Question 1

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Accepted Answer

A) True 
 B)False

Question 2

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

Accepted Answer

A) True 
 B)False

Question 3

A company just starting business made the following four inventory purchases in June: $\begin{array}{lrlr}
\text { June }  1 & 150 \text { units } & \$ 390 \
\text { June }  10 & 200 \text { units } & 585 \
\text { June }  15 & 200 \text { units } & 630 \
\text { June }  28 & 150 \text { units } & 510\&&\$2,115
\end{array}$ A physical count of merchandise inventory on June 30 reveals that there are 250 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 weighted average unit cost method. 
D)  not determinable. 
A)  the FIFO method. 
B)  the LIFO method. 
C)  the weighted average unit cost method. 
D)  not determinable.

Question 4

Moroni Industries has the following inventory information. $\begin{array}{rll}
\text { July }1 & \text { Beginning Inventory } & 40 \text { units at } \$ 120 \
5 & \text { Purchases } & 240 \text { units at } \$ 112 \
14 & \text { Sale } & 160 \text { units } \
21 & \text { Purchases } & 120 \text { units at } \$ 115 \
30 & \text { Sale } & 140 \text { units }
\end{array}$ Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis?

Accepted Answer

A)  $11,500 
B)  $11,520 
C)  $33,960 
D)  $33,980 
A)  $11,500 
B)  $11,520 
C)  $33,960 
D)  $33,980

Question 5

The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 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)  $84 
B)  $2,800 
C)  $400 
D)  $420 
A)  $84 
B)  $2,800 
C)  $400 
D)  $420

Question 6

In a manufacturing business, inventory that is ready for sale is called

Accepted Answer

A)  raw materials inventory. 
B)  work in process inventory. 
C)  finished goods inventory. 
D)  store supplies inventory. 
A)  raw materials inventory. 
B)  work in process inventory. 
C)  finished goods inventory. 
D)  store supplies inventory.

Question 7

An auto manufacturer would classify vehicles in various stages of production as

Accepted Answer

A)  finished goods. 
B)  merchandise inventory. 
C)  raw materials. 
D)  work in process. 
A)  finished goods. 
B)  merchandise inventory. 
C)  raw materials. 
D)  work in process.

Question 8

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

Accepted Answer

A) True 
 B)False

Question 9

In a period of rising prices, FIFO will have

Accepted Answer

A)  lower net income than LIFO. 
B)  lower cost of goods sold than LIFO. 
C)  lower income tax expense than LIFO. 
D)  lower net purchases than LIFO. 
A)  lower net income than LIFO. 
B)  lower cost of goods sold than LIFO. 
C)  lower income tax expense than LIFO. 
D)  lower net purchases than LIFO.

Question 10

Inventoriable costs include all of the following except the

Accepted Answer

A)  freight costs incurred when buying inventory. 
B)  costs of the purchasing and warehousing departments. 
C)  cost of the beginning inventory. 
D)  cost of goods purchased. 
A)  freight costs incurred when buying inventory. 
B)  costs of the purchasing and warehousing departments. 
C)  cost of the beginning inventory. 
D)  cost of goods purchased.

Question 11

Priscilla has the following inventory information. $$\begin{array} { r l l r } 
\text { July } 1 & \text { Beginning Inventory } & 20 \text { units at } \$ 19 & \$ 380 \
7 & \text { Purchases } & 70 \text { units at } \$ 20 & 1,400 \
22 & \text { Purchases } & 10 \text { units at } \$ 23 &  { 230 } \&&&{ \$ 2,010 }
\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

Accepted Answer

A)  $1,280. 
B)  $1,287. 
C)  $1,306. 
D)  $1,330. 
A)  $1,280. 
B)  $1,287. 
C)  $1,306. 
D)  $1,330.

Question 12

Othello Company understated its inventory by $20,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Othello's stockholder's equity was:

Accepted Answer

A)  understated at December 31, 2014, and overstated at December 31, 2015. 
B)  understated at December 31, 2014, and properly stated at December 31, 2015. 
C)  overstated at December 31, 2014, and overstated at December 31, 2015. 
D)  understated at December 31, 2014, and understated at December 31, 2015. 
A)  understated at December 31, 2014, and overstated at December 31, 2015. 
B)  understated at December 31, 2014, and properly stated at December 31, 2015. 
C)  overstated at December 31, 2014, and overstated at December 31, 2015. 
D)  understated at December 31, 2014, and understated at December 31, 2015.

Question 13

Which of the following items will increase inventoriable costs for the buyer of goods?

Accepted Answer

A)  Purchase returns and allowances granted by the seller 
B)  Purchase discounts taken by the purchaser 
C)  Freight charges paid by the seller 
D)  Freight charges paid by the purchaser 
A)  Purchase returns and allowances granted by the seller 
B)  Purchase discounts taken by the purchaser 
C)  Freight charges paid by the seller 
D)  Freight charges paid by the purchaser

Question 14

Companies adopt different cost flow methods for each of the following reasons except

Accepted Answer

A)  balance sheet effects. 
B)  cost effects. 
C)  income statements effects. 
D)  tax effects. 
A)  balance sheet effects. 
B)  cost effects. 
C)  income statements effects. 
D)  tax effects.

Question 15

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows: $$\begin{array} { l c c r } 
& \text { Units } & \text { Per unit price } & \text { Total } \
\text { Balance, } 1 / 1 / 15 & 200 & \$ 5.00 & \$ 1,000 \
\text { Purchase, } 1 / 15 / 15 & 100 & 5.30 & 530 \
\text { Purchase, } 1 / 28 / 15 & 100 & 5.50 & 550
\end{array}$$ An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

Accepted Answer

A)  $800 
B)  $832 
C)  $848 
D)  $868 
A)  $800 
B)  $832 
C)  $848 
D)  $868

Question 16

If a company uses the FIFO cost flow assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

Accepted Answer

A) True 
 B)False

Question 17

Certain agricultural and mineral products can be reported at net realizable value under GAAP$\quad$IFRS
a. Yes$\quad$$\quad$No
b. Yes$\quad$$\quad$Yes
c. No$\quad$$\quad$No
d. No$\quad$$\quad$Yes

Accepted Answer

The answer of Certain agricultural and mineral products can be...

Question 18

Under the gross profit method, each of the following items are estimated except for the

Accepted Answer

A)  cost of ending inventory. 
B)  cost of goods sold. 
C)  cost of goods purchased. 
D)  gross profit. 
A)  cost of ending inventory. 
B)  cost of goods sold. 
C)  cost of goods purchased. 
D)  gross profit.

Question 19

Netta Shutters has the following inventory information. $$\begin{array} { r l l } 
\text { Nov. } 1 & \text { Inventory } & 30 \text { units @ \$8.00 } \
8 & \text { Purchase } & 120 \text { units @ \$8.30 } \
17 & \text { Purchase } & 60 \text { units @ \$8.40 } \
25 & \text { Purchase } & 90 \text { units @ \$8.80 }
\end{array}$$ A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used. Ending inventory under LIFO is

Accepted Answer

A)  $738. 
B)  $792. 
C)  $1,740. 
D)  $1,794. 
A)  $738. 
B)  $792. 
C)  $1,740. 
D)  $1,794.

Question 20

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

Accepted Answer

A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  tax method. 
A)  FIFO method. 
B)  LIFO method. 
C)  average-cost method. 
D)  tax method.

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 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?

In a manufacturing business, inventory that is ready for sale is called

An auto manufacturer would classify vehicles in various stages of production as

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

In a period of rising prices, FIFO will have

Inventoriable costs include all of the following except the

Othello Company understated its inventory by $20,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Othello's stockholder's equity was:

Which of the following items will increase inventoriable costs for the buyer of goods?

Companies adopt different cost flow methods for each of the following reasons except

If a company uses the FIFO cost flow assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

Certain agricultural and mineral products can be reported at net realizable value under GAAP $\quad$ IFRS a. Yes $\quad$ $\quad$ No b. Yes $\quad$ $\quad$ Yes c. No $\quad$ $\quad$ No d. No $\quad$ $\quad$ Yes

Under the gross profit method, each of the following items are estimated except for the

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

Exam 6: Inventories

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 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?

In a manufacturing business, inventory that is ready for sale is called

An auto manufacturer would classify vehicles in various stages of production as

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

In a period of rising prices, FIFO will have

Inventoriable costs include all of the following except the

Othello Company understated its inventory by $20,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Othello's stockholder's equity was:

Which of the following items will increase inventoriable costs for the buyer of goods?

Companies adopt different cost flow methods for each of the following reasons except

If a company uses the FIFO cost flow assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

Certain agricultural and mineral products can be reported at net realizable value under GAAP \quad IFRS a. Yes \quad\quad No b. Yes \quad\quad Yes c. No \quad\quad No d. No \quad\quad Yes

Under the gross profit method, each of the following items are estimated except for the

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

Certain agricultural and mineral products can be reported at net realizable value under GAAP $\quad$ IFRS a. Yes $\quad$ $\quad$ No b. Yes $\quad$ $\quad$ Yes c. No $\quad$ $\quad$ No d. No $\quad$ $\quad$ Yes