C)  $584,000. 
D)  $589,000. 
A)  $520,000. 
B)  $550,000. 
C)  $584,000. 
D)  $589,000.

Exam 8: Valuation of Inventories: a Cost-Basis Approach

If both purchases and ending inventory are overstated by the same amount, net income is not affected.

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?

The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation:

Opera Corp. uses the dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows: What is the 2013 inventory balance using dollar-value LIFO?

Under what circumstances should a company with high rate of return on sales consider the inventory sold?

How should the following costs affect a retailer's inventory valuation?

Which inventory costing method most closely approximates current cost for each of the following:

Feine Co. accepted delivery of merchandise which it purchased on account. As of December 31, Feine had recorded the transaction, but did not include the merchandise in its inventory. The effect of this on its financial statements for December 31 would be

Milford Company had 400 units of "Tank" in its inventory at a cost of $6 each. It purchased 600 more units of "Tank" at a cost of $9 each. Milford then sold 700 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by

Valuation of inventories requires the determination of all of the following except

Which of the following methods is also referred as "parking transactions"?

Milford Company had 500 units of "Tank" in its inventory at a cost of $4 each. It purchased, for $2,800, 300 more units of "Tank". Milford then sold 400 units at a selling price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used by Milford

The LIFO conformity rule requires that if a company uses LIFO for tax purposes, it must also use LIFO for financial accounting purposes.

Use the following information for questions 103 through 106. Transactions for the month of June were: -Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Web World began using dollar-value LIFO for costing its inventory last year. The base year layer consists of $400,000. Assuming the current inventory at end of year prices equals $552,000 and the index for the current year is 1.10, what is the ending inventory using dollar-value LIFO?

The following information was derived from the 2014 accounting records of Perez Co.: Perez's 2014 cost of sales was

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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