Question 1

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Accepted Answer

A) True 
 B)False

Question 2

A. Macarty Company's records indicate the following information for the year: $\begin{array}{lr}
\text { Merchandise inventory, } 1 / 1 & \$ 550,000 \
\text { Purchases } & 2,250,000 \
\text { Net sales } & 3,100,000
\end{array}$ On December 31 a physical inventory determined that ending inventory of $600000 was in the warehouse. A. Macarty's gross profit on sales has remained constant at 30%. A. Macarty suspects some of the inventory may have been taken by some new employees. At December 31 what is the estimated cost of missing inventory?

Accepted Answer

A)  $30000 
B)  $42000 
C)  $180000 
D)  $600000 
A)  $30000 
B)  $42000 
C)  $180000 
D)  $600000

Question 3

Certain agricultural and mineral products can be reported at net realizable value under $\begin{array} { l l l } 
& \underline{ \text {GAAP  }} & \underline{ \text {  IFRS }} \\end{array}$
A)$\begin{array} { l l l }  &\text { Yes } & &\text { No } \\end{array}$
B)$\begin{array} { l l l } &\text { Yes } && \text { Yes } \\end{array}$
C)$\begin{array} { l l l }& \text { No } && \text {No } \\end{array}$
D)$\begin{array} { l l l } &\text {  No } && \text {Yes  }
\end{array}$

Accepted Answer

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

Question 4

The managers of Venice 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct with respect to inventories?

Accepted Answer

A)  The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  It is generally good business management to sell the most recently acquired goods first. 
C)  Under FIFO the ending inventory is based on the latest units purchased. 
D)  FIFO seldom coincides with the actual physical flow of inventory. 
A)  The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  It is generally good business management to sell the most recently acquired goods first. 
C)  Under FIFO the ending inventory is based on the latest units purchased. 
D)  FIFO seldom coincides with the actual physical flow of inventory.

Question 7

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Accepted Answer

A)  The cost of beginning inventory and the cost of ending inventory 
B)  The cost of ending inventory and the cost of goods purchased during the year 
C)  The cost of beginning inventory and the cost of goods purchased during the year 
D)  The difference between the costs of goods purchased and the cost of goods sold during the year 
A)  The cost of beginning inventory and the cost of ending inventory 
B)  The cost of ending inventory and the cost of goods purchased during the year 
C)  The cost of beginning inventory and the cost of goods purchased during the year 
D)  The difference between the costs of goods purchased and the cost of goods sold during the year

Question 8

FIFO and LIFO are the two most common cost flow assumptions made in costing inventories. The amounts assigned to the same inventory items on hand may be different under each cost flow assumption. If a company has no beginning inventory explain the difference in ending inventory values under the FIFO and LIFO cost bases when the price of inventory items purchased during the period have been (1) increasing (2) decreasing and (3) remained constant.

Accepted Answer

The FIFO method determines the ending in

Question 9

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

Accepted Answer

1. FIFO: Ending inventory   In

Question 10

Freight terms of FOB shipping point mean that the

Accepted Answer

A)  seller must debit freight out. 
B)  buyer must bear the freight costs. 
C)  goods are placed free on board at the buyer's place of business. 
D)  seller must bear the freight costs. 
A)  seller must debit freight out. 
B)  buyer must bear the freight costs. 
C)  goods are placed free on board at the buyer's place of business. 
D)  seller must bear the freight costs.

Question 11

Errors occasionally occur when physically counting inventory items on hand. Identify the financial statement effects of an overstatement of the ending inventory in the current period. If the error is not corrected how does it affect the financial statements for the following year?

Accepted Answer

The overstatement of ending inventory wi

Question 12

If a company changes its inventory valuation method the effect of the change on net income should be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Barley Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: $\begin{array}{ccc}
 \text { Product } & \text { Cost } & \text { Market } \
\hline \text { A } & \$ 115,000 & \$ 120,000 \
 \text { B } & 80,000 & 73,000 \
 \text { C } & 158.000 &162,000 \
\end{array}$
 If Barley applies the LCM basis the value of the inventory reported on the balance sheet would be

Accepted Answer

A)  $346000. 
B)  $353000. 
C)  $355000. 
D)  $362000. 
A)  $346000. 
B)  $353000. 
C)  $355000. 
D)  $362000.

Question 14

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 15

Storme Shutters has the following inventory information. $$\begin{array} { r l r } 
\text { Nov. } 1 & \text { Inventory } & 30 \text { units } @\$ 8.00 \
8 & \text { Purchase } & 120 \text { units }@\$ 8.30 \
17 & \text { Purchase } & 60 \text { units } @ \$ 8.70 \
25 & \text { Purchase } & 90 \text { units }@\$ 8.80
\end{array}$$ A physical count of merchandise inventory on November 30 reveals that there are 80 units on hand. Assume a periodic inventory system is used. Ending inventory under FIFO is

Accepted Answer

A)  $655. 
B)  $704. 
C)  $1758. 
D)  $1812. 
A)  $655. 
B)  $704. 
C)  $1758. 
D)  $1812.

Question 16

The lower-of-cost-or-market basis of valuing inventories is an example of

Accepted Answer

A)  comparability. 
B)  the historical cost principle. 
C)  conservatism. 
D)  consistency. 
A)  comparability. 
B)  the historical cost principle. 
C)  conservatism. 
D)  consistency.

Question 17

Inventory is reported in the financial statements at

Accepted Answer

A)  cost. 
B)  market. 
C)  the higher-of-cost-or-market. 
D)  the lower-of-cost-or-market. 
A)  cost. 
B)  market. 
C)  the higher-of-cost-or-market. 
D)  the lower-of-cost-or-market.

Question 18

Glenn Company has the following inventory information. $$\begin{array} { r l l } 
\text { July } 1 & \text { Beginning Inventory } & 10 \text { units at } \$ 90 \
5 & \text { Purchases } & 60 \text { units at } \$ 92 \
14 & \text { Sale } & 50 \text { units } \
21 & \text { Purchases } & 30 \text { units at } \$ 95 \
30 & \text { Sale } & 35 \text { units }
\end{array}$$ Assuming that a perpetual inventory system is used what is the ending inventory (round all calculations to nearest dollar) under the moving-average cost method?

Accepted Answer

A)  $1385 
B)  $1391 
C)  $1405 
D)  $1425 
A)  $1385 
B)  $1391 
C)  $1405 
D)  $1425

Question 19

Lester Company sells many products. Hackenberry is one of its popular items. Below is an analysis of the inventory purchases and sales of Hackenberry for the month of March. Lester Company uses the periodic inventory system.   Instructions
(a) Using the FIFO assumption calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the weighted average method calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c) Using the LIFO assumption calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Accepted Answer

None

Question 20

Storme Shutters has the following inventory information. $$\begin{array} { r l r } 
\text { Nov. } 1 & \text { Inventory } & 30 \text { units } @\$ 8.00 \
8 & \text { Purchase } & 120 \text { units }@\$ 8.30 \
17 & \text { Purchase } & 60 \text { units } @ \$ 8.70 \
25 & \text { Purchase } & 90 \text { units }@\$ 8.80
\end{array}$$ A physical count of merchandise inventory on November 30 reveals that there are 80 units on hand. Assume a periodic inventory system is used. Assuming that the specific identification method is used and that ending inventory consists of 20 units from each of the three purchases and 20 units from the November 1 inventory cost of goods sold is

Accepted Answer

A)  $1758. 
B)  $1870. 
C)  $1862. 
D)  $1812. 
A)  $1758. 
B)  $1870. 
C)  $1862. 
D)  $1812.

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Certain agricultural and mineral products can be reported at net realizable value under A) Yes No B) Yes Yes C) No No D) No Yes

The managers of Venice 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 lower-of-cost-or-market basis market is defined as current replacement cost.

Which of the following statements is correct with respect to inventories?

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

Freight terms of FOB shipping point mean that the

Errors occasionally occur when physically counting inventory items on hand. Identify the financial statement effects of an overstatement of the ending inventory in the current period. If the error is not corrected how does it affect the financial statements for the following year?

If a company changes its inventory valuation method the effect of the change on net income should be disclosed in the financial statements.

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

The lower-of-cost-or-market basis of valuing inventories is an example of

Inventory is reported in the financial statements at

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

Exam 6: Inventories

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Certain agricultural and mineral products can be reported at net realizable value under A) Yes No B) Yes Yes C) No No D) No Yes

The managers of Venice 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 lower-of-cost-or-market basis market is defined as current replacement cost.

Which of the following statements is correct with respect to inventories?

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?

Freight terms of FOB shipping point mean that the

Errors occasionally occur when physically counting inventory items on hand. Identify the financial statement effects of an overstatement of the ending inventory in the current period. If the error is not corrected how does it affect the financial statements for the following year?

If a company changes its inventory valuation method the effect of the change on net income should be disclosed in the financial statements.

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

The lower-of-cost-or-market basis of valuing inventories is an example of

Inventory is reported in the financial statements at

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters