Question 1

The inventory cost formula that best matches cost and revenues is FIFO.

Accepted Answer

A) True 
 B)False

Question 2

Approximating the physical flow of inventory is not important when selecting an inventory cost formula.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Selection of an inventory cost formula 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 5

Which cost formula smooths the effects of price changes?

Accepted Answer

A)  specific identification 
B)  FIFO 
C)  average cost 
D)  lower of cost and net realizable value 
A)  specific identification 
B)  FIFO 
C)  average cost 
D)  lower of cost and net realizable value

Question 6

Use the following information for questions.
A company just starting its 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 7

Goods held on consignment are

Accepted Answer

A)  never owned by the consignee. 
B)  included in the consignee's ending inventory. 
C)  kept for sale on the premises of the consignor. 
D)  not included in anyone's ending inventory. 
A)  never owned by the consignee. 
B)  included in the consignee's ending inventory. 
C)  kept for sale on the premises of the consignor. 
D)  not included in anyone's ending inventory.

Question 8

In the average cost formula used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

Accepted Answer

A) True 
 B)False

Question 9

Houle Limited reported the following summarized annual data at the end of 2018:   *Based on an ending inventory of $420,000, using FIFO.The controller of the company is considering a switch from FIFO to average cost. He has determined that on an average cost basis, the ending inventory would have been $320,000.Instructions 
a. Restate the summary information on an average cost basis.
b. If you were the management of this business, what would your reaction be to this proposed change?

Accepted Answer

@#IMG-DLM& (b) The company's management would not

Question 10

Describe the steps in determining inventory quantities.

Accepted Answer

The steps are (1) determining

Question 11

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Accepted Answer

A)  valued at their current cost. 
B)  valued at their selling price. 
C)  not under-valued. 
D)  not over-valued. 
A)  valued at their current cost. 
B)  valued at their selling price. 
C)  not under-valued. 
D)  not over-valued.

Question 12

Use the following information for the month of July for questions.  
-If ABC Inc. used the average cost formula instead of FIFO, gross profit from the July 8 sale would be

Accepted Answer

A)  higher. 
B)  lower. 
C)  the same. 
D)  cannot be determined. 
A)  higher. 
B)  lower. 
C)  the same. 
D)  cannot be determined.

Question 13

Inventory that originally cost $100 had been written down to its net realizable value (NRV) of $75. Subsequently, the NRV of the inventory recovered to equal its cost of $100. In this situation, the amount of the $25 ($100 - $75) prior writedown in value should be reversed.

Accepted Answer

A) True 
 B)False

Question 14

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.

Accepted Answer

The answer of For each of the independent events listed...

Question 15

The specific identification method of inventory cost formula 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 16

Inventory cost formulas such as FIFO and average cost, deal more with the flow of costs than with the flow of goods.

Accepted Answer

A) True 
 B)False

Question 17

Owl Ltd. sells many products. Hoot is one of its popular items. Below is an analysis of the inventory purchases and sales of Hoot for the month of March. Owl uses the perpetual inventory system.   Instructions 
a. Using the FIFO cost formula, calculate the cost of goods sold for March. Show calculations.
b. Using the average cost formula, calculate the ending inventory at March 31. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.

Accepted Answer

(a) FIFO @#IMG-DLM& (b) Average @#IMG-DLM& Please

Question 18

The first-in, first-out (FIFO) inventory cost formula results in an ending inventory valued at the most recent cost.

Accepted Answer

A) True 
 B)False

The inventory cost formula that best matches cost and revenues is FIFO.

Approximating the physical flow of inventory is not important when selecting an inventory cost formula.

Inventory cost methods make assumptions about the flow of

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

Which cost formula smooths the effects of price changes?

Goods held on consignment are

In the average cost formula used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

Describe the steps in determining inventory quantities.

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Use the following information for the month of July for questions. -If ABC Inc. used the average cost formula instead of FIFO, gross profit from the July 8 sale would be

Inventory that originally cost $100 had been written down to its net realizable value (NRV) of $75. Subsequently, the NRV of the inventory recovered to equal its cost of $100. In this situation, the amount of the $25 ($100 - $75) prior writedown in value should be reversed.

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.

The specific identification method of inventory cost formula must be used

Inventory cost formulas such as FIFO and average cost, deal more with the flow of costs than with the flow of goods.

The first-in, first-out (FIFO) inventory cost formula results in an ending inventory valued at the most recent cost.

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters

Exam 6: Reporting and Analyzing Inventory

The inventory cost formula that best matches cost and revenues is FIFO.

Approximating the physical flow of inventory is not important when selecting an inventory cost formula.

Inventory cost methods make assumptions about the flow of

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

Which cost formula smooths the effects of price changes?

Goods held on consignment are

In the average cost formula used in a periodic inventory system, the same weighted average cost per unit is used to calculate all of the goods sold during the period.

Describe the steps in determining inventory quantities.

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Use the following information for the month of July for questions. -If ABC Inc. used the average cost formula instead of FIFO, gross profit from the July 8 sale would be

Inventory that originally cost $100 had been written down to its net realizable value (NRV) of $75. Subsequently, the NRV of the inventory recovered to equal its cost of $100. In this situation, the amount of the $25 ($100 - $75) prior writedown in value should be reversed.

For each of the independent events listed below, analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item.

The specific identification method of inventory cost formula must be used

Inventory cost formulas such as FIFO and average cost, deal more with the flow of costs than with the flow of goods.

The first-in, first-out (FIFO) inventory cost formula results in an ending inventory valued at the most recent cost.

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters