Question 1

Willy World began using dollar-value LIFO for costing its inventory two years ago. The ending inventory for the past two years in end-of-year dollars was $180,000 and $270,000 and the year-end price indices were 1.0 and 1.2, respectively. Assuming the current inventory at end of year prices equals $387,000 and the index for the current year is 1.25, what is the ending inventory using dollar-value LIFO?

Accepted Answer

A)  $319,500. 
B)  $335,520. 
C)  $342,000. 
D)  $339,750.

Question 2

Malone Corporation uses the perpetual inventory method. On March 1, it purchased $60,000 of inventory, terms 2/10, n/30. On March 3, Malone returned goods that cost $6,000. On March 9, Malone paid the supplier. On March 9, Malone should credit

Accepted Answer

A)  purchase discounts for $1,200. 
B)  inventory for $1,200. 
C)  purchase discounts for $1,080. 
D)  inventory for $1,080.

Question 3

What is the effect of a $50,000 overstatement of last year's inventory on current years ending retained earning balance?

Accepted Answer

A)  Understated by $50,000. 
B)  No effect. 
C)  Overstated by $50,000. 
D)  Need more information to determine.

Question 4

FIFO and LIFO periodic inventory methods.
The Rock Shop shows the following data related to an item of inventory:
Instructions

(a) What value should be assigned to the ending inventory using FIFO?
(b) What value should be assigned to cost of goods sold using LIFO?

Accepted Answer

The answer of FIFO and LIFO periodic inventory methods.
The Rock...

Question 5

Use the following information for questions 100 and 101.
Niles Co. has the following data related to an item of inventory: 
-The value assigned to cost of goods sold if Niles uses FIFO is

Accepted Answer

A)  $ 580. 
B)  $ 552. 
C)  $1,724. 
D)  $1,696.

Question 6

Goods in transit which are shipped F.o.b. shipping point should be

Accepted Answer

A)  included in the inventory of the seller. 
B)  included in the inventory of the buyer. 
C)  included in the inventory of the shipping company. 
D)  None of these answer choices are correct.

Question 7

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 360 units that cost $65 each. During the month, the company made two purchases: 540 units at $68 each and 270 units at $70 each. Chess Top also sold 900 units during the month. Using the average cost method, what is the amount of ending inventory?

Accepted Answer

A)  $18,900. 
B)  $60,786. 
C)  $60,120. 
D)  $18,236.

Question 8

Use the following information for questions 92 through 94.
Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2015 and 2014 contained errors as follows: 
-Assume that no correcting entries were made at December 31, 2014. Ignoring income taxes, by how much will retained earnings at December 31, 2015 be overstated or understated?

Accepted Answer

A)  $ 2,000 understated 
B)  $15,000 overstated 
C)  $15,000 understated 
D)  $18,000 understated

Question 9

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  base stock. 
D)  weighted-average.

Question 10

Why are inventories included in the computation of net income?

Accepted Answer

A)  To determine cost of goods sold. 
B)  To determine sales revenue. 
C)  To determine merchandise returns. 
D)  Inventories are not included in the computation of net income.

Question 11

What is consigned inventory?

Accepted Answer

A)  Goods that are shipped, but title transfers to the receiver. 
B)  Goods that are sold, but payment is not required until the goods are sold. 
C)  Goods that are shipped, but title remains with the shipper. 
D)  Goods that have been segregated for shipment to a customer.

Question 12

Nichols Company had 400 units of "Dink" in its inventory at a cost of $12 each. It purchased 600 more units of "Dink" at a cost of $18 each. Nichols then sold 700 units at a selling price of $30 each. The LIFO liquidation overstated normal gross profit by

Accepted Answer

A)  $ -0- 
B)  $ 600. 
C)  $1,200. 
D)  $1,800.

Question 13

Many U.S. companies that have international operations use LIFO for U.S. purposes but use FIFO for their foreign subsidiaries.

Accepted Answer

A) True 
 B)False

Question 14

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 360 units that cost $65 each. During the month, the company made two purchases: 540 units at $68 each and 270 units at $70 each. Chess Top also sold 900 units during the month. Using the FIFO method, what is the amount of cost of goods sold for the month?

Accepted Answer

A)  $60,786. 
B)  $58,500. 
C)  $61,470. 
D)  $60,120.

Question 15

Where should goods in transit that were recently purchased F.o.b. destination be included on the balance sheet?

Accepted Answer

A)  Accounts payable. 
B)  Inventory. 
C)  Equipment. 
D)  Not on the balance sheet.

Question 16

Inventory cut-off.
Vogts Company sells TVs. The perpetual inventory was stated as $38,500 on the books at December 31, 2014. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows.
1. TVs shipped to a customer January 2, 2015, costing $5,000 were included in inventory at December 31, 2014. The sale was recorded in 2015.
2. TVs costing $12,000 received December 30, 2014, were recorded as received on January 2, 2015.
3. TVs received during 2014 costing $4,600 were recorded twice in the inventory account.
4. TVs shipped to a customer December 28, 2014, f.o.b. shipping point, which cost $9,000, were not received by the customer until January, 2015. The TVs were included in the ending inventory.
5. TVs on hand that cost $6,100 were never recorded on the books.

Instructions
Compute the correct inventory at December 31, 2014."

Accepted Answer

The answer of Inventory cut-off.
Vogts Company sells TVs. The perpetual...

Question 17

Use the following information for questions 56 and 57.
During 2014, which was the first year of operations, Oswald Company had merchandise purchases of $985,000 before cash discounts. All purchases were made on terms of 2/10, n/30. Three-fourths of the items purchased were paid for within 10 days of purchase. All of the goods available had been sold at year end.
-Which of the following recording procedures would result in the highest net income for 2014?1. Recording purchases at gross amounts2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement

Accepted Answer

A)  1 
B)  2 
C)  Either 1 or 2 will result in the same net income. 
D)  Cannot be determined from the information provided.

Question 18

In a period of rising prices, the inventory method which tends to give the highest reported inventory is

Accepted Answer

A)  FIFO. 
B)  moving average. 
C)  LIFO. 
D)  weighted-average.

Question 19

White Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2014 was $160,000. The balance in the same account at the end of 2015 is $240,000. White's Cost of Goods Sold account has a balance of $1,200,000 from sales transactions recorded during the year. What amount should White report as Cost of Goods Sold in the 2015 income statement?

Accepted Answer

A)  $1,120,000. 
B)  $1,200,000. 
C)  $1,280,000. 
D)  $1,440,000.

Question 20

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 360 units that cost $65 each. During the month, the company made two purchases: 540 units at $68 each and 270 units at $70 each. Chess Top also sold 900 units during the month. Using the LIFO method, what is the amount of cost of goods sold for the month?

Accepted Answer