Question 1

Use this inventory information for the month of June to answer the following questions.  Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

Accepted Answer

A)   More information is needed.
B)   $10,240
C)   $5,440
D)   $5,760

Question 2

An understatement of year 1's ending inventory will

Accepted Answer

A)   cause year 2's cost of goods sold to be overstated.
B)   result in an understatement of year 2's beginning inventory.
C)   not affect year 2's ending owner's equity.
D)   have no effect on year 2's gross margin.

Question 3

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Accepted Answer

A) True 
 B)False

Question 4

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Accepted Answer

A)   Full disclosure
B)   Consistency
C)   Cost-benefit
D)   Conservatism

Question 5

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

Accepted Answer

The lower-of-cost-or-market rule require...

Question 6

The average-cost method relies on a calculation of average unit cost.

Accepted Answer

A) True 
 B)False

Question 7

What is the chief objective of supply-chain management? How is it accomplished?

Accepted Answer

The chief objective of supply-chain mana...

Question 8

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)   $4,278.
B)   $1,518.
C)   $1,692.
D)   $1,584.

Question 9

The just-in-time operating environment produces decreased carrying costs for inventory.

Accepted Answer

A) True 
 B)False

Question 10

An understatement of year 1's beginning inventory will

Accepted Answer

A)   cause year 2's gross margin to be overstated.
B)   cause year 1's cost of goods sold to be understated.
C)   cause year 2's gross margin to be understated.
D)   have no effect on year 1's gross margin.

Question 11

An assumption about cost flow is necessary

Accepted Answer

A)   because it is required by income tax regulations.
B)   only when the flow of goods cannot be determined.
C)   because prices usually change,and tracking which units have been sold is difficult.
D)   even when there is no change in the purchase price of inventory.

Question 12

Use this inventory information for the month of May to answer the following question.  Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

Accepted Answer

A)   $2,880
B)   $5,120
C)   $5,200
D)   $2,800

Question 13

Costs incurred in storing inventory usually are included in inventory costs.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

Accepted Answer

A)   Purchases
B)   Beginning inventory
C)   Sales
D)   Freight-in

Question 16

Which of the following companies would be most likely to use the retail method?

Accepted Answer

A)   A dealer in heavy machinery
B)   A TV repair company
C)   A women's dress shop
D)   A farm supply company

Question 17

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

Accepted Answer

A)   $100,000
B)   $300,000
C)   $200,000
D)   $400,000

Question 18

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Accepted Answer

A)   Materiality
B)   Cost-benefit
C)   Matching
D)   Consistency

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A fur dealer probably would use which of the following inventory methods?

Accepted Answer

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

Exam 7: Inventories

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

Correct AnswerverifiedThe lower-of-cost-or-market rule require...View AnswerShow Answer

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

Correct AnswerverifiedShow Answer

An understatement of year 1's ending inventory will

Correct AnswerverifiedShow Answer

An understatement of year 1's beginning inventory will

Correct AnswerverifiedShow Answer

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A fur dealer probably would use which of the following inventory methods?

Correct AnswerverifiedShow Answer

An assumption about cost flow is necessary

Correct AnswerverifiedShow Answer

The average-cost method relies on a calculation of average unit cost.

Correct AnswerverifiedShow Answer

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Correct AnswerverifiedShow Answer

The just-in-time operating environment produces decreased carrying costs for inventory.

Correct AnswerverifiedShow Answer

What is the chief objective of supply-chain management? How is it accomplished?

Correct AnswerverifiedThe chief objective of supply-chain mana...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

Costs incurred in storing inventory usually are included in inventory costs.

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Which of the following companies would be most likely to use the retail method?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

Correct AnswerverifiedShow Answer

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

Correct AnswerverifiedShow Answer

Use this inventory information for the month of June to answer the following questions. Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

Correct AnswerverifiedShow Answer

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

Correct AnswerverifiedShow Answer

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The chief objective of supply-chain mana...
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