Question 1

The LIFO method tends to smooth out the peaks and valleys of a business cycle.

Accepted Answer

A) True 
 B)False

Question 2

A company has cost of goods available for sale of $250,000, sales of $305,000, and a gross profit percentage of 30 percent. Using the gross profit method, what is the ending inventory?

Accepted Answer

A)  $95,000 
B)  $50,000 
C)  $36,500 
D)  $158,500 
A)  $95,000 
B)  $50,000 
C)  $36,500 
D)  $158,500

Question 3

An assumption about cost flow is necessary

Accepted Answer

A)  because it is required by income tax regulations. 
B)  only when the flow of goods cannot be determined. 
C)  because prices usually change, and tracking which units have been sold is difficult. 
D)  even when there is no change in the purchase price of inventory. 
A)  because it is required by income tax regulations. 
B)  only when the flow of goods cannot be determined. 
C)  because prices usually change, and tracking which units have been sold is difficult. 
D)  even when there is no change in the purchase price of inventory.

Question 4

In a period of rising prices, which inventory method is best to use for tax purposes?

Accepted Answer

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

Question 5

What is a LIFO liquidation, and what is its effect on income before income taxes?

Accepted Answer

Under LIFO, ending inventory is assumed

Question 6

The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost that is in excess of its market value.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Inventory costing methods place primary reliance on assumptions about the flow of

Accepted Answer

A)  costs. 
B)  goods. 
C)  resale prices. 
D)  values. 
A)  costs. 
B)  goods. 
C)  resale prices. 
D)  values.

Question 9

When the average-cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.

Accepted Answer

A) True 
 B)False

Question 10

During October, Tedesco Company sold 240 units of Product R. Its beginning inventory and purchases during the month were as follows:
Assume the periodic inventory system is used
  
 Compute the cost of goods sold under each of three methods: (a) average-cost, (b) LIFO, and (c) FIFO. (Show your work.)

Accepted Answer

a. Average-cost: $5,760 [(100 @#LAT-DLM& $20) + (1

Question 11

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Accepted Answer

FIFO will provide the same valuation res

Question 12

Use this inventory information for the month of June to answer the following question.   Assuming that a periodic inventory system is used, what is cost of goods sold under the average-cost method?

Accepted Answer

A)  $3,648 
B)  $7,752 
C)  $3,712 
D)  $7,888 
A)  $3,648 
B)  $7,752 
C)  $3,712 
D)  $7,888

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Prior to a fire that destroyed most of its inventory, Verona Company had inventory purchases during the period of $80,000 and sales of $250,000. Verona began the period with $190,000 in inventory. Verona's typical gross profit percentage is 20 percent. Inventory that cost $10,000 survived the fire. Using the gross profit method, estimate the inventory loss from the fire. (Show your work.)

Accepted Answer

The answer of Prior to a fire that destroyed most...

Question 15

Manufacturing overhead would not include which of the following costs?

Accepted Answer

A)  Packing materials 
B)  Supervisory salaries 
C)  Factory rent 
D)  Raw materials 
A)  Packing materials 
B)  Supervisory salaries 
C)  Factory rent 
D)  Raw materials

Question 16

When the average-cost method is applied to a perpetual inventory system, the sale of goods will change the unit cost of the goods that remain in inventory.

Accepted Answer

A) True 
 B)False

Question 17

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 under the LIFO method?

Accepted Answer

A)  $2,720 
B)  $2,800 
C)  More information is needed. 
D)  $2,880 
A)  $2,720 
B)  $2,800 
C)  More information is needed. 
D)  $2,880

Question 18

When applying the lower-of-cost-or-market rule to inventory valuation, market generally means

Accepted Answer

A)  original cost, less physical deterioration. 
B)  replacement cost. 
C)  original cost. 
D)  resale value. 
A)  original cost, less physical deterioration. 
B)  replacement cost. 
C)  original cost. 
D)  resale value.

Question 19

Use this information to answer the following question.   Assuming that the specific identification method is used and that ending inventory consists of 15 units from each of the three purchases and five units from the January 1 inventory, cost of goods sold is

Accepted Answer

A)  $221. 
B)  $418. 
C)  $338. 
D)  $445. 
A)  $221. 
B)  $418. 
C)  $338. 
D)  $445.

Question 20

A cost-to-retail percentage must be calculated when applying the retail method.

Accepted Answer

A) True 
 B)False

Exam 8: Inventories

The LIFO method tends to smooth out the peaks and valleys of a business cycle.

A company has cost of goods available for sale of $250,000, sales of $305,000, and a gross profit percentage of 30 percent. Using the gross profit method, what is the ending inventory?

An assumption about cost flow is necessary

In a period of rising prices, which inventory method is best to use for tax purposes?

What is a LIFO liquidation, and what is its effect on income before income taxes?

The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost that is in excess of its market value.

Which of the following is an inventory costing method?

Inventory costing methods place primary reliance on assumptions about the flow of

When the average-cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.

During October, Tedesco Company sold 240 units of Product R. Its beginning inventory and purchases during the month were as follows: Assume the periodic inventory system is used Compute the cost of goods sold under each of three methods: (a) average-cost, (b) LIFO, and (c) FIFO. (Show your work.)

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Use this inventory information for the month of June to answer the following question. Assuming that a periodic inventory system is used, what is cost of goods sold under the average-cost method?

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

Manufacturing overhead would not include which of the following costs?

When the average-cost method is applied to a perpetual inventory system, the sale of goods will change the unit cost of the goods that remain in inventory.

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 under the LIFO method?

When applying the lower-of-cost-or-market rule to inventory valuation, market generally means

Use this information to answer the following question. Assuming that the specific identification method is used and that ending inventory consists of 15 units from each of the three purchases and five units from the January 1 inventory, cost of goods sold is

A cost-to-retail percentage must be calculated when applying the retail method.

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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