Question 1

Which of the following statements about the use of the FIFO assumption is NOT true?

Accepted Answer

A)  The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. 
B)  The FIFO assumption is not affected by the inventory control method. 
C)  In periods of rising prices it produces a higher profit than LIFO. 
D)  The FIFO assumption produces inventory asset values that are based on older purchase costs. 
A)  The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. 
B)  The FIFO assumption is not affected by the inventory control method. 
C)  In periods of rising prices it produces a higher profit than LIFO. 
D)  The FIFO assumption produces inventory asset values that are based on older purchase costs. D

Question 2

The following details relate to a perpetual inventory system:
 
What was the value of opening inventory?

Accepted Answer

A)  $204 000 
B)  $306 000 
C)  $459 000 
D)  $561 000 
A)  $204 000 
B)  $306 000 
C)  $459 000 
D)  $561 000 B

Question 3

Which of the following statements about the perpetual inventory control method is NOT true?

Accepted Answer

A)  When a sale is made, cost of goods sold is increased. 
B)  When inventory is purchased, it is treated as an expense. 
C)  A separate record is kept for each item of inventory. 
D)  An inventory count can reveal inventory losses. 
A)  When a sale is made, cost of goods sold is increased. 
B)  When inventory is purchased, it is treated as an expense. 
C)  A separate record is kept for each item of inventory. 
D)  An inventory count can reveal inventory losses. B

Question 4

Use the information below to answer the following question.
Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period:
 
If Pinkerton Ltd had employed the periodic inventory method, what would its gross profit have been?

Accepted Answer

A)  $280 000 
B)  $300 000 
C)  $320 000 
D)  $440 000 
A)  $280 000 
B)  $300 000 
C)  $320 000 
D)  $440 000

Question 5

A company purchases and sells Roofoo. It began last year with five units of Roofoo on hand at a cost of $10 each, and during the year its purchases and sales were as follows:
 
What was the value of the ending inventory of Roofoo, using the FIFO assumption?

Accepted Answer

A)  $30 
B)  $39 
C)  $45 
D)  $15 
A)  $30 
B)  $39 
C)  $45 
D)  $15

Question 6

Which of the following statements about the use of the weighted average assumption is true?

Accepted Answer

A)  The balance sheet figure is between the LIFO and FIFO figures. 
B)  When prices are rising, it shows lower balance sheet figures than the LIFO method. 
C)  When prices are falling, it shows lower balance sheet figures than the FIFO method. 
D)  None of the answers provided. 
A)  The balance sheet figure is between the LIFO and FIFO figures. 
B)  When prices are rising, it shows lower balance sheet figures than the LIFO method. 
C)  When prices are falling, it shows lower balance sheet figures than the FIFO method. 
D)  None of the answers provided.

Question 7

At 1 July 2015, Epsilon Pty Ltd had 100 items of inventory which had cost $50 each. During the year ended 30 June 2016, it purchased 1500 items at a cost of $50 each. Of these, 200 were returned to the supplier as they were damaged. During the year, 1200 items were sold for $80 each, but 50 were returned by customers. Overhead expenses during the year amounted to $15 000. What was the value of inventory in the balance sheet at 30 June 2016?

Accepted Answer

A)  $22 500 
B)  $10 000 
C)  $7500 
D)  $12 500 
A)  $22 500 
B)  $10 000 
C)  $7500 
D)  $12 500

Question 8

The following information relates to Moderate Ltd:
 
What were the purchases for the period?

Accepted Answer

A)  $135 000 
B)  $186 000 
C)  $234 000 
D)  $240 000 
A)  $135 000 
B)  $186 000 
C)  $234 000 
D)  $240 000

Question 9

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September:
 
What was the value of ending inventory of Algo, using the LIFO assumption in a perpetual inventory system?

Accepted Answer

A)  $1460 
B)  $1480 
C)  $1580 
D)  $2400 
A)  $1460 
B)  $1480 
C)  $1580 
D)  $2400

Question 10

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September:
 
What was the value of ending inventory of Algo, using the FIFO assumption?

Accepted Answer

A)  $1460 
B)  $1480 
C)  $2400 
D)  $1400 
A)  $1460 
B)  $1480 
C)  $2400 
D)  $1400

Question 11

A company discovered that inventory that cost $1000 and normally sells for $1200 has become obsolete and will be scrapped next month. The effect of the adjusting journal entry is to:

Accepted Answer

A)  decrease profit by $1000 and decrease total assets by $1000. 
B)  decrease profit by $1200 and decrease total assets by $1000. 
C)  decrease profit by $1200 and decrease total assets by $1200. 
D)  decrease profit by $1000 and not affect total assets. 
A)  decrease profit by $1000 and decrease total assets by $1000. 
B)  decrease profit by $1200 and decrease total assets by $1000. 
C)  decrease profit by $1200 and decrease total assets by $1200. 
D)  decrease profit by $1000 and not affect total assets.

Question 12

At 1 July 2015, Epsilon Pty Ltd had 100 items of inventory which had cost $50 each. During the year ended 30 June 2016, it purchased 1500 items at a cost of $50 each. Of these, 200 were returned to the supplier as they were damaged. During the year, 1200 items were sold for $80 each, but 50 were returned by customers. Overhead expenses during the year amounted to $15 000. What was Epsilon Pty Ltd's cost of goods sold for the year?

Accepted Answer

A)  $47 500 
B)  $57 500 
C)  $60 000 
D)  $62 500 
A)  $47 500 
B)  $57 500 
C)  $60 000 
D)  $62 500

Question 13

During the year ended 30 June 2016, Rico Ltd had net sales of $750 000 and net purchases of $440 000. Cost of goods sold was $475 000. What was Rico Ltd's gross profit for the year ended 30 June 2016?

Accepted Answer

A)  $240 000 
B)  $275 000 
C)  $310 000 
D)  $475 000 
A)  $240 000 
B)  $275 000 
C)  $310 000 
D)  $475 000

Question 14

Which of the following statements about the use of the LIFO assumption is true?

Accepted Answer

A)  The LIFO assumption assigns older costs to the cost of goods sold expense account. 
B)  The LIFO assumption produces inventory asset values that are close to current costs. 
C)  The LIFO assumption produces a lower inventory asset value and the highest cost of goods sold. 
D)  None of the answers provided. 
A)  The LIFO assumption assigns older costs to the cost of goods sold expense account. 
B)  The LIFO assumption produces inventory asset values that are close to current costs. 
C)  The LIFO assumption produces a lower inventory asset value and the highest cost of goods sold. 
D)  None of the answers provided.

Question 15

If purchase prices are falling, which cost flow assumption provides the highest cost of goods sold?

Accepted Answer

A)  FIFO 
B)  Annual weighted average 
C)  Moving weighted average 
D)  LIFO 
A)  FIFO 
B)  Annual weighted average 
C)  Moving weighted average 
D)  LIFO

Question 16

Which of the following is NOT an advantage of the perpetual over the periodic inventory method?

Accepted Answer

A)  A continuous record of inventory on hand is furnished. 
B)  Inventory theft may be detected. 
C)  Recording is simplified. 
D)  The perpetual inventory system provides a continuous record of cost of goods sold. 
A)  A continuous record of inventory on hand is furnished. 
B)  Inventory theft may be detected. 
C)  Recording is simplified. 
D)  The perpetual inventory system provides a continuous record of cost of goods sold.

Question 17

The entry to record a credit sale when the perpetual inventory method is employed will include a debit to:

Accepted Answer

A)  cost of goods sold. 
B)  sales. 
C)  purchases. 
D)  inventory. 
A)  cost of goods sold. 
B)  sales. 
C)  purchases. 
D)  inventory.

Question 18

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September:
 
What was the value of ending inventory of Algo, using the LIFO assumption in a periodic inventory system?

Accepted Answer

A)  $1580 
B)  $1480 
C)  $1460 
D)  $1590 
A)  $1580 
B)  $1480 
C)  $1460 
D)  $1590

Question 19

Use the information below to answer the following question.
Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period:
 
What was the balance of Pinkerton Ltd's accounts payable at the end of the period?

Accepted Answer

A)  $20 000 
B)  $40 000 
C)  $90 000 
D)  $100 000 
A)  $20 000 
B)  $40 000 
C)  $90 000 
D)  $100 000

Question 20

A company has four products and has 100 units of each in stock. The cost and net realisable value of each of the products are:
 
The value of inventory in the balance sheet should be:

Accepted Answer

A)  $2800. 
B)  $3100. 
C)  $3400. 
D)  none of the answers provided. 
A)  $2800. 
B)  $3100. 
C)  $3400. 
D)  none of the answers provided.

Which of the following statements about the use of the FIFO assumption is NOT true?

The following details relate to a perpetual inventory system: What was the value of opening inventory?

Which of the following statements about the perpetual inventory control method is NOT true?

Use the information below to answer the following question. Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period: If Pinkerton Ltd had employed the periodic inventory method, what would its gross profit have been?

A company purchases and sells Roofoo. It began last year with five units of Roofoo on hand at a cost of $10 each, and during the year its purchases and sales were as follows: What was the value of the ending inventory of Roofoo, using the FIFO assumption?

Which of the following statements about the use of the weighted average assumption is true?

The following information relates to Moderate Ltd: What were the purchases for the period?

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the LIFO assumption in a perpetual inventory system?

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the FIFO assumption?

A company discovered that inventory that cost $1000 and normally sells for $1200 has become obsolete and will be scrapped next month. The effect of the adjusting journal entry is to:

During the year ended 30 June 2016, Rico Ltd had net sales of $750 000 and net purchases of $440 000. Cost of goods sold was $475 000. What was Rico Ltd's gross profit for the year ended 30 June 2016?

Which of the following statements about the use of the LIFO assumption is true?

If purchase prices are falling, which cost flow assumption provides the highest cost of goods sold?

Which of the following is NOT an advantage of the perpetual over the periodic inventory method?

The entry to record a credit sale when the perpetual inventory method is employed will include a debit to:

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the LIFO assumption in a periodic inventory system?

Use the information below to answer the following question. Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period: What was the balance of Pinkerton Ltd's accounts payable at the end of the period?

A company has four products and has 100 units of each in stock. The cost and net realisable value of each of the products are: The value of inventory in the balance sheet should be:

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Noncurrent Assets

Liabilities

Completing the Balance Sheet

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters

Exam 9: Inventory

Which of the following statements about the use of the FIFO assumption is NOT true?

The following details relate to a perpetual inventory system: What was the value of opening inventory?

Which of the following statements about the perpetual inventory control method is NOT true?

Use the information below to answer the following question. Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period: If Pinkerton Ltd had employed the periodic inventory method, what would its gross profit have been?

A company purchases and sells Roofoo. It began last year with five units of Roofoo on hand at a cost of $10 each, and during the year its purchases and sales were as follows: What was the value of the ending inventory of Roofoo, using the FIFO assumption?

Which of the following statements about the use of the weighted average assumption is true?

The following information relates to Moderate Ltd: What were the purchases for the period?

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the LIFO assumption in a perpetual inventory system?

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the FIFO assumption?

A company discovered that inventory that cost $1000 and normally sells for $1200 has become obsolete and will be scrapped next month. The effect of the adjusting journal entry is to:

During the year ended 30 June 2016, Rico Ltd had net sales of $750 000 and net purchases of $440 000. Cost of goods sold was $475 000. What was Rico Ltd's gross profit for the year ended 30 June 2016?

Which of the following statements about the use of the LIFO assumption is true?

If purchase prices are falling, which cost flow assumption provides the highest cost of goods sold?

Which of the following is NOT an advantage of the perpetual over the periodic inventory method?

The entry to record a credit sale when the perpetual inventory method is employed will include a debit to:

Diligent Ltd had 5 units of the commodity Algo on hand at 1 September 2016. The following purchases and sales were made during September: What was the value of ending inventory of Algo, using the LIFO assumption in a periodic inventory system?

Use the information below to answer the following question. Pinkerton Ltd uses a perpetual control system for its inventory. It had the following data for a recent period: What was the balance of Pinkerton Ltd's accounts payable at the end of the period?

A company has four products and has 100 units of each in stock. The cost and net realisable value of each of the products are: The value of inventory in the balance sheet should be:

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Noncurrent Assets

Liabilities

Completing the Balance Sheet

Revenue and Expense Recognition: Additional Concepts

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters