Question 1

Use this information to answer the following question.   A periodic inventory system is used.
Using LIFO, the cost assigned to ending inventory is

Accepted Answer

A)  $1,740. 
B)  $4,056. 
C)  $1,332. 
D)  $4,464. 
A)  $1,740. 
B)  $4,056. 
C)  $1,332. 
D)  $4,464.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Use this inventory information for the month of May to answer the following question.   Assuming that a periodic inventory system is used, what is cost of goods sold on a FIFO basis?

Accepted Answer

A)  $2,880 
B)  $5,120 
C)  $5,200 
D)  $2,800 
A)  $2,880 
B)  $5,120 
C)  $5,200 
D)  $2,800

Question 4

The average-cost method produces an ending inventory figure that is somewhere between the figures produced by FIFO and LIFO.

Accepted Answer

A) True 
 B)False

Question 5

Use this inventory information for the month of May to answer the following question.   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 6

Goods in transit shipped FOB shipping point should not be included in the seller's ending inventory.

Accepted Answer

A) True 
 B)False

Question 7

Goods in transit shipped FOB destination should not be included in the buyer's ending inventory.

Accepted Answer

A) True 
 B)False

Question 8

Why are cost flow assumptions made when accounting for merchandise inventory?

Accepted Answer

With changing prices, one would have to

Question 9

The average-cost method relies on a simple average calculation.

Accepted Answer

A) True 
 B)False

Question 10

Use this information to answer the following question.   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 11

Which inventory method generally results in the most realistic balance sheet valuation?

Accepted Answer

A)  FIFO 
B)  Specific identification 
C)  LIFO 
D)  Average-cost 
A)  FIFO 
B)  Specific identification 
C)  LIFO 
D)  Average-cost

Question 12

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 13

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work-in-process.

Accepted Answer

A) True 
 B)False

Question 14

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 15

For each of the following descriptive statements, indicate whether FIFO or LIFO is being described.
_____ 1. Preferable method for conforming to matching principle
_____ 2. Preferable method for tax purposes under rising prices
_____ 3. Results in more up-to-date ending inventory figure
_____ 4. Results in fictitious profits under rising prices
_____ 5. Produces higher income when prices are declining
_____ 6. Produces higher ending inventory when prices are rising

Accepted Answer

1. LIFO 
2. LIFO 
3.

Question 16

The gross profit method requires that records be kept at both cost and retail.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following inventory methods when used for income tax purposes must also be used for reporting purposes?

Accepted Answer

A)  Specific identification 
B)  LIFO 
C)  FIFO 
D)  Average-cost 
A)  Specific identification 
B)  LIFO 
C)  FIFO 
D)  Average-cost

Question 18

Up to the date of a fire that completely destroyed Singer's inventory, Singer had sales of $2,000,000, purchases of $1,800,000, and freight-in of $80,000. The cost of beginning inventory was $140,000 and the company's typical gross profit was 40 percent. Using the gross profit method, estimate Singer's inventory loss from the fire. (Show your work.)

Accepted Answer

The answer of Up to the date of a fire...

Question 19

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 20

If a company uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Exam 8: Inventories

Use this information to answer the following question. A periodic inventory system is used. Using LIFO, the cost assigned to ending inventory is

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

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used, what is cost of goods sold on a FIFO basis?

The average-cost method produces an ending inventory figure that is somewhere between the figures produced by FIFO and LIFO.

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used, what is ending inventory (rounded) under the average-cost method?

Goods in transit shipped FOB shipping point should not be included in the seller's ending inventory.

Goods in transit shipped FOB destination should not be included in the buyer's ending inventory.

Why are cost flow assumptions made when accounting for merchandise inventory?

The average-cost method relies on a simple average calculation.

Use this information to answer the following question. 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

Which inventory method generally results in the most realistic balance sheet valuation?

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

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work-in-process.

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

The gross profit method requires that records be kept at both cost and retail.

Which of the following inventory methods when used for income tax purposes must also be used for reporting purposes?

Which of the following is an inventory valuation method?

If a company uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-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

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