Exam 7: Inventories

Why will an understated beginning inventory produce an overstated income before income taxes for the same period? Will the understatement have a favorable or unfavorable effect on current year income taxes?

Which costing method tends to level out the effects of cost increases or decreases?

In a period of declining prices,which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

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

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

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

Days' inventory on hand equals 365 divided by

An overstatement of beginning inventory results in

Which costing method is used based on the reasoning that the fairest determination of income occurs if the current costs are matched against current sales prices?

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

The FIFO inventory method does not produce the most up-to-date figure for ending inventory.

The lower the inventory turnover,the lower the days' inventory on hand.

When the average-cost method is applied to a perpetual inventory system,the sale of goods will not change the unit cost of the goods that remain in inventory.

An understatement of year 1's beginning inventory will

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

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

If prices were to never change,there would be no need for alternative inventory methods.

Which of the following is an inventory processing system?

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

Use this information to answer the following question. A periodic inventory system is used. -Cost of goods sold under FIFO is