Question 1

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the average cost method?

Accepted Answer

A)  Prices decreased.
B)  Prices remained unchanged.
C)  Prices increased.
D)  Price trend cannot be determined from information given.E) A) and C)
F) A) and B)

Question 2

Oats Company offers a trade discount to its customers as a reward for large orders.According to the International Accounting Standards Board (IASB)  how should the customers of Oats Company account for these trade discounts?

Accepted Answer

A)  As an expense.
B)  As a revenue.
C)  As a reduction in the cost of inventory.
D)  The IASB allows any of these treatments so long as the company applies it consistently.E) A) and C)
F) None of the above

Question 3

June Corp.sells one product and uses a perpetual inventory system.The beginning inventory consisted of 10 units that cost $20 per unit.During the current month, the company purchased 60 units at $20 each.Sales during the month totaled 45 units for $43 each.What is the number of units in the ending inventory?

Accepted Answer

A)  10 units.
B)  15 units.
C)  25 units.
D)  70 units.E) A) and B)
F) B) and C)

Question 4

Groh Co.recorded the following data pertaining to raw material X during January 2010:  The moving-average unit cost of X inventory at January 31, 2010 is

Accepted Answer

A)  $8.70.
B)  $8.85.
C)  $9.00.
D)  $9.40.E) A) and D)
F) None of the above

Question 5

Use the following information for questions.
Winsor Co.records purchases at net amounts.On May 5 Winsor purchased merchandise on account, $16,000, terms 2\10, n\30.Winsor returned $1,200 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid.
-By how much should the account payable be adjusted on May 31?

Accepted Answer

A)  $0.
B)  $344.
C)  $320.
D)  $296.E) A) and D)
F) All of the above

Question 6

How might a company obtain a price index in order to apply dollar-value LIFO?

Accepted Answer

A)  Calculate an index based on recent inventory purchases.
B)  Use a general price level index published by the government.
C)  Use a price index prepared by an industry group.
D)  All of the above.E) None of the above
F) B) and D)

Question 7

Which of the following is true regarding the use of LIFO for inventory valuation?

Accepted Answer

A)  If LIFO is used for external financial reporting, then it must also be used for internal reports.
B)  For purposes of external financial reporting, LIFO may not be used with the lower-of-cost-or-net realizable value approach.
C)  If LIFO is used for external financial reporting, then it cannot be used for tax purposes.
D)  None of these.E) All of the above
F) C) and D)

Question 8

Use the following information for questions.
During 2010 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2011.Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne.In 2011 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan.
-This transaction is known as a(n)

Accepted Answer

A)  consignment.
B)  installment sale.
C)  assignment for the benefit of creditors.
D)  product financing arrangement.E) C) and D)
F) None of the above

Question 9

Use the following information for questions.
Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2009.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: 
-What is the cost of the ending inventory at December 31, 2011 under dollar-value LIFO?

Accepted Answer

A)  $232,000.
B)  $231,400.
C)  $232,840.
D)  $240,000.E) A) and B)
F) A) and C)

Question 10

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

Accepted Answer

A)  moving-average.
B)  first-in, first-out.
C)  specific identification.
D)  weighted-average.E) B) and D)
F) A) and D)

Question 11

A manufacturing concern would report the cost of units only partially processed as inventory in the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 12

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

Accepted Answer

A)  invoice price.
B)  invoice price plus any purchase discount lost.
C)  invoice price less the purchase discount taken.
D)  invoice price less the purchase discount allowable whether taken or not.E) A) and C)
F) C) and D)

Question 13

Interest costs incurred to manufacture large quantities of inventory that are produced routinely should be capitalized.

Accepted Answer

A) True 
 B)False

Question 14

In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

Accepted Answer

A) True 
 B)False

Question 15

Use the following information for questions.
Transactions for the month of June were: 
-Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Accepted Answer

A)  $4,096.
B)  $4,238.
C)  $4,290.
D)  $4,322.E) C) and D)
F) A) and D)

Question 16

Homes 4 You builds single-family homes throughout the United States and Europe.The International Accounting Standards Board (IASB)  Requires Homes 4 You to use which of the following cost flow assumptions for its inventory?

Accepted Answer

A)  FIFO (first-in, first-out) .
B)  Specific identification.
C)  Weighted-average.
D)  The IASB allows any of these cost flow assumptions as long as the company uses it consistently.E) All of the above
F) None of the above

Question 17

Use of LIFO provides a tax benefit in an industry where unit costs tend to decrease as production increases.

Accepted Answer

A) True 
 B)False

Question 18

What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO?

Accepted Answer

A)  $256,240.
B)  $254,800.
C)  $250,000.
D)  $263,400.E) A) and C)
F) A) and B)

Question 19

Nichols Company had 400 units of "Dink" in its inventory at a cost of $6 each.It purchased 600 more units of "Dink" at a cost of $9 each.Nichols then sold 700 units at a selling price of $15 each.The LIFO liquidation overstated normal gross profit by

Accepted Answer

A)  $ -0-
B)  $300.
C)  $600.
D)  $900.E) B) and D)
F) None of the above

Question 20

Which of the following is a period cost?

Accepted Answer

A)  Labor costs.
B)  Freight in.
C)  Production costs.
D)  Selling costs.E) All of the above
F) B) and D)

Exam 8: Valuation of Inventories: a Cost-Basis Approach

Correct Answer
verified

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

Correct Answer
verified

In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

Correct Answer
verified

Which of the following is true regarding the use of LIFO for inventory valuation?

Correct Answer
verified

How might a company obtain a price index in order to apply dollar-value LIFO?

Correct Answer
verified

Which of the following is a period cost?

Correct Answer
verified

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the average cost method?

Correct Answer
verified

What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO?

Correct Answer
verified

Correct Answer
verified

Interest costs incurred to manufacture large quantities of inventory that are produced routinely should be capitalized.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Groh Co.recorded the following data pertaining to raw material X during January 2010: The moving-average unit cost of X inventory at January 31, 2010 is

Correct Answer
verified

Homes 4 You builds single-family homes throughout the United States and Europe.The International Accounting Standards Board (IASB) Requires Homes 4 You to use which of the following cost flow assumptions for its inventory?

Correct Answer
verified

Use the following information for questions. Transactions for the month of June were: -Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Correct Answer
verified

Use of LIFO provides a tax benefit in an industry where unit costs tend to decrease as production increases.

Correct Answer
verified

Nichols Company had 400 units of "Dink" in its inventory at a cost of $6 each.It purchased 600 more units of "Dink" at a cost of $9 each.Nichols then sold 700 units at a selling price of $15 each.The LIFO liquidation overstated normal gross profit by

Correct Answer
verified

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

Correct Answer
verified

Oats Company offers a trade discount to its customers as a reward for large orders.According to the International Accounting Standards Board (IASB) how should the customers of Oats Company account for these trade discounts?

Correct Answer
verified

A manufacturing concern would report the cost of units only partially processed as inventory in the statement of financial position.

Correct Answer
verified

Exam 8: Valuation of Inventories: a Cost-Basis Approach

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

Correct AnswerverifiedShow Answer

Which of the following is true regarding the use of LIFO for inventory valuation?

Correct AnswerverifiedShow Answer

How might a company obtain a price index in order to apply dollar-value LIFO?

Correct AnswerverifiedShow Answer

Which of the following is a period cost?

Correct AnswerverifiedShow Answer

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the average cost method?

Correct AnswerverifiedShow Answer

What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Interest costs incurred to manufacture large quantities of inventory that are produced routinely should be capitalized.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Groh Co.recorded the following data pertaining to raw material X during January 2010: The moving-average unit cost of X inventory at January 31, 2010 is

Correct AnswerverifiedShow Answer

Homes 4 You builds single-family homes throughout the United States and Europe.The International Accounting Standards Board (IASB) Requires Homes 4 You to use which of the following cost flow assumptions for its inventory?

Correct AnswerverifiedShow Answer

Use the following information for questions. Transactions for the month of June were: -Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is

Correct AnswerverifiedShow Answer

Use of LIFO provides a tax benefit in an industry where unit costs tend to decrease as production increases.

Correct AnswerverifiedShow Answer

Nichols Company had 400 units of "Dink" in its inventory at a cost of $6 each.It purchased 600 more units of "Dink" at a cost of $9 each.Nichols then sold 700 units at a selling price of $15 each.The LIFO liquidation overstated normal gross profit by

Correct AnswerverifiedShow Answer

The use of a Purchase Discounts account implies that the recorded cost of a purchased inventory item is its

Correct AnswerverifiedShow Answer

Oats Company offers a trade discount to its customers as a reward for large orders.According to the International Accounting Standards Board (IASB) how should the customers of Oats Company account for these trade discounts?

Correct AnswerverifiedShow Answer

A manufacturing concern would report the cost of units only partially processed as inventory in the statement of financial position.

Correct AnswerverifiedShow Answer

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