Question 1

The primary reason for the popularity of LIFO is that it:

Accepted Answer

A) Provides better matching of physical flow and cost flow. 
B) Saves income taxes currently. 
C) Simplifies recordkeeping. 
D) Provides a permanent reduction of income taxes. 
A) Provides better matching of physical flow and cost flow. 
B) Saves income taxes currently. 
C) Simplifies recordkeeping. 
D) Provides a permanent reduction of income taxes.

Question 2

Cost of goods on consignment is included in the consignee's inventory until sold.

Accepted Answer

A) True 
 B)False

Question 3

Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.

Accepted Answer

The choice of accounting methods is both

Question 4

What is ending inventory assuming Northwest uses the gross method to record purchases?

Accepted Answer

A) $112,490. 
B) $112,550. 
C) $116,500. 
D) $120,300. 
A) $112,490. 
B) $112,550. 
C) $116,500. 
D) $120,300.

Question 5

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:

Accepted Answer

A) Option a 
B) Option b 
C) Option c 
D) Option d 
A) Option a 
B) Option b 
C) Option c 
D) Option d

Question 6

In a perpetual average cost system:

Accepted Answer

A) A new weighted-average unit cost is calculated each time additional units are purchased. 
B) The cost allocated to ending inventory is generally the same as it would be in a periodic inventory system. 
C) The moving-average unit cost is determined following each sale. 
D) The average is determined by dividing the total number of units sold by the cost of units purchased during the period. 
A) A new weighted-average unit cost is calculated each time additional units are purchased. 
B) The cost allocated to ending inventory is generally the same as it would be in a periodic inventory system. 
C) The moving-average unit cost is determined following each sale. 
D) The average is determined by dividing the total number of units sold by the cost of units purchased during the period.

Question 7

Thompson's 2013 inventory turnover ratio is:

Accepted Answer

A) 3.91. 
B) 4.00. 
C) 4.88. 
D) 5.00. 
A) 3.91. 
B) 4.00. 
C) 4.88. 
D) 5.00.

Question 8

LIFO always provides a better match of revenue and expense than does FIFO.

Accepted Answer

A) True 
 B)False

Question 9

LIFO liquidation profits occur when inventory quantity declines and costs are rising.

Accepted Answer

A) True 
 B)False

Question 10

Required:
Compute the January 31 ending inventory and cost of goods sold for January, assuming Random Creations uses average cost and a perpetual inventory system.

Accepted Answer

Perpetual

Question 11

The Mateo Corporation's inventory at December 31, 2013, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following: ▪ Merchandise costing $30,000, shipped f.o.b. shipping point from a vendor on December 30, 2013, was received on January 5, 2014.
▪ Merchandise costing $22,000, shipped f.o.b. destination from a vendor on December 28, 2013, was received on January 3, 2014.
▪ Merchandise costing $38,000 was shipped to a customer f.o.b. destination on December 28, arrived at the customer's location on January 6, 2014.
▪ Merchandise costing $12,000 was being held on consignment by Traynor Company.
What amount should Mateo Corporation report as inventory in its December 31, 2013, balance sheet?

Accepted Answer

A) $367,000. 
B) $427,000. 
C) $405,000. 
D) $325,000. 
A) $367,000. 
B) $427,000. 
C) $405,000. 
D) $325,000.

Question 12

Required:
The disclosure note indicates an inventory liquidation during 2010 and 2011. By how much did net income in 2010 increase due to the liquidation? Assume an income tax of 40%.

Accepted Answer

The effect (pre-tax) * (1 - .4

Question 13

Liquidated Corporation had a DVL inventory of $800,000 at the beginning of the current year when it adopted DVL. Its year-end inventory at year-end prices was $850,000. The index for the current year was 1.08.
Required:
Compute the DVL inventory (rounded) to be reported at the end of the year.

Accepted Answer

DVL with a LIFO Liqu

Question 14

Bascomb Company purchased $420,000 in merchandise on account during the month of April, and merchandise costing $350,000 was sold on account for $425,000.
Required:
1. Prepare journal entries to record the purchases and sales assuming Bascomb uses a perpetual inventory system.
2. Prepare journal entries to record the purchases and sales assuming Bascomb uses a periodic inventory system.

Accepted Answer

The answer of Bascomb Company purchased $420,000 in merchandise on...

Question 15

If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes:

Accepted Answer

A) When inventory purchase costs are rising. 
B) When inventory purchase costs are declining. 
C) Whether inventory purchase costs are declining or rising. 
D) LIFO liquidations are not problematic for a company's income taxes. 
A) When inventory purchase costs are rising. 
B) When inventory purchase costs are declining. 
C) Whether inventory purchase costs are declining or rising. 
D) LIFO liquidations are not problematic for a company's income taxes.

Question 16

Briefly explain how companies that use LIFO can both increase and decrease reported earnings by "managing" ending inventories.

Accepted Answer

A company that uses LIFO can manipulate

Question 17

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Accepted Answer

A) $5,940. 
B) $5,880. 
C) $6,000. 
D) $6,120. 
A) $5,940. 
B) $5,880. 
C) $6,000. 
D) $6,120.

Question 18

Required:
Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses LIFO and a perpetual inventory system.

Accepted Answer

The answer of Required:
Compute the January 31 ending inventory and...

Question 19

Assuming CBC uses the gross method to record purchases, ending inventory would be:

Accepted Answer

A) $6,480. 
B) $15,400. 
C) $15,480. 
D) $21,000. 
A) $6,480. 
B) $15,400. 
C) $15,480. 
D) $21,000.

Question 20

FIFO periodic and FIFO perpetual always produce the same amounts for cost of goods sold.

Accepted Answer

A) True 
 B)False

The primary reason for the popularity of LIFO is that it:

Cost of goods on consignment is included in the consignee's inventory until sold.

Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.

What is ending inventory assuming Northwest uses the gross method to record purchases?

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:

In a perpetual average cost system:

Thompson's 2013 inventory turnover ratio is:

LIFO always provides a better match of revenue and expense than does FIFO.

LIFO liquidation profits occur when inventory quantity declines and costs are rising.

Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Random Creations uses average cost and a perpetual inventory system.

Required: The disclosure note indicates an inventory liquidation during 2010 and 2011. By how much did net income in 2010 increase due to the liquidation? Assume an income tax of 40%.

Liquidated Corporation had a DVL inventory of $800,000 at the beginning of the current year when it adopted DVL. Its year-end inventory at year-end prices was $850,000. The index for the current year was 1.08. Required: Compute the DVL inventory (rounded) to be reported at the end of the year.

If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes:

Briefly explain how companies that use LIFO can both increase and decrease reported earnings by "managing" ending inventories.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses LIFO and a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

FIFO periodic and FIFO perpetual always produce the same amounts for cost of goods sold.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible 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 Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 8: Inventories: Measurement

The primary reason for the popularity of LIFO is that it:

Cost of goods on consignment is included in the consignee's inventory until sold.

Costs and prices regularly fall every year in the microcomputer industry. Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.

What is ending inventory assuming Northwest uses the gross method to record purchases?

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:

In a perpetual average cost system:

Thompson's 2013 inventory turnover ratio is:

LIFO always provides a better match of revenue and expense than does FIFO.

LIFO liquidation profits occur when inventory quantity declines and costs are rising.

Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Random Creations uses average cost and a perpetual inventory system.

Required: The disclosure note indicates an inventory liquidation during 2010 and 2011. By how much did net income in 2010 increase due to the liquidation? Assume an income tax of 40%.

Liquidated Corporation had a DVL inventory of $800,000 at the beginning of the current year when it adopted DVL. Its year-end inventory at year-end prices was $850,000. The index for the current year was 1.08. Required: Compute the DVL inventory (rounded) to be reported at the end of the year.

If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes:

Briefly explain how companies that use LIFO can both increase and decrease reported earnings by "managing" ending inventories.

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses LIFO and a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

FIFO periodic and FIFO perpetual always produce the same amounts for cost of goods sold.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible 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 Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters