Question 1

The second step in calculating dollar-value LIFO is to

Accepted Answer

A)  compute the change in the inventory level for the year at base-year cost 
B)  roll back the ending inventory cost to base-year costs 
C)  value the total ending inventory at current-year costs 
D)  roll forward the increase to current-year cost by applying the current-year conversion index 
A)  compute the change in the inventory level for the year at base-year cost 
B)  roll back the ending inventory cost to base-year costs 
C)  value the total ending inventory at current-year costs 
D)  roll forward the increase to current-year cost by applying the current-year conversion index

Question 2

Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

Accepted Answer

A)  FIFO and specific identification 
B)  LIFO and average cost 
C)  FIFO and average cost 
D)  LIFO and specific identification 
A)  FIFO and specific identification 
B)  LIFO and average cost 
C)  FIFO and average cost 
D)  LIFO and specific identification

Question 3

Trooper Company has provided the following inventory data for the year:  
Required:
Compute the cost of goods sold and the ending inventory using the periodic inventory system for each of the following cost flow assumptions:
a.FIFO
b.LIFO
c.weighted average

Accepted Answer

The answer of Trooper Company has provided the following inventory...

Question 4

Which of the following inventory cost flow assumptions produces the same ending inventory values under both the periodic and perpetual systems?

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  average 
D)  dollar-value LIFO 
A)  FIFO 
B)  LIFO 
C)  average 
D)  dollar-value LIFO

Question 5

Which one of the following statements is false?

Accepted Answer

A)  Under conditions of rising prices, the LIFO method results in lower income than the FIFO method. 
B)  In most cases, the FIFO method approximates the physical flow of items in inventory. 
C)  The LIFO method produces a higher ending inventory value than the FIFO method. 
D)  The FIFO method includes holding gains in income. 
A)  Under conditions of rising prices, the LIFO method results in lower income than the FIFO method. 
B)  In most cases, the FIFO method approximates the physical flow of items in inventory. 
C)  The LIFO method produces a higher ending inventory value than the FIFO method. 
D)  The FIFO method includes holding gains in income.

Question 6

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar-value LIFO is the

Accepted Answer

A)  inventory pool method 
B)  double-extension method 
C)  weighted average method 
D)  link-chain method 
A)  inventory pool method 
B)  double-extension method 
C)  weighted average method 
D)  link-chain method

Question 7

Exhibit 7-5 Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2013, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:   
-Refer to Exhibit 7-5. The ending inventory at December 31, 2015, using the dollar-value LIFO method would be

Accepted Answer

A)  $422,000 
B)  $402,000 
C)  $426,000 
D)  $420,400 
A)  $422,000 
B)  $402,000 
C)  $426,000 
D)  $420,400

Question 8

The term LIFO reserve refers to

Accepted Answer

A)  a cost flow assumption for valuing inventory 
B)  a special fund set aside to cover LIFO liquidation 
C)  inventory pools used in the dollar-value LIFO method 
D)  any difference between the ending inventory amount under LIFO and the ending inventory amount under FIFO or average cost 
A)  a cost flow assumption for valuing inventory 
B)  a special fund set aside to cover LIFO liquidation 
C)  inventory pools used in the dollar-value LIFO method 
D)  any difference between the ending inventory amount under LIFO and the ending inventory amount under FIFO or average cost

Question 9

Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2014, the following information was obtained from the inventory records:   Required:
Prepare the necessary entry to convert to LIFO at the end of 2013.

Accepted Answer

The answer of Cabinets for Less uses FIFO for internal...

Question 10

The following information was obtained from the accounting records of Junie Company.

Required:
Compute the missing amounts.

Accepted Answer

The answer of The following information was obtained from the...

Question 11

Near the end of 2015, Spruce Co. made the following purchases. The months involved in all cases are December 2015 and January 2016.

What amount of the above purchases should be included in Spruce's inventory at December 31, 2015?

Accepted Answer

A)  $1,575 
B)  $1,890 
C)  $4,320 
D)  $4,575 
A)  $1,575 
B)  $1,890 
C)  $4,320 
D)  $4,575

Question 12

The basic criterion for including items in inventory is

Accepted Answer

A)  physical control 
B)  legal ownership 
C)  physical possession 
D)  economic control 
A)  physical control 
B)  legal ownership 
C)  physical possession 
D)  economic control

Question 13

In a period of falling prices, FIFO produces the lowest cost of goods sold and the highest gross profit.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following statements is true?

Accepted Answer

A)  Income manipulation is difficult under LIFO. 
B)  Accounting principles do not require that the inventory cost flow approximate the physical flow of goods. 
C)  Companies may use LIFO for tax purposes and FIFO in the financial statements. 
D)  In periods of declining prices, LIFO will result in the payment of lower income taxes. 
A)  Income manipulation is difficult under LIFO. 
B)  Accounting principles do not require that the inventory cost flow approximate the physical flow of goods. 
C)  Companies may use LIFO for tax purposes and FIFO in the financial statements. 
D)  In periods of declining prices, LIFO will result in the payment of lower income taxes.

Question 15

Martins Game Stop began the current quarter with the following inventory: 900 units @ $10 per unit and 250 units @ $12 per unit. During the quarter, Martin purchased 400 units @ $13 per unit and sold 680 units. Martin prepares interim financial statements each quarter.
Required: 
a.Determine the amount of LIFO liquidation profit for the quarter.
b.Assume the liquidation is not to be reflected in the current quarter's financial statements. Prepare the necessary adjusting entry.
c.Explain the circumstances when an inventory liquidation is not reported on interim financial statements.

Accepted Answer

The answer of Martins Game Stop began the current quarter...

Question 16

Exhibit 7-2 Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2014. Credit terms of 3/20, n/60 applied.
-Refer to Exhibit 7-2. If Edwards uses the net method and pays for the purchase on March 18, 2014, what amount is recorded in the Purchase Discounts Taken account?

Accepted Answer

A)  $0 
B)  $2,850 
C)  $5,000 
D)  $3,000 
A)  $0 
B)  $2,850 
C)  $5,000 
D)  $3,000

Question 17

The costs of operating a purchasing department are necessary to the purchasing of inventory therefore those costs incurred should be allocated to inventory.

Accepted Answer

A) True 
 B)False

Question 18

The IFRS disallow the use of LIFO for external financial reporting. Assume a U.S. based company has been using LIFO for financial and tax reporting but now wants to prepare IFRS conforming financial statements to enable its stock to be traded on one of the European stock exchanges.
Required:

Accepted Answer

@#IMG-DLM&_TB6205_00

Question 19

A company uses a LIFO reserve because internal reporting

Accepted Answer

A)  and GAAP reporting are not the same as tax reporting 
B)  and GAAP reporting are the same as tax reporting 
C)  is the same as GAAP reporting and tax reporting 
D)  is not the same as GAAP reporting and tax reporting 
A)  and GAAP reporting are not the same as tax reporting 
B)  and GAAP reporting are the same as tax reporting 
C)  is the same as GAAP reporting and tax reporting 
D)  is not the same as GAAP reporting and tax reporting

Question 20

Exhibit 7-3 Davis Co. had the following inventory activity during April:   
-Refer to Exhibit 7-3. Assuming Davis uses a periodic LIFO cost flow assumption, ending inventory at April 30 would be

Accepted Answer

A)  $880 
B)  $920 
C)  $1,090 
D)  $1,890 
A)  $880 
B)  $920 
C)  $1,090 
D)  $1,890

Exam 7: Inventories: Cost Measurement and Flow Assumptions

The second step in calculating dollar-value LIFO is to

Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

Trooper Company has provided the following inventory data for the year: Required: Compute the cost of goods sold and the ending inventory using the periodic inventory system for each of the following cost flow assumptions: a.FIFO b.LIFO c.weighted average

Which of the following inventory cost flow assumptions produces the same ending inventory values under both the periodic and perpetual systems?

Which one of the following statements is false?

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar-value LIFO is the

The term LIFO reserve refers to

Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2014, the following information was obtained from the inventory records: Required: Prepare the necessary entry to convert to LIFO at the end of 2013.

The following information was obtained from the accounting records of Junie Company. Required: Compute the missing amounts.

Near the end of 2015, Spruce Co. made the following purchases. The months involved in all cases are December 2015 and January 2016. What amount of the above purchases should be included in Spruce's inventory at December 31, 2015?

The basic criterion for including items in inventory is

In a period of falling prices, FIFO produces the lowest cost of goods sold and the highest gross profit.

Which one of the following statements is true?

Exhibit 7-2 Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2014. Credit terms of 3/20, n/60 applied. -Refer to Exhibit 7-2. If Edwards uses the net method and pays for the purchase on March 18, 2014, what amount is recorded in the Purchase Discounts Taken account?

The costs of operating a purchasing department are necessary to the purchasing of inventory therefore those costs incurred should be allocated to inventory.

The IFRS disallow the use of LIFO for external financial reporting. Assume a U.S. based company has been using LIFO for financial and tax reporting but now wants to prepare IFRS conforming financial statements to enable its stock to be traded on one of the European stock exchanges. Required:

A company uses a LIFO reserve because internal reporting

Exhibit 7-3 Davis Co. had the following inventory activity during April: -Refer to Exhibit 7-3. Assuming Davis uses a periodic LIFO cost flow assumption, ending inventory at April 30 would be

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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