Question 1

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?

Accepted Answer

A) Specific identification 
B) Average-cost 
C) LIFO 
D) FIFO 
A) Specific identification 
B) Average-cost 
C) LIFO 
D) FIFO

Question 2

The costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 3

A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost,and ending inventory of $160,000 at retail.What is the estimated cost of ending inventory?

Accepted Answer

A) $128,000 
B) $160,000 
C) $110,000 
D) $88,000 
A) $128,000 
B) $160,000 
C) $110,000 
D) $88,000

Question 4

Both the retail method and the gross profit method are useful in estimating the inventory cost.

Accepted Answer

A) True 
 B)False

Question 5

In general,in times of rising prices,using FIFO has a favorable effect on cash flows.

Accepted Answer

A) True 
 B)False

Question 6

Assume that during the physical count of the inventory of a large corporation for this year,$450,000 of merchandise was counted twice.The error was not detected,and the financial statements were prepared.Identify the individual statements that would be affected and explain the effect the count error would have on each.(Omit income tax considerations.)

Accepted Answer

The double-counting of merchandise would

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an inventory costing method?

Accepted Answer

A) Perpetual 
B) Lower-of-cost-or-market 
C) Specific identification 
D) Periodic 
A) Perpetual 
B) Lower-of-cost-or-market 
C) Specific identification 
D) Periodic

Question 9

Which of the following is an inventory valuation method?

Accepted Answer

A) First-in,first-out 
B) Average-cost 
C) Lower-of-cost-or-market 
D) Perpetual 
A) First-in,first-out 
B) Average-cost 
C) Lower-of-cost-or-market 
D) Perpetual

Question 10

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) costs. 
B) goods. 
C) resale prices. 
D) values. 
A) costs. 
B) goods. 
C) resale prices. 
D) values.

Question 12

In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) $429. 
B) $426. 
C) $452. 
D) $237. 
A) $429. 
B) $426. 
C) $452. 
D) $237.

Question 14

Use this information to answer the following question.   A periodic inventory system is used.
Using the average-cost method,the cost assigned to ending inventory is

Accepted Answer

A) $3,036. 
B) $3,168. 
C) $3,384. 
D) $8,556. 
A) $3,036. 
B) $3,168. 
C) $3,384. 
D) $8,556.

Question 15

A jeweler probably would use which of the following inventory methods?

Accepted Answer

A) Specific identification 
B) FIFO 
C) Average-cost 
D) LIFO 
A) Specific identification 
B) FIFO 
C) Average-cost 
D) LIFO

Question 16

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

Accepted Answer

A) LIFO 
B) Cannot tell without more information 
C) FIFO 
D) Average-cost 
A) LIFO 
B) Cannot tell without more information 
C) FIFO 
D) Average-cost

Question 17

Inventory is an example of a long-term asset.

Accepted Answer

A) True 
 B)False

Question 18

The LIFO method tends to create peaks and valleys in the business cycle.

Accepted Answer

A) True 
 B)False

Question 19

An overstatement of ending inventory in a period will result in an understatement of gross margin in that period.

Accepted Answer

A) True 
 B)False

Question 20

Use the following information to calculate ending inventory on (a)a LIFO basis,(b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.

Accepted Answer

a. LIFO: 50 × $28 = $1,400.00 b. FIFO: (

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 costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.

A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost,and ending inventory of $160,000 at retail.What is the estimated cost of ending inventory?

Both the retail method and the gross profit method are useful in estimating the inventory cost.

In general,in times of rising prices,using FIFO has a favorable effect on cash flows.

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

Which of the following is an inventory costing method?

Which of the following is an inventory valuation method?

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

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

In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.

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

Use this information to answer the following question. A periodic inventory system is used. Using the average-cost method,the cost assigned to ending inventory is

A jeweler probably would use which of the following inventory methods?

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

Inventory is an example of a long-term asset.

The LIFO method tends to create peaks and valleys in the business cycle.

An overstatement of ending inventory in a period will result in an understatement of gross margin in that period.

Use the following information to calculate ending inventory on (a)a LIFO basis,(b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters

Exam 7: Inventories

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 costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.

A retail store has goods available for sale of $2 million at retail and $1,100,000 at cost,and ending inventory of $160,000 at retail.What is the estimated cost of ending inventory?

Both the retail method and the gross profit method are useful in estimating the inventory cost.

In general,in times of rising prices,using FIFO has a favorable effect on cash flows.

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

Which of the following is an inventory costing method?

Which of the following is an inventory valuation method?

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

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

In periods of falling prices,LIFO will result in a higher ending inventory valuation than FIFO.

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

Use this information to answer the following question. A periodic inventory system is used. Using the average-cost method,the cost assigned to ending inventory is

A jeweler probably would use which of the following inventory methods?

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

Inventory is an example of a long-term asset.

The LIFO method tends to create peaks and valleys in the business cycle.

An overstatement of ending inventory in a period will result in an understatement of gross margin in that period.

Use the following information to calculate ending inventory on (a)a LIFO basis,(b)a FIFO basis,and (c)an average-cost basis.Assume a perpetual inventory system.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters