Question 1

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

Accepted Answer

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

Question 2

Holliday Company's inventory records show the following data: 
$\begin{array}{lrr}&\text { Units }&\text { Unit Cost }\
\text { Inventory, January } 1 & 5,000 & £ 4.50 \
\text { Purchases: June 18 } & 4,500 & 4.00 \
\text { November } 8 & 3,000 & 3.50
\end{array}$

A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $ £ 6 $ each. The company has an effective tax rate of $ 20 \% $. Holliday uses the periodic inventory method. The weighted-average cost per unit is

Accepted Answer

A) $ £3.75$. 
B)  $ £ 4.00 $. 
C)  $ £ 4.08 $. 
D)  $ £ 4.38 $. 
A) $ £3.75$. 
B)  $ £ 4.00 $. 
C)  $ £ 4.08 $. 
D)  $ £ 4.38 $.

Question 3

In a period of falling prices, the average-cost method results in a lower cost of goods sold than the FIFO method.

Accepted Answer

A) True 
 B)False

Question 4

If a company uses the FIFO cost 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 5

The average cost method costs units using a weighted-average unit cost.

Accepted Answer

A) True 
 B)False

Question 6

Accounting for inventories under IFRS is very similar to accounting under GAAP.

Accepted Answer

A) True 
 B)False

Question 7

Breguet Company uses the FIFO inventory method.The company reported inventory of CHF2,230,000 on its December 31, 2011 statement of financial position.Had average-cost been used, the company would have reported inventory of CHF1,860,000.The company's tax rate is 30% what is the impact of the inventory cost flow assumption on Breguet's 2011 financial statements?

Accepted Answer

A) Income before taxes reported by Breguet would be CHF370,000 lower as a result of using the FIFO cost flow assumption. 
B) Breguet would pay CHF111,000 less in taxes for 2011 as a result of using the FIFO cost flow assumption. 
C) Income after taxes reported by Breguet would be CHF259,000 higher as a result of using the FIFO cost flow assumption. 
D) The only financial statement affected by the cost flow assumption is the statement of financial position, which would report CHF370,000 more in inventory as a result of using the FIFO cost flow assumption. 
A) Income before taxes reported by Breguet would be CHF370,000 lower as a result of using the FIFO cost flow assumption. 
B) Breguet would pay CHF111,000 less in taxes for 2011 as a result of using the FIFO cost flow assumption. 
C) Income after taxes reported by Breguet would be CHF259,000 higher as a result of using the FIFO cost flow assumption. 
D) The only financial statement affected by the cost flow assumption is the statement of financial position, which would report CHF370,000 more in inventory as a result of using the FIFO cost flow assumption.

Question 8

The retail inventory method requires a company to value its inventory on the statement of financial position at retail prices.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Which costing method cannot be used to determine the cost of inventory items before lower-of-cost-or-net realizable value market is applied?

Accepted Answer

A) Specific identification 
B) FIFO 
C) Average-cost 
D) All of these methods can be used. 
A) Specific identification 
B) FIFO 
C) Average-cost 
D) All of these methods can be used.

Question 11

The specific identification method of inventory costing

Accepted Answer

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

Question 12

Holliday Company's inventory records show the following data:
 $\begin{array}{lrr}\text { Units }&\text { Unit Cost }\
\text { Inventory, January } 1 & 5,000 & £ 4.50 \
\text { Purchases: June 18 } & 4,500 & 4.00 \
\text { November } 8 & 3,000 & 3.50
\end{array}$

A physical inventory on December 31 shows 2,000 units on hand.Holliday sells the units for ?6 each.The company has an effective tax rate of 20%.Holliday uses the periodic inventory method. Under the FIFO method, the December 31 inventory is valued at

Accepted Answer

A) ?7,000. 
B) ?7,250. 
C) ?7,500. 
D) ?9,000. 
A) ?7,000. 
B) ?7,250. 
C) ?7,500. 
D) ?9,000.

Question 13

The LIFO cost flow assumption can also be called the LISH assumption.

Accepted Answer

A) True 
 B)False

Question 14

A major advantage of LIFO is that the inventory reported on the statement of financial position will approximate current cost.

Accepted Answer

A) True 
 B)False

Question 15

If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the average-cost and FIFO inventory methods.

Accepted Answer

A) True 
 B)False

Question 16

Colletti Company recorded the following data: $\begin{array}{lrrr} 
&\text { Units }&&&\text { Unit }\
\text { Date }& \text { Received}& \text { Sold }& \text {On Hand }&\text { Cost }\
\text { 1/1 Inventory }&&& 600 & \$ 2.00 \
1 / 8 \text { Purchased }&900&& 1.500 & 2.20 \
1 / 12 \text { Sold }&&1,200 & 300 &
\end{array}$

The weighted average unit cost of the inventory at January 31 is:

Accepted Answer

A) $2.00. 
B) $2.10. 
C) $2.12. 
D) $2.20. 
A) $2.00. 
B) $2.10. 
C) $2.12. 
D) $2.20.

Question 17

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $£ 600$ and originally retailed for $£ 825$. At the statement date, each computer has a net realizable value of $£ 350$. How much loss should Paulson, Inc., record for the year?

Accepted Answer

A)  $£ 1,125$. 
B)  $£ 1,250$. 
C)  $£ 1,500$. 
D)  $£ 1,750$. 
A)  $£ 1,125$. 
B)  $£ 1,250$. 
C)  $£ 1,500$. 
D)  $£ 1,750$.

Question 18

The cost of goods available for sale is allocated to the cost of goods sold and the

Accepted Answer

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

Question 19

Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.

Accepted Answer

A) True 
 B)False

Question 20

Goods out on consignment should be included in the inventory of the consignor.

Accepted Answer

A) True 
 B)False

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

In a period of falling prices, the average-cost method results in a lower cost of goods sold than the FIFO method.

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

The average cost method costs units using a weighted-average unit cost.

Accounting for inventories under IFRS is very similar to accounting under GAAP.

The retail inventory method requires a company to value its inventory on the statement of financial position at retail prices.

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

Which costing method cannot be used to determine the cost of inventory items before lower-of-cost-or-net realizable value market is applied?

The specific identification method of inventory costing

The LIFO cost flow assumption can also be called the LISH assumption.

A major advantage of LIFO is that the inventory reported on the statement of financial position will approximate current cost.

If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the average-cost and FIFO inventory methods.

Colletti Company recorded the following data: Units Unit Date Received Sold On Hand Cost 1/1 Inventory 600 \ 2.00 1/8 Purchased 900 1.500 2.20 1/12 Sold 1,200 300 The weighted average unit cost of the inventory at January 31 is:

Paulson, Inc. has 5 computers which have been part of the inventory for over two years. Each computer cost $£ 600$ and originally retailed for $£ 825$ . At the statement date, each computer has a net realizable value of $£ 350$ . How much loss should Paulson, Inc., record for the year?

The cost of goods available for sale is allocated to the cost of goods sold and the

Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.

Goods out on consignment should be included in the inventory of the consignor.

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, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 6: Inventories

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

In a period of falling prices, the average-cost method results in a lower cost of goods sold than the FIFO method.

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

The average cost method costs units using a weighted-average unit cost.

Accounting for inventories under IFRS is very similar to accounting under GAAP.

The retail inventory method requires a company to value its inventory on the statement of financial position at retail prices.

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

Which costing method cannot be used to determine the cost of inventory items before lower-of-cost-or-net realizable value market is applied?

The specific identification method of inventory costing

The LIFO cost flow assumption can also be called the LISH assumption.

A major advantage of LIFO is that the inventory reported on the statement of financial position will approximate current cost.

If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the average-cost and FIFO inventory methods.

Colletti Company recorded the following data: Units Unit Date Received Sold On Hand Cost 1/1 Inventory 600 \ 2.00 1/8 Purchased 900 1.500 2.20 1/12 Sold 1,200 300 The weighted average unit cost of the inventory at January 31 is:

The cost of goods available for sale is allocated to the cost of goods sold and the

Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.

Goods out on consignment should be included in the inventory of the consignor.

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, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters