Question 1

In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.

Accepted Answer

A) True 
 B)False

Question 2

Inventory is reported in the financial statements at

Accepted Answer

A) cost. 
B) net realizable value. 
C) the higher-of-cost-or-net realizable value. 
D) the lower-of-cost-or-net realizable value. 
A) cost. 
B) net realizable value. 
C) the higher-of-cost-or-net realizable value. 
D) the lower-of-cost-or-net realizable value.

Question 3

Which one of the following inventory methods is often impractical to use?

Accepted Answer

A) Specific identification 
B) Average cost 
C) FIFO 
D) All of the above are practical to use 
A) Specific identification 
B) Average cost 
C) FIFO 
D) All of the above are practical to use

Question 4

Ted's Used Cars uses the specific identification method of costing inventory.During March, Ted purchased three cars for $8,000, $10,000, and $13,000, respectively.During March, two cars are sold for $12,000 each.Ted determines that at March 31, the $13,000 car is still on hand.What is Ted's gross profit for March?

Accepted Answer

A) $7,000. 
B) $6,000. 
C) $1,000. 
D) $11,000. 
A) $7,000. 
B) $6,000. 
C) $1,000. 
D) $11,000.

Question 5

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 6

IFRS allows companies to cost inventory using either the LIFO or the FIFO cost flow assumption.

Accepted Answer

A) True 
 B)False

Question 7

Net realizable value is

Accepted Answer

A) original cost plus costs to complete and sell. 
B) selling price. 
C) original cost less costs to complete and sell. 
D) selling cost less costs to complete and sell. 
A) original cost plus costs to complete and sell. 
B) selling price. 
C) original cost less costs to complete and sell. 
D) selling cost less costs to complete and sell.

Question 8

A major difference between IFRS and GAAP is that GAAP specifically prohibits use of the FIFO cost flow assumption.

Accepted Answer

A) True 
 B)False

Question 9

Which inventory costing method most closely approximates current cost for each of the following:

$\begin{array}{lcc}\text { Ending Inventory }&\text { Cost of Goods Sold }\\end{array}$

Accepted Answer

A) $\begin{array}{lcc}\text {  } & \text { FIFO } & \text {\quad\quad\quad\quad\quad FIFO } \\end{array}$ 
B) $\begin{array}{lcc}\text {  } & \text { FIFO } & \text {\quad\quad\quad\quad Average-cost } \\end{array}$ 
C) $\begin{array}{lcc}\text { } & \text { Average-cost } & \text {\quad\quad FIFO } \\end{array}$ 
D) $\begin{array}{lcc}\text {  } & \text { Average-cost } & \text {\quad Average-cost }
\end{array}$ 
A) $\begin{array}{lcc}\text {  } & \text { FIFO } & \text {\quad\quad\quad\quad\quad FIFO } \\end{array}$ 
B) $\begin{array}{lcc}\text {  } & \text { FIFO } & \text {\quad\quad\quad\quad Average-cost } \\end{array}$ 
C) $\begin{array}{lcc}\text { } & \text { Average-cost } & \text {\quad\quad FIFO } \\end{array}$ 
D) $\begin{array}{lcc}\text {  } & \text { Average-cost } & \text {\quad Average-cost }
\end{array}$

Question 10

At year-end, Dana Corporation has 2,000 units of Lolland, 2,000 units of Falster, and 3,000 units of Jultand in its ending inventory.Specific data with respect to each product follows: $\begin{array}{lrrr}&\text { Lolland }&\text { Falster } & \text { Jutland }\
\text { Historical cost } & € 55 & € 70 & € 98 \
\text { Net realizable value } & 48 & 77 & 94
\end{array}$
What amount will Dana report for ending inventory using lower-of-cost-or-net realizable value?

Accepted Answer

A)  $ € 518,000 $. 
B)  $ € 528,000 $. 
C)  $ € 544,000 $. 
D)  $ € 558,000 $. 
A)  $ € 518,000 $. 
B)  $ € 528,000 $. 
C)  $ € 544,000 $. 
D)  $ € 558,000 $.

Question 11

Shandy Shutters has the following inventory information.
$\begin{array} { r l l } \text { Nov. } 1 & \text { Inventory } & 15 \text { units @ } € 6.00 \ 8 & \text { Purchase } & 60 \text { units @ } € 6.45 \ 17 & \text { Purchase } & 30 \text { units @ } € 6.30 \ 25 & \text { Purchase } & 45 \text { units @ } € 6.60 \end{array}$
A physical count of merchandise inventory on November 30 reveals that there are 50 units on hand. Assume a periodic inventory system is used. Ending inventory under FIFO is

Accepted Answer

A)  $€ 329$. 
B)  $€ 634$. 
C)  $€ 316$. 
D)  $€ 647$. 
A)  $€ 329$. 
B)  $€ 634$. 
C)  $€ 316$. 
D)  $€ 647$.

Question 12

$\text { Neighborly Industries has the following inventory information. }$
$\begin{array}{rll}
\text { July }1 & \text { Beginning Inventory } & 20 \text { units at } \$ 120 \
5 & \text { Purchases } & 120 \text { units at } \$ 112 \
14 & \text { Sale } & 80 \text { units } \
21 & \text { Purchases } & 60 \text { units at } \$ 115 \
30 & \text { Sale } & 56 \text { units }
\end{array}$
Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis?

Accepted Answer

A)  $ 7,328 
B) $ 7,348 
C) $ 15,392 
D) $ 15,412 
A)  $ 7,328 
B) $ 7,348 
C) $ 15,392 
D) $ 15,412

Question 13

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Accepted Answer

A) True 
 B)False

Question 14

At May 1, 2011, Deitrich Company had beginning inventory consisting of 100 units with a unit cost of $ € 3.50 $. During May, the company purchased inventory as follows:

200 units at $ € 3.50 $
300 units at $ € 4.00 $

The company sold 500 units during the month for $ € 6 $ per unit. Deitrich uses the average cost method. Deitrich's gross profit for the month of May is

Accepted Answer

A)  € 1,125 . 
B)  € 1,875 . 
C)  € 2,250 . 
D)  € 3,000 . 
A)  € 1,125 . 
B)  € 1,875 . 
C)  € 2,250 . 
D)  € 3,000 .

Question 15

Items not yet placed into production are considered to be

Accepted Answer

A) raw materials. 
B) work in process. 
C) finished goods. 
D) merchandise inventory. 
A) raw materials. 
B) work in process. 
C) finished goods. 
D) merchandise inventory.

Question 16

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be

Accepted Answer

A) $65. 
B) $75. 
C) $60. 
D) $50. 
A) $65. 
B) $75. 
C) $60. 
D) $50.

Question 17

If an error understates the beginning inventory, net income will also be understated.

Accepted Answer

A) True 
 B)False

Question 18

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

Accepted Answer

A) True 
 B)False

Question 19

The term "FOB" denotes

Accepted Answer

A) free on board. 
B) freight on board. 
C) free only (to) buyer. 
D) freight charge on buyer. 
A) free on board. 
B) freight on board. 
C) free only (to) buyer. 
D) freight charge on buyer.

Question 20

Overstating ending inventory will overstate all of the following except

Accepted Answer

A) assets. 
B) cost of goods sold. 
C) net income. 
D) equity. 
A) assets. 
B) cost of goods sold. 
C) net income. 
D) equity.

In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.

Inventory is reported in the financial statements at

Which one of the following inventory methods is often impractical to use?

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

IFRS allows companies to cost inventory using either the LIFO or the FIFO cost flow assumption.

Net realizable value is

A major difference between IFRS and GAAP is that GAAP specifically prohibits use of the FIFO cost flow assumption.

Which inventory costing method most closely approximates current cost for each of the following: Ending Inventory Cost of Goods Sold

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Items not yet placed into production are considered to be

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be

If an error understates the beginning inventory, net income will also be understated.

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

The term "FOB" denotes

Overstating ending inventory will overstate all of the following except

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

Exam 6: Inventories

In applying the LIFO assumption in a perpetual inventory system, the cost of the units most recently purchased prior to sale is allocated first to the units sold.

Inventory is reported in the financial statements at

Which one of the following inventory methods is often impractical to use?

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

IFRS allows companies to cost inventory using either the LIFO or the FIFO cost flow assumption.

Net realizable value is

A major difference between IFRS and GAAP is that GAAP specifically prohibits use of the FIFO cost flow assumption.

Which inventory costing method most closely approximates current cost for each of the following: Ending Inventory Cost of Goods Sold

An error that overstates the ending inventory will also cause net income for the period to be overstated.

Items not yet placed into production are considered to be

A company just starting in business purchased three merchandise inventory items at the following prices.First purchase $80; Second purchase $95; Third purchase $85.If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be

If an error understates the beginning inventory, net income will also be understated.

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

The term "FOB" denotes

Overstating ending inventory will overstate all of the following except

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