In periods of rising prices, LIFO will produce: lower net income than FIFO. higher net income than FIFO. higher net income than FIFO. higher net…

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1. In periods of rising prices, LIFO will produce: a. lower net income than FIFO. b. higher net income than FIFO. c. higher net income than FIFO. d. higher net income than average costing.

2. Which statement is false regarding the lower of cost or market (LCM) method of inventory? a. LCM is an example of the revenue recognition principle b. Market is defined as current replacement cost, not selling price. c. LCM is an example of an accounting concept of conservatism. d. Inventory is written down to its market value in the period in which the price decline occurs.

3. The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $61 First purchase 25 units at $63 Second purchase 30 units at $64 Third purchase 15 units at $73 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method? a. $1,300 b. $1,305 c. $1,415 d. $1,236

4. A company just starting business purchased three merchandise inventory items at the following prices: first purchase $520; second purchase $550; third purchase $580. If two items were sold during the period and the company used the LIFO costing method, the gross profit for the period would be how much greater or less than if the FIFO costing method had been used? a. Gross profit would be $60 greater. b. Gross profit would be $60 less. c. Gross profit would be the same. d. Gross profit would be $30 greater.

5. In a period of rising prices, the inventory method that will show the highest net income is: a. Average Cost. b. FIFO. c. LIFO. d. Specific Identification.

6. A company just starting business made the following purchases in August: August 1 300 units $1,560 August 12 400 units $2,340 August 24 400 units $2,520 August 30 300 units $1,980 1,400 units $8,400 A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the LIFO inventory method, the value of the ending inventory on August 31 is: a. $5,670. b. $3,240. c. $5,160. d. $2,730. Accounting G101 ‒ Financial Accounting Chapter 6 Quiz ‒ Inventory 2

7. In a period of rising prices, the inventory method that results in the lowest income tax payment is a. LIFO. b. FIFO. c. average cost. d. specific identification.

8. The inventory methods that result in the most current costs in the income statement and balance sheet are Income Statement Balance Sheet a. FIFO FIFO b. LIFO FIFO c. LIFO LIFO d. FIFO LIFO

9. The following information is available for Brighten Company: Sales $130,000 Freight-in $10,000 Ending Merchandise Inventory 15,000 Purchase Returns and Allowances 5,000 Purchases 90,000 Beginning Merchandise Inventory 12,000 Brighten’s cost of goods sold is a. $112,000. b. $107,000. c. $98,000. d. $92,000.

10. If ending inventory is overstated, net income and assets will be Net Income Assets a. Understated Understated b. Overstated Overstated c. Understated Overstated d. Overstated Understated

11. Stetson Company’s financial information is presented below. Sales $ ???? Purchase Returns and Allowances $ 15,000 Sales Returns and Allowances 30,000 Ending Merchandise Inventory 35,000 Net Sales 250,000 Cost of Goods Sold 180,000 Beginning Merchandise Inventory ???? Gross Profit ???? Purchases 170,000 The missing amounts above are: Sales Beginning Inventory Gross Profit a. $280,000 $45,000 $70,000 b. $220,000 $45,000 $100,000 c. $280,000 $60,000 $70,000 d. $220,000 $60,000 $100,000

12. Beginning inventory is $12,000; purchases are $34,000; sales are $60,000; and cost of goods sold is $31,000. Ending inventory is: a. $31,000. b. $46,000. c. $14,000. d. $15,000.

13. Assume that sales are $450,000, sales discounts are $10,000, net income is $35,000, and cost of goods Accounting G101 ‒ Financial Accounting Chapter 6 Quiz ‒ Inventory 3 sold is $320,000. Gross profit and operating expenses are, respectively: a. $120,000 and $95,000. b. $120,000 and $85,000. c. $130,000 and $95,000. d. $130,000 and $85,000.

14. S. Hagger Sounds has accumulated the following cost and market data on March 31: Cost Market Stereos $24,000 $20,400 Radios $18,000 $19,000 CDS $28,000 $25,600 Using the lower of cost or market, the value of the ending inventory is: a. $65,000. b. $70,000. c. $71,000. d. $64,000.

15. Which of the following would most likely employ the specific identification method of inventory costing? a. Grocery store . b. Jewelry store. c. Hardware store. d. Gasoline station.

16. A company just starting business made the following purchases in August: August 1 300 units $1,560 August 12 400 units $2,340 August 24 400 units $2,520 August 30 300 units $1,980 1,400 units $8,400 A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the LIFO inventory method that produces the lowest gross profit for August is a. The FIFO method b. The average cost method c. Not determinable d. The LIFO method.

17. The FIFO inventory method assumes that the cost of the earliest units purchased are the a. last to be allocated to the beginning inventory. b. first to be allocated to the cost of goods sold. c. first to be allocated to the ending inventory. d. last to be allocated to the cost of goods sold.

18. A company just starting business made the following purchases in August: August 1 300 units $1,560 August 12 400 units $2,340 August 24 400 units $2,520 August 30 300 units $1,980 1,400 units $8,400 A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the FIFO inventory method, the value of the ending inventory on August 31 is: a. $5,670. Accounting G101 ‒ Financial Accounting Chapter 6 Quiz ‒ Inventory 4 b. $3,240. c. $5,160. d. $2,730.

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