Question 1

Which cost method provides the better (1) income statement and (2) statement of financial position valuations, respectively?

Accepted Answer

A) (1) average and (2) FIFO 
B) (1) FIFO and (2) average 
C) (1) FIFO and (2) FIFO 
D) (1) average and (2) average 
A) (1) average and (2) FIFO 
B) (1) FIFO and (2) average 
C) (1) FIFO and (2) FIFO 
D) (1) average and (2) average

Question 2

Inventory cost methods make assumptions about the flow of

Accepted Answer

A) costs. 
B) goods. 
C) resale prices. 
D) fair values. 
A) costs. 
B) goods. 
C) resale prices. 
D) fair values.

Question 3

Use the following information for questions 
A company just starting business made the following four inventory purchases in June:   On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-The inventory cost formula that results in the highest gross profit for June is

Accepted Answer

A) FIFO. 
B) average. 
C) Gross profit is the same under both cost formulas. 
D) not determinable. 
A) FIFO. 
B) average. 
C) Gross profit is the same under both cost formulas. 
D) not determinable.

Question 4

Goods that have been purchased FOB destination, but are in transit, should be excluded from the buyer's ending inventory.

Accepted Answer

A) True 
 B)False

Question 5

An increase in inventory turnover means days in inventory

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) cannot be determined. 
A) increases. 
B) decreases. 
C) remains the same. 
D) cannot be determined.

Question 6

Describe the steps in determining inventory quantities.

Accepted Answer

The steps are (1) taking a phy

Question 7

The specific identification method of inventory costing

Accepted Answer

A) always maximizes a company's profit. 
B) always minimizes a company's profit. 
C) has no effect on a company's profit. 
D) may enable management to manipulate profit. 
A) always maximizes a company's profit. 
B) always minimizes a company's profit. 
C) has no effect on a company's profit. 
D) may enable management to manipulate profit.

Question 8

An error that understates the ending inventory will cause assets to be understated.

Accepted Answer

A) True 
 B)False

Question 9

Of the following businesses, which one would not be likely to use the specific identification method for inventory costing?

Accepted Answer

A) piano store 
B) car dealership 
C) antique shop 
D) grocery store 
A) piano store 
B) car dealership 
C) antique shop 
D) grocery store

Question 10

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

Accepted Answer

A) True 
 B)False

Question 11

Selection of an inventory cost method by management should be influenced most by the

Accepted Answer

A) fiscal year end. 
B) physical flow of goods. 
C) goal of reporting inventory at its lowest cost. 
D) Income tax effects. 
A) fiscal year end. 
B) physical flow of goods. 
C) goal of reporting inventory at its lowest cost. 
D) Income tax effects.

Question 12

Use the following information for the month of July for questions 
ABC Inc.uses the FIFO cost method in a perpetual inventory system.  
-Ending inventory at July 31 is

Accepted Answer

A) $2,330. 
B) $720. 
C) $680. 
D) $550. 
A) $2,330. 
B) $720. 
C) $680. 
D) $550.

Question 13

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom's inventory at December 31?

Accepted Answer

A) (2) and (3) 
B) (1) and (4) 
C) (1) and (3) 
D) (2) and (4) 
A) (2) and (3) 
B) (1) and (4) 
C) (1) and (3) 
D) (2) and (4)

Question 14

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

Accepted Answer

A) True 
 B)False

Question 15

The physical inventory count determines the number of units on hand.

Accepted Answer

A) True 
 B)False

Question 16

All three methods of inventory cost determination will produce the same cumulative cost of goods sold over the life cycle of the business.

Accepted Answer

A) True 
 B)False

Question 17

Consigned goods are held for sale by one party although ownership of the goods is retained by another party.

Accepted Answer

A) True 
 B)False

Question 18

The specific identification method of inventory cost determination must be used

Accepted Answer

A) for goods that are produced and segregated for specific projects. 
B) when goods are not ordinarily interchangeable. 
C) when high priced goods are purchased. 
D) for goods that are produced and segregated for specific projects, and/or when goods are not ordinarily interchangeable. 
A) for goods that are produced and segregated for specific projects. 
B) when goods are not ordinarily interchangeable. 
C) when high priced goods are purchased. 
D) for goods that are produced and segregated for specific projects, and/or when goods are not ordinarily interchangeable.

Question 19

The consistent application of an inventory cost method is essential for

Accepted Answer

A) neutrality. 
B) accuracy. 
C) comparability. 
D) relevance. 
A) neutrality. 
B) accuracy. 
C) comparability. 
D) relevance.

Question 20

An error in the ending inventory of the current period will have a similar but inverse effect on profit of the next accounting period.

Accepted Answer

A) True 
 B)False

Which cost method provides the better (1) income statement and (2) statement of financial position valuations, respectively?

Inventory cost methods make assumptions about the flow of

Goods that have been purchased FOB destination, but are in transit, should be excluded from the buyer's ending inventory.

An increase in inventory turnover means days in inventory

Describe the steps in determining inventory quantities.

The specific identification method of inventory costing

An error that understates the ending inventory will cause assets to be understated.

Of the following businesses, which one would not be likely to use the specific identification method for inventory costing?

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

Selection of an inventory cost method by management should be influenced most by the

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -Ending inventory at July 31 is

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom's inventory at December 31?

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

The physical inventory count determines the number of units on hand.

All three methods of inventory cost determination will produce the same cumulative cost of goods sold over the life cycle of the business.

Consigned goods are held for sale by one party although ownership of the goods is retained by another party.

The specific identification method of inventory cost determination must be used

The consistent application of an inventory cost method is essential for

An error in the ending inventory of the current period will have a similar but inverse effect on profit of the next accounting period.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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 Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

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Exam 6: Reporting and Analyzing Inventory

Which cost method provides the better (1) income statement and (2) statement of financial position valuations, respectively?

Inventory cost methods make assumptions about the flow of

Goods that have been purchased FOB destination, but are in transit, should be excluded from the buyer's ending inventory.

An increase in inventory turnover means days in inventory

Describe the steps in determining inventory quantities.

The specific identification method of inventory costing

An error that understates the ending inventory will cause assets to be understated.

Of the following businesses, which one would not be likely to use the specific identification method for inventory costing?

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

Selection of an inventory cost method by management should be influenced most by the

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -Ending inventory at July 31 is

Westcom Corporation's goods in transit at December 31 include (1) sales made FOB destination, (2) sales made FOB shipping point, (3) purchases made FOB destination, and (4) purchases made FOB shipping point.Which items should be included in Westcom's inventory at December 31?

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

The physical inventory count determines the number of units on hand.

All three methods of inventory cost determination will produce the same cumulative cost of goods sold over the life cycle of the business.

Consigned goods are held for sale by one party although ownership of the goods is retained by another party.

The specific identification method of inventory cost determination must be used

The consistent application of an inventory cost method is essential for

An error in the ending inventory of the current period will have a similar but inverse effect on profit of the next accounting period.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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 Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters