Question 1

Manufacturers usually classify inventory into all the following general categories except:

Accepted Answer

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

Question 2

Aiwa Inc.uses the average-cost inventory method.Its 2011, the company reported net income of ¥59,800,000.Had average-cost been used, the company would have reported net income of ¥58,900,000.Assuming a 25% tax rate, what is the impact of the inventory cost flow assumption on Aiwa's taxes for 2011?

Accepted Answer

A) Aiwa would pay ¥225,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO. 
B) Aiwa would pay ¥675,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO. 
C) the inventory method does not impact the amount of income tax paid. 
D) not determinable without income before taxes. 
A) Aiwa would pay ¥225,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO. 
B) Aiwa would pay ¥675,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO. 
C) the inventory method does not impact the amount of income tax paid. 
D) not determinable without income before taxes.

Question 3

In a period of falling prices, which inventory method would result in the lowest tax burden?

Accepted Answer

A) Average-cost. 
B) FIFO. 
C) No difference. 
D) Cannot be determined. 
A) Average-cost. 
B) FIFO. 
C) No difference. 
D) Cannot be determined.

Question 4

Net realizable value refers to

Accepted Answer

A) the net amount the company expects to realize from the sale. 
B) the selling price. 
C) the cost to replace the item. 
D) the gross profit realized from the sale. 
A) the net amount the company expects to realize from the sale. 
B) the selling price. 
C) the cost to replace the item. 
D) the gross profit realized from the sale.

Question 5

Use the following information for questions . $\text { Brocken Co. has the following data related to an item of inventory. }$
$\begin{array}{ll}
\text { Inventory, May } 1 & 1,000 \text { units } @ £ 4.20 \
\text { Purchase, May 7 } & 3,500 \text { units } @ £ 4.40 \
\text { Purchase, May } 16 & 700 \text { units } @ £ 4.50 \
\text { Inventory May } 31 & 1,300 \text { units }
\end{array}$
-The value assigned to cost of goods sold if Brocken uses FIFO is

Accepted Answer

A)  $ £ 16,900 $. 
B)  $ £ 16,960 $. 
C)  $ £ 17,069 $. 
D)  $ £ 17,082 $ 
A)  $ £ 16,900 $. 
B)  $ £ 16,960 $. 
C)  $ £ 17,069 $. 
D)  $ £ 17,082 $

Question 6

The accounting concept of prudence dictates that the accounting principle used should
be the one least likely to overstate assets and income.

Accepted Answer

A) True 
 B)False

Question 7

Blosser Company's goods in transit at December 31 include:
$\begin{array} { l  }
 \text {sales made } & \text { purchases made} \
 \text {(1) FOB destination } & \text {(3) FOB destination } \
 \text { (2) FOB shipping point} & \text {(4) FOB shipping point } \
\end{array}$
Which items should be included in Blosser's inventory at December 31 ?

Accepted Answer

A)  (2) and (3) 
B)  (1) and (4) 
C)  (1) and (3) 
D)  $ ( 2 )$ and (4) 
A)  (2) and (3) 
B)  (1) and (4) 
C)  (1) and (3) 
D)  $ ( 2 )$ and (4)

Question 8

A problem with the specific identification method is that

Accepted Answer

A) inventories can be reported at actual costs. 
B) management can manipulate income. 
C) matching is not achieved. 
D) the lower-of-cost-or-net realizable value basis cannot be applied. 
A) inventories can be reported at actual costs. 
B) management can manipulate income. 
C) matching is not achieved. 
D) the lower-of-cost-or-net realizable value basis cannot be applied.

Question 9

Use the following information for questions. $\text { Following information was available from the inventory records of Queen Company for July: }$
$\begin{array}{lrrr}&\text { Units }& \text { Unit Cost }& \text { Total.Cost }\
\text { Balance at July 1 } & 30,000 & £ 9.00 & £ 270,000 \
\text { Purchases: } & & & \
\quad \text { July 6 } & 20,000 & 10.20 & 204,000 \
\text { January 26 } & 27,000 & 10.40 & 280,800
\end{array}$

$\begin{array}{cc}\text { Sales: }\
\text { July } 7 &(25,000) \
\text { July } 31 &\underline{(40,000)} \
\text { Balance at July } 31 &\underline{\underline{ 12,000}}
\end{array}$
-What should be the inventory reported on Queen's July 31 statement of financial position using the FIFO inventory method?

Accepted Answer

A)  $ £ 108,000 $. 
B)  $ £ 117,600 $. 
C)  $  £ 124,800 $. 
D)  $ £ 126,000 $. 
A)  $ £ 108,000 $. 
B)  $ £ 117,600 $. 
C)  $  £ 124,800 $. 
D)  $ £ 126,000 $.

Question 10

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 $. What value should Paulson, Inc., have for the computers at the end of the year?

Accepted Answer

A)  $ £ 1,250 $. 
B)  $ £ 1,750 $. 
C)  $ £ 3,000 $. 
D)  $ \$ 4,125 $ 
A)  $ £ 1,250 $. 
B)  $ £ 1,750 $. 
C)  $ £ 3,000 $. 
D)  $ \$ 4,125 $

Question 11

At December 31, 2011, Daewoo Inc. reported total assets of $ W 201,295,000 $, and net income of $ W 50,335,000 $ for the current year. Daewoo determined that inventory was overstated by W1,600,000 at the beginning of 2012 (this was not corrected). What is Daewoo's corrected amount for total assets for 2011 ?

Accepted Answer

A)  W150,969,000. 
B)  W199,695,000. 
C)  W202,895,000.
d $ W 251,630,000 $ 
A)  W150,969,000. 
B)  W199,695,000. 
C)  W202,895,000.
d $ W 251,630,000 $

Question 12

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under FIFO and average cost flow assumptions.

Accepted Answer

A) True 
 B)False

Question 13

The accountant at Reber Company has determined that income before income taxes amounted to $6,750 using the FIFO costing assumption.If the income tax rate is 30% and the amount of income taxes paid would be $225 greater if the average-cost assumption were used, what would be the amount of income before taxes under the average-cost assumption?

Accepted Answer

A) $6,975 
B) $7,500 
C) $6,090 
D) $6,525 
A) $6,975 
B) $7,500 
C) $6,090 
D) $6,525

Question 14

In a period of rising prices which inventory method generally provides the greatest amount of net income?

Accepted Answer

A) Average-cost. 
B) FIFO. 
C) LISH. 
D) Cannot be determined. 
A) Average-cost. 
B) FIFO. 
C) LISH. 
D) Cannot be determined.

Question 15

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

Accepted Answer

A) called the matching principle. 
B) called the consistency principle. 
C) nonexistent; that is, there is no accounting requirement. 
D) called the physical flow assumption. 
A) called the matching principle. 
B) called the consistency principle. 
C) nonexistent; that is, there is no accounting requirement. 
D) called the physical flow assumption.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Kershaw Bookstore had 600 units on hand at January 1, costing $€ 18$ each. Purchases and sales during the month of January were as follows:
$\begin{array}{lll}\text { Date }&\text { Purchases }&\text { Sales }\\hline
\text { Jan. }  14 && 450 @ € 28 \
\quad\quad17 & 300 @ € 20  \
\quad\quad25 & 300 @ € 22 & \
\quad\quad29 & & 300 @ € 32
\end{array}$
Kershaw does not maintain perpetual inventory records. According to a physical count, 450 units were on hand at January 31.
The cost of the inventory at January 31, under the FIFO method is:

Accepted Answer

A)  $€ 1,200$. 
B)  $€ 8,100$. 
C)  $€ 9,300$ 
D)  $€ 9,600$. 
A)  $€ 1,200$. 
B)  $€ 8,100$. 
C)  $€ 9,300$ 
D)  $€ 9,600$.

Question 18

As a result of a thorough physical inventory, Hastings Company determined that it had inventory worth $540,000 at December 31, 2011.This count did not take into consideration the following facts: Carlin Consignment store currently has goods worth $104,000 on its sales floor that belong to Hastings but are being sold on consignment by Carlin.The selling price of these goods is $150,000.Hastings purchased $40,000 of goods that were shipped on December 27 FOB destination, that will be received by Hastings on January 3.Determine the correct amount of inventory that Hastings should report.

Accepted Answer

A) $580,000. 
B) $684,000. 
C) $644,000. 
D) $690,000. 
A) $580,000. 
B) $684,000. 
C) $644,000. 
D) $690,000.

Question 19

Keiko Company took a physical inventory at December 31,2010 and determined that $ ¥ 3,030,000 $ of goods were on hand. In addition, the company had goods consigned with Chang Company that had a cost of $ ¥ 700,000 $. On December 29 , Keiko sold and shipped f.o.b. shipping point $ ¥ 600,000 $ worth of inventory. These goods arrived at the buyer's place of business on January 4, 2011. What amount should Keiko report as inventory on its December 31,2010 statement of financial position?

Accepted Answer

A)  $  ¥ 3,030,000 $. 
B)  $ ¥ 3,630,000 $. 
C)  $ ¥ 3,730,000 $. 
D)  $ ¥ 4230,000 $. 
A)  $  ¥ 3,030,000 $. 
B)  $ ¥ 3,630,000 $. 
C)  $ ¥ 3,730,000 $. 
D)  $ ¥ 4230,000 $.

Question 20

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory.The effect of this error in the current period is 
$\begin{array}{ll}\text { Cost of Goods Sold }&\text { Net Income }\\end{array}$

Accepted Answer

A) $\begin{array}{ll}\text { Understated } & \text { \quad \quad Understated } \\end{array}$ 
B) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
C) $\begin{array}{ll}\text { Understated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
D) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Understated }
\end{array}$ 
A) $\begin{array}{ll}\text { Understated } & \text { \quad \quad Understated } \\end{array}$ 
B) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
C) $\begin{array}{ll}\text { Understated } & \text {\quad\quad\quad Overstated } \\end{array}$ 
D) $\begin{array}{ll}\text { Overstated } & \text {\quad\quad\quad Understated }
\end{array}$

Manufacturers usually classify inventory into all the following general categories except:

Aiwa Inc.uses the average-cost inventory method.Its 2011, the company reported net income of ¥59,800,000.Had average-cost been used, the company would have reported net income of ¥58,900,000.Assuming a 25% tax rate, what is the impact of the inventory cost flow assumption on Aiwa's taxes for 2011?

In a period of falling prices, which inventory method would result in the lowest tax burden?

Net realizable value refers to

The accounting concept of prudence dictates that the accounting principle used should be the one least likely to overstate assets and income.

Blosser Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Blosser's inventory at December 31 ?

A problem with the specific identification method is that

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under FIFO and average cost flow assumptions.

In a period of rising prices which inventory method generally provides the greatest amount of net income?

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

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

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory.The effect of this error in the current period is Cost of Goods Sold Net Income

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

Manufacturers usually classify inventory into all the following general categories except:

In a period of falling prices, which inventory method would result in the lowest tax burden?

Net realizable value refers to

The accounting concept of prudence dictates that the accounting principle used should be the one least likely to overstate assets and income.

Blosser Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Blosser's inventory at December 31 ?

A problem with the specific identification method is that

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under FIFO and average cost flow assumptions.

In a period of rising prices which inventory method generally provides the greatest amount of net income?

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

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

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory.The effect of this error in the current period is Cost of Goods Sold Net Income

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