Question 1

Holliday Company's inventory records show the following data:  A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for ₤3 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. The weighted-average cost per unit is

Accepted Answer

A)   ₤1.88.
B)   ₤2.00.
C)   ₤2.04.
D)   ₤2.19. C

Question 2

Understating beginning inventory will understate

Accepted Answer

A)   assets.
B)   cost of goods sold.
C)   net income.
D)   equity. B

Question 3

In a manufacturing company, goods that are ready to be sold to customers are referred to as ________________, whereas in a merchandising company they are generally referred to as _______________.

Accepted Answer

not answered

Question 4

Which costing method cannot be used to determine the cost of inventory items before lower-of-cost-or-net realizable value market is applied?

Accepted Answer

A)   Specific identification
B)   FIFO
C)   Average-cost
D)   All of these methods can be used.

Question 5

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is

Accepted Answer

The answer of An error in the physical count of...

Question 6

In periods of rising prices, the inventory method which results in the inventory value on the statement of financial position that is closest to current cost is the

Accepted Answer

A)   FIFO method.
B)   specific identification method.
C)   average-cost method.
D)   tax method.

Question 7

The specific identification method of inventory costing

Accepted Answer

A)   always maximizes a company's net income.
B)   always minimizes a company's net income.
C)   has no effect on a company's net income.
D)   may enable management to manipulate net income.

Question 8

Euler Company made an inventory count on December 31, 2014. During the count, one of the clerks made the error of counting an inventory item twice. For the statement of financial position at December 31, 2014, the effects of this error are

Accepted Answer

The answer of Euler Company made an inventory count on...

Question 9

Specific identification

Accepted Answer

A)   must be used under IFRS if it would result in the most conservative net income.
B)   cannot be used under GAAP.
C)   cannot be used under IFRS.
D)   must be used under IFRS if the inventory items are not interchangeable.

Question 10

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

Accepted Answer

A) True 
 B)False

Question 11

Items not yet placed into production are considered to be

Accepted Answer

A)   raw materials.
B)   work in process.
C)   finished goods.
D)   merchandise inventory.

Question 12

Hoyt Company's inventory records show the following data for the month of September:  A physical inventory on September 30 shows 200 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

Accepted Answer

The answer of Hoyt Company's inventory records show the following...

Question 13

Quigley Company's records indicate the following information for the year:  On December 31, a physical inventory determined that ending inventory of ₤720,000 was in the warehouse. Quigley's gross profit on sales has remained constant at 30%. Quigley suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory?

Accepted Answer

A)   ₤120,000
B)   ₤240,000
C)   ₤360,000
D)   ₤840,000

Question 14

In a period of falling prices, which inventory method would result in the lowest tax burden?

Accepted Answer

A)   Average-cost.
B)   FIFO.
C)   No difference.
D)   Cannot be determined.

Question 15

The following information was available from the inventory records of Queen Company for July:  What should be the inventory reported on Queen's July 31 statement of financial position using the FIFO inventory method?

Accepted Answer

A)   £54,000.
B)   £58,800.
C)   £62,400.
D)   £63,000.

Question 16

In a period of rising prices, the inventory method which tends to report the lowest inventory is

Accepted Answer

A)   FIFO.
B)   LISH.
C)   Specific identification.
D)   Average-cost.

Question 17

Swiss-Mart Company's beginning inventory balance and purchase and sales transactions for the month of June were as follows:  Assuming that the company keeps perpetual inventory records, Swiss-Mart's inventory at June 30 on a LIFO basis is

Accepted Answer

A)   CHF3,000.
B)   CHF3,200.
C)   CHF3,300.
D)   CHF3,500.

Question 18

Disclosures about inventory should include each of the following except the

Accepted Answer

A)   basis of accounting.
B)   cost method.
C)   quantity of inventory.
D)   major inventory classifications.

Question 19

In a period of rising prices, FIFO will have

Accepted Answer

A)   lower net income than average-cost.
B)   lower cost of goods sold than average-cost.
C)   lower income tax expense than average-cost.
D)   lower net purchases than average-cost.

Question 20

This information is available for Grant's Photo Corporation for 2013 and 2014.  Instructions
Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2013 and 2014. Comment on any trends.

Accepted Answer

The answer of This information is available for Grant's Photo...

Exam 6: Inventories

Holliday Company's inventory records show the following data: A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for ₤3 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. The weighted-average cost per unit is