Exam 6: Inventories

During periods of consistently falling prices,the FIFO inventory method will produce the highest possible amount of net income.

Under rising prices,why will the FIFO method produce a higher ending inventory than LIFO?

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

An understatement of ending inventory in one period results in

In periods of rising prices,the LIFO method will result in a larger gross margin than the FIFO method.

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

Graczyk Company uses a periodic inventory system.During October,it sold 360 units of Product Z.Its beginning inventory and purchases during the month were as follows: Compute the cost of goods sold under each of three methods: (a)average-cost, (b)LIFO,and (c)FIFO.(Show your work. )

When the cost of inventory is written down due to a market decline,a loss must be recorded.

Market is the amount that a merchandising company would pay at the present time for the same goods that are in the inventory and from the usual suppliers in the usual quantities

Under a periodic inventory system,cost of goods sold is not recorded until the end of the accounting period.

The determination of the balance sheet cost of merchandise inventory is not important to the determination of net income.

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

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

Which of the following is an inventory processing system?

Direct materials and direct labor are components of manufacturing overhead.

Assuming a perpetual inventory system is used,use the following information to calculate cost of goods sold on an average-cost basis.

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

Portocall Sailboats reports income before income taxes of $160,000 during 2014.If beginning inventory was overstated by $14,000 and ending inventory was understated by $16,000,calculate corrected income before income taxes for the year.(Show your work. )

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

The detailed records of purchases and sales maintained under the perpetual inventory system make which costing method more practical than when a periodic system is used?