Question 1

The choice of cost flow assumption (FIFO, LIFO, or average) does not depend on the physical flow of the product.

Accepted Answer

A) True 
 B)False  True

Question 2

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses LIFO and a periodic inventory system.

Accepted Answer

The answer of Required: Compute the ending inventory and cost...

Question 3

Briefly explain when there would be a tax benefit from electing LIFO rather than FIFO.

Accepted Answer

In periods of rising costs, LIFO provides a tax benefit through the deferral of the payment of income taxes which increases current cash inflows. Over a company's life, LIFO and FIFO produce the same cumulative gross profit, but LIFO results in lower income in the earlier periods. This is similar to the advantage provided by accelerated methods of depreciation. The opposite effect will occur in periods of deflation. An increase in tax rates in the future may also reduce or eliminate the tax benefit of the tax deferral.

Question 4

Under the net method, purchase discounts lost are:

Accepted Answer

A) Included in purchases. 
B) Added to accounts payable. 
C) Included in interest expense. 
D) Deducted from discount income. 
A) Included in purchases. 
B) Added to accounts payable. 
C) Included in interest expense. 
D) Deducted from discount income.

Question 5

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2009 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2008. Assuming HH has a 30% income tax rate:

Accepted Answer

A) Its reported cost of goods for 2009 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements. 
B) Its reported cost of goods for 2009 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements. 
C) Its reported cost of goods sold for 2009 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements. 
D) Its reported cost of goods sold for 2009 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements. 
A) Its reported cost of goods for 2009 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements. 
B) Its reported cost of goods for 2009 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements. 
C) Its reported cost of goods sold for 2009 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements. 
D) Its reported cost of goods sold for 2009 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements.

Question 6

Net purchases are reduced for discounts taken whether the net method is used or the gross method is used.

Accepted Answer

A) True 
 B)False

Question 7

Meteor Co. purchased merchandise on March 4, 2009, at a price of $30,000, subject to credit terms of 2/10, n30. Meteor uses the net method for recording purchases and uses a periodic inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on March 11, 2009.
3. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on April 2, 2009.

Accepted Answer

The answer of Meteor Co. purchased merchandise on March 4,...

Question 8

The following information is taken from the accounting records of Madeline Inc. for the year 2009. Missing information has been left blank. Inventory is the only supply that Madeline purchases on credit.

Required: Compute the missing amounts.

-

Accepted Answer

The answer of  The following information is taken from...

Question 9

Ending inventory assuming LIFO in a perpetual inventory system would be:

Accepted Answer

A) $4,960. 
B) $5,060. 
C) $5,080. 
D) $5,140. 
A) $4,960. 
B) $5,060. 
C) $5,080. 
D) $5,140.

Question 10

In periods when costs are rising LIFO liquidations:

Accepted Answer

A) Can't occur. 
B) Are used to reduce tax liabilities. 
C) Are a source of off-balance-sheet financing. 
D) Distort the net income. 
A) Can't occur. 
B) Are used to reduce tax liabilities. 
C) Are a source of off-balance-sheet financing. 
D) Distort the net income.

Question 11

The following information is taken from the accounting records of Rapid Runner Inc. for the year 2009. Missing information has been left blank.
 
 Required: Compute the missing amounts.

-

Accepted Answer

The answer of   The following information is taken...

Question 12

What inventory balance should Badger report on its 12/31/09 balance sheet?

Accepted Answer

A) $126,000 
B) $121,000 
C) $120,000 
D) $100,000 $126,000/1.05 = $120,000.This includes two layers, the first at $100,000 and the second at $20,000.The second is then brought forward to 12/31/09 by $20,000 1.05 = $21,000. 
A) $126,000 
B) $121,000 
C) $120,000 
D) $100,000 $126,000/1.05 = $120,000.This includes two layers, the first at $100,000 and the second at $20,000.The second is then brought forward to 12/31/09 by $20,000 1.05 = $21,000.

Question 13

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2009 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2008. Assuming GG has a 40% income tax rate:

Accepted Answer

A) Its reported cost of goods sold for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
B) Its reported cost of goods sold for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements. 
C) Its reported net income for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
D) Its reported net income for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.This is (1 tax rate) the pre-tax effect of $15 million. 
A) Its reported cost of goods sold for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
B) Its reported cost of goods sold for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements. 
C) Its reported net income for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements. 
D) Its reported net income for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.This is (1 tax rate) the pre-tax effect of $15 million.

Question 14

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:

Accepted Answer

A) FIFO. 
B) LIFO. 
C) Weighted average. 
D) None of these. 
A) FIFO. 
B) LIFO. 
C) Weighted average. 
D) None of these.

Question 15

In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:

Accepted Answer

A) Weighted average. 
B) LIFO. 
C) Moving average. 
D) FIFO. 
A) Weighted average. 
B) LIFO. 
C) Moving average. 
D) FIFO.

Question 16

Cost of goods sold is given by:

Accepted Answer

A) Beginning inventory net purchases + ending inventory. 
B) Beginning inventory + accounts payable net purchases. 
C) Net purchases + ending inventory beginning inventory. 
D) Net Purchases + beginning inventory ending inventory. 
A) Beginning inventory net purchases + ending inventory. 
B) Beginning inventory + accounts payable net purchases. 
C) Net purchases + ending inventory beginning inventory. 
D) Net Purchases + beginning inventory ending inventory.

Question 17

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses average cost and a periodic inventory system.

Accepted Answer

The answer of Required: Compute the ending inventory and cost...

Question 18

Ending inventory assuming LIFO in a periodic inventory system would be:

Accepted Answer

A) $5,040. 
B) $5,055. 
C) $5,075. 
D) $5,135. 
A) $5,040. 
B) $5,055. 
C) $5,075. 
D) $5,135.

Question 19

On January 1, 2008, RAY Co. adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $300 million. The 12/31/08 inventory valued at year-end costs were $385 million. The 12/31/08 inventory, using dollar-value LIFO was $355 million.
Required:
Calculate 2008 cost index for RAY's inventory.

Accepted Answer

The answer of On January 1, 2008, RAY Co. adopted...

Question 20

Thompson's 2009 gross profit ratio is:

Accepted Answer

A) 25%. 
B) 19%. 
C) 20%. 
D) None of these is correct.$84,000 $420,000 = 20% 
A) 25%. 
B) 19%. 
C) 20%. 
D) None of these is correct.$84,000 $420,000 = 20%

The choice of cost flow assumption (FIFO, LIFO, or average) does not depend on the physical flow of the product.

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses LIFO and a periodic inventory system.

Briefly explain when there would be a tax benefit from electing LIFO rather than FIFO.

Under the net method, purchase discounts lost are:

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2009 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2008. Assuming HH has a 30% income tax rate:

Net purchases are reduced for discounts taken whether the net method is used or the gross method is used.

The following information is taken from the accounting records of Madeline Inc. for the year 2009. Missing information has been left blank. Inventory is the only supply that Madeline purchases on credit. Required: Compute the missing amounts. -

Ending inventory assuming LIFO in a perpetual inventory system would be:

In periods when costs are rising LIFO liquidations:

The following information is taken from the accounting records of Rapid Runner Inc. for the year 2009. Missing information has been left blank. Required: Compute the missing amounts. -

What inventory balance should Badger report on its 12/31/09 balance sheet?

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2009 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2008. Assuming GG has a 40% income tax rate:

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:

In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:

Cost of goods sold is given by:

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses average cost and a periodic inventory system.

Ending inventory assuming LIFO in a periodic inventory system would be:

Thompson's 2009 gross profit ratio is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Operational Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters

Exam 8: Inventories: Measurement

The choice of cost flow assumption (FIFO, LIFO, or average) does not depend on the physical flow of the product.

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses LIFO and a periodic inventory system.

Briefly explain when there would be a tax benefit from electing LIFO rather than FIFO.

Under the net method, purchase discounts lost are:

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2009 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2008. Assuming HH has a 30% income tax rate:

Net purchases are reduced for discounts taken whether the net method is used or the gross method is used.

The following information is taken from the accounting records of Madeline Inc. for the year 2009. Missing information has been left blank. Inventory is the only supply that Madeline purchases on credit. Required: Compute the missing amounts. -

Ending inventory assuming LIFO in a perpetual inventory system would be:

In periods when costs are rising LIFO liquidations:

The following information is taken from the accounting records of Rapid Runner Inc. for the year 2009. Missing information has been left blank. Required: Compute the missing amounts. -

What inventory balance should Badger report on its 12/31/09 balance sheet?

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2009 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2008. Assuming GG has a 40% income tax rate:

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:

In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:

Cost of goods sold is given by:

Required: Compute the ending inventory and cost of goods sold assuming Random Creations uses average cost and a periodic inventory system.

Ending inventory assuming LIFO in a periodic inventory system would be:

Thompson's 2009 gross profit ratio is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Operational Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters