Question 1

The FIFO inventory method produces the most up-to-date figure for ending inventory.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following terms best describes the assumption made in applying the four inventory methods?

Accepted Answer

A)  Cost flow 
B)  Goods flow 
C)  Asset flow 
D)  Physical flow 
A)  Cost flow 
B)  Goods flow 
C)  Asset flow 
D)  Physical flow

Question 3

Use this inventory information for the month of May to answer the following question. $$\begin{array} { r r l l } 
\text { May } &1& \text { Begnning inventory } & \text { 20 units @ } 76 \
& 7 & \text { Purchase } & 70 \text { units @ } \$ 80 \
&18 & \text { Sale } & 25 \text { units } \
&22 & \text { purchase } & 10 \text { units @ } \$ 88 \
&29 & \text { Sale } & 40 \text { units }
\end{array}$$ Assuming that a periodic inventory system is used,what is ending inventory (rounded)under the average-cost method?

Accepted Answer

A)  $5,200 
B)  $5,288 
C)  $2,848 
D)  $2,800 
A)  $5,200 
B)  $5,288 
C)  $2,848 
D)  $2,800

Question 4

Which of the following is an inventory valuation method?

Accepted Answer

A)  First-in, first-out 
B)  Average-cost 
C)  Lower-of-cost-or-market 
D)  Perpetual 
A)  First-in, first-out 
B)  Average-cost 
C)  Lower-of-cost-or-market 
D)  Perpetual

Question 5

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an inventory costing method?

Accepted Answer

A)  Perpetual 
B)  Lower-of-cost-or-market 
C)  Specific identification 
D)  Periodic 
A)  Perpetual 
B)  Lower-of-cost-or-market 
C)  Specific identification 
D)  Periodic

Question 7

Assuming that ending inventory for 2009 was overstated,indicate whether each of the following will be understated (U),overstated (O),or not affected (N).
_____ 1.Beginning inventory for 2010
_____ 2.Cost of goods sold for 2009
_____ 3.Stockholders' equity at the end of 2010
_____ 4.Income before income taxes for 2010
_____ 5.Stockholders' equity at the end of 2009
_____ 6.Cost of goods sold for 2010
_____ 7.Income before income taxes for 2009

Accepted Answer

The answer of Assuming that ending inventory for 2009 was...

Question 8

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.Assume the periodic inventory system is used.(Show your work.)
 $$\begin{array} { l c l l r } 
\text { Jan. } & 1 & \text { Beginning inventory } & 100 \text { items @ } \$ 4 = & 400 \
\text { July } & 1 & \text { Purchases } & \underline { 300 } \text { items } @ \$ 8 = & 2,400 \
& & \text { Totals } & 400 \text { items } & \$2,800\
& & \text { Total sales } & \underline { 240 } \text { items } & \
\text { Dec. } & 31 & \text { Ending inventary } & \underline { 160 } \text { items } &
\end{array}$$

Accepted Answer

a.Average-cost: $1,120 ($2,800

Question 9

Use this information to answer the following question. $\begin{array}{llll}
\text { Feb. } & 1 & \text { Inventory } & 200 \text { units @ } \$ 6.00 \
& 6 & \text { Purchase } & 300 \text { units } @ \$ 6.60\
&13 & \text { Purchase } & 100 \text { units } @ \$ 7.20 \
&20 & \text { Purchase } & 200 \text { units } @ \$ 7.80 \
&25 & \text { Purchase } & 40 \text { units @ } \$ 8.40 \
&&\text { Total sales }& 620 \text { units }
\end{array}$
 A periodic inventory system is used.
Using the average-cost method,the cost assigned to ending inventory is

Accepted Answer

A)  $4,278. 
B)  $1,518. 
C)  $1,692. 
D)  $1,584. 
A)  $4,278. 
B)  $1,518. 
C)  $1,692. 
D)  $1,584.

Question 10

In which of the following cases would the gross profit method most likely be used?

Accepted Answer

A)  In a company with good accounting records 
B)  In applying the average-cost method 
C)  In estimating the market value of inventory for application of the lower-of-cost-or-market rule 
D)  In estimating an inventory loss from fire 
A)  In a company with good accounting records 
B)  In applying the average-cost method 
C)  In estimating the market value of inventory for application of the lower-of-cost-or-market rule 
D)  In estimating an inventory loss from fire

Question 11

The computer has made the perpetual inventory system more popular and easier to apply.

Accepted Answer

A) True 
 B)False

Question 12

In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.

Accepted Answer

A) True 
 B)False

Question 13

Specific identification is a very popular inventory method because it is very easy to apply.

Accepted Answer

A) True 
 B)False

Question 14

A retail store prices its goods to achieve a gross margin of 30 percent.Up to the date of a fire that destroyed the store's inventory,sales were $200,000 and cost of goods available for sale was $150,000.The estimated cost of the inventory destroyed is

Accepted Answer

A)  $10,000. 
B)  $35,000. 
C)  $60,000. 
D)  $50,000. 
A)  $10,000. 
B)  $35,000. 
C)  $60,000. 
D)  $50,000.

Question 15

Use this information to answer the following question. $\begin{array}{llll}
\text { Feb. } & 1 & \text { Inventory } & 200 \text { units @ } \$ 6.00 \
& 6 & \text { Purchase } & 300 \text { units } @ \$ 6.60\
&13 & \text { Purchase } & 100 \text { units } @ \$ 7.20 \
&20 & \text { Purchase } & 200 \text { units } @ \$ 7.80 \
&25 & \text { Purchase } & 40 \text { units @ } \$ 8.40 \
&&\text { Total sales }& 620 \text { units }
\end{array}$

A periodic inventory system is used.
Using the specific identification method and assuming that 50 of the items left are from the February 13 purchase and the rest are from the February 20 purchase,the cost assigned to ending inventory is

Accepted Answer

A)  $1,920. 
B)  $1,656. 
C)  $1,686. 
D)  $1,588. 
A)  $1,920. 
B)  $1,656. 
C)  $1,686. 
D)  $1,588.

Question 16

Freyman's Shoe Store had net retail sales of $200,000 during the current year.The following additional information was obtained from the accounting records.
 $\begin{array}{lrr}
&\text { At Cost}&\text { At Retail}\ 
\text { Beginning inventory } & \$ 30,000 & \$ 63,000 \
\text { Net purchases for the period } & 89,000 & 193,000 \
\text { Freight-in } & 9,000 &
\end{array}$
 Estimate the company's ending inventory at cost using the retail method.(Show your work.)

Accepted Answer

None

Question 17

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Accepted Answer

A)  Full disclosure 
B)  Matching 
C)  Materiality 
D)  Conservatism 
A)  Full disclosure 
B)  Matching 
C)  Materiality 
D)  Conservatism

Question 18

Merchandise inventory is valued on the balance sheet at the expected resale price.

Accepted Answer

A) True 
 B)False

Question 19

Match between columns
                        Premises:  Interest income
 Outstanding checks
 Check written for $89, but $98 recorded in books
 Customer's NSF check
 Note receivable collected by bank
 Deposit made for $70, but $700 recorded in books
 Bank check-printing charge
 Check written for $52, but $25 recorded in books
 Deposits in transit
 Bank fee for collection on note receivable

Accepted Answer

The Answer of Add to balance per bank and Deduct is...

Question 20

Use the following information to calculate ending inventory on (a)a LIFO basis,(b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.
Round answers to nearest dollar.
 $\begin{array}{llll}
\text { Dec. } & 1 & \text { Beginning inventory } & 70 \text { units @ } @ 14 \
& 9 & \text { Purchases } & 30 \text { units } @ \$ 16\
&17 & \text { Sales } & 25 \text { units } \
&22 & \text { Purchases } & 15 \text { units @\$18 } \
&27 & \text { Sales } & 40 \text { units } 
\end{array}$

Accepted Answer

a.LIFO: $700 (50 * $14)
b.FIFO

Exam 6: Inventories

The FIFO inventory method produces the most up-to-date figure for ending inventory.

Which of the following terms best describes the assumption made in applying the four inventory methods?

Which of the following is an inventory valuation method?

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

Which of the following is an inventory costing method?

In which of the following cases would the gross profit method most likely be used?

The computer has made the perpetual inventory system more popular and easier to apply.

In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.

Specific identification is a very popular inventory method because it is very easy to apply.

A retail store prices its goods to achieve a gross margin of 30 percent.Up to the date of a fire that destroyed the store's inventory,sales were $200,000 and cost of goods available for sale was $150,000.The estimated cost of the inventory destroyed is

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Merchandise inventory is valued on the balance sheet at the expected resale price.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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