Question 1

In periods of inflation, phantom or paper profits may be reported as a result of using the

Accepted Answer

A)  perpetual inventory method. 
B)  FIFO costing assumption. 
C)  LIFO costing assumption. 
D)  periodic inventory method. 
A)  perpetual inventory method. 
B)  FIFO costing assumption. 
C)  LIFO costing assumption. 
D)  periodic inventory method.

Question 2

An employee assigned to counting computer monitors in boxes should

Accepted Answer

A)  estimate the number if there is a large quantity to be counted. 
B)  read each box and rely on the box description for the contents. 
C)  determine that the box contains a monitor. 
D)  rely on the warehouse records of the number of computer monitors. 
A)  estimate the number if there is a large quantity to be counted. 
B)  read each box and rely on the box description for the contents. 
C)  determine that the box contains a monitor. 
D)  rely on the warehouse records of the number of computer monitors.

Question 3

Snug-As-A-Bug Blankets has the following inventory data:   Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July?

Accepted Answer

A)  $5,802 
B)  $5,772 
C)  $5,796. 
D)  $5,916 
A)  $5,802 
B)  $5,772 
C)  $5,796. 
D)  $5,916

Question 4

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Average cost method 
D)  Income tax expense for the period will be the same under all assumptions. 
A)  FIFO 
B)  LIFO 
C)  Average cost method 
D)  Income tax expense for the period will be the same under all assumptions.

Question 5

Grayson Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Grayson Company uses the perpetual inventory system.   Instructions
(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the FIFO assumption, calculate the value of ending inventory for March.
(c) Using the moving average cost method, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(d) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(e) Using the LIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)

Accepted Answer

@#IMG-DLM& (a) Using FIFO - the earliest units pur

Question 6

When the average cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.

Accepted Answer

A) True 
 B)False

Question 7

Dole Industries had the following inventory transactions occur during 2014:   The company sold 204 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars)

Accepted Answer

A)  $19,528 
B)  $18,920 
C)  $6,784 
D)  $6,176 
A)  $19,528 
B)  $18,920 
C)  $6,784 
D)  $6,176

Question 8

Hess Company's inventory records show the following data for the month of September:   A physical inventory on September 30 shows 150 units on hand.
Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

Accepted Answer

Ending inventory: (100 units ×

Question 9

The average cost inventory method relies on a simple average calculation.

Accepted Answer

A) True 
 B)False

Question 10

Use the following information regarding Black Company and Red Company to answer the question "Which amount is equal to Black Company's "days in inventory" for 2014 (to the closest decimal place)?"

Accepted Answer

A)  35.1 days 
B)  34.1 days 
C)  82.5 days 
D)  29.5 days 
A)  35.1 days 
B)  34.1 days 
C)  82.5 days 
D)  29.5 days

Question 11

The situation that requires a departure from the cost basis of accounting to the lower of cost or market basis in valuing inventory is necessitated by

Accepted Answer

A)  a decline in the value of the inventory. 
B)  an increase in selling price. 
C)  an increase in the value of the inventory. 
D)  a desire for more profit. 
A)  a decline in the value of the inventory. 
B)  an increase in selling price. 
C)  an increase in the value of the inventory. 
D)  a desire for more profit.

Question 12

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

Accepted Answer

A)  the ending LIFO reserve is added to LIFO cost of goods sold. 
B)  the ending LIFO reserve is subtracted from LIFO cost of goods sold. 
C)  an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. 
D)  a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold. 
A)  the ending LIFO reserve is added to LIFO cost of goods sold. 
B)  the ending LIFO reserve is subtracted from LIFO cost of goods sold. 
C)  an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. 
D)  a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold.

Question 13

Quark Inc. just began business and made the following four inventory purchases in June:   A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Accepted Answer

A)  $1,105. 
B)  $1,100. 
C)  $1,170. 
D)  $1,180. 
A)  $1,105. 
B)  $1,100. 
C)  $1,170. 
D)  $1,180.

Question 14

Which statement is false?

Accepted Answer

A)  Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. 
B)  No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. 
C)  An inventory count is generally more accurate when goods are not being sold or received during the counting. 
D)  Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period. 
A)  Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. 
B)  No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. 
C)  An inventory count is generally more accurate when goods are not being sold or received during the counting. 
D)  Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.

Question 15

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Accepted Answer

A) True 
 B)False

Question 16

A survey of major U.S. companies revealed that 77% of those companies used either LIFO or FIFO cost flow methods, while 19% used average cost, and only 4% used other methods.
Requirement
Provide brief, yet concise responses to the following questions.
a. Why are LIFO and FIFO so popular?
b. Since computers and inventory management software are readily available, why aren't more companies using specific identification?

Accepted Answer

a. FIFO and LIFO are based on cost flow

Question 17

An overstatement of the beginning inventory results in

Accepted Answer

A)  no effect on the period's net income. 
B)  an overstatement of net income. 
C)  an understatement of net income. 
D)  a need to adjust purchases. 
A)  no effect on the period's net income. 
B)  an overstatement of net income. 
C)  an understatement of net income. 
D)  a need to adjust purchases.

Question 18

In periods of falling prices, LIFO will result in a higher ending inventory valuation than FIFO.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true regarding inventory cost flow assumptions?

Accepted Answer

A)  A company may use more than one costing method concurrently. 
B)  A company must comply with the method specified by industry standards. 
C)  A company must use the same method for domestic and foreign operations. 
D)  A company may never change its inventory costing method once it has chosen a method. 
A)  A company may use more than one costing method concurrently. 
B)  A company must comply with the method specified by industry standards. 
C)  A company must use the same method for domestic and foreign operations. 
D)  A company may never change its inventory costing method once it has chosen a method.

Question 20

Under GAAP, companies can choose which inventory system?

Accepted Answer

The answer of Under GAAP, companies can choose which inventory...

In periods of inflation, phantom or paper profits may be reported as a result of using the

An employee assigned to counting computer monitors in boxes should

Snug-As-A-Bug Blankets has the following inventory data: Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July?

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

When the average cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.

Dole Industries had the following inventory transactions occur during 2014: The company sold 204 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars)

Hess Company's inventory records show the following data for the month of September: A physical inventory on September 30 shows 150 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

The average cost inventory method relies on a simple average calculation.

Use the following information regarding Black Company and Red Company to answer the question "Which amount is equal to Black Company's "days in inventory" for 2014 (to the closest decimal place)?"

The situation that requires a departure from the cost basis of accounting to the lower of cost or market basis in valuing inventory is necessitated by

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

Quark Inc. just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Which statement is false?

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

An overstatement of the beginning inventory results in

In periods of falling prices, LIFO will result in a higher ending inventory valuation than FIFO.

Which of the following statements is true regarding inventory cost flow assumptions?

Under GAAP, companies can choose which inventory system?

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 Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Time Value of Money

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Exam 6: Reporting and Analyzing Inventory

In periods of inflation, phantom or paper profits may be reported as a result of using the

An employee assigned to counting computer monitors in boxes should

Snug-As-A-Bug Blankets has the following inventory data: Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July?

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

When the average cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.

Dole Industries had the following inventory transactions occur during 2014: The company sold 204 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars)

Hess Company's inventory records show the following data for the month of September: A physical inventory on September 30 shows 150 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

The average cost inventory method relies on a simple average calculation.

Use the following information regarding Black Company and Red Company to answer the question "Which amount is equal to Black Company's "days in inventory" for 2014 (to the closest decimal place)?"

The situation that requires a departure from the cost basis of accounting to the lower of cost or market basis in valuing inventory is necessitated by

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold

Quark Inc. just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Which statement is false?

The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

An overstatement of the beginning inventory results in

In periods of falling prices, LIFO will result in a higher ending inventory valuation than FIFO.

Which of the following statements is true regarding inventory cost flow assumptions?

Under GAAP, companies can choose which inventory system?

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 Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Time Value of Money

Filters