100. Given the following information, determine the cost of the inventory at June 30 using the
LIFO perpetual inventory method.
June 1 Beginning inventory, 15 units at $20 each
June 15 Sale of 6 units for $50 each
June 29 Purchase of 8 units at $25 each
The cost of the ending inventory is:
A. $200
B. $220
C. $380
D. $275
E. $300
101. In applying the lower of cost or market method to inventory valuation, market is defined
as:
A. Historical cost.
B. Current replacement cost.
C. Current sales price.
D. FIFO.
E. LIFO.
102. Generally accepted accounting principles require that the inventory of a company be
reported at:
A. Market value.
B. Historical cost.
C. Lower of cost or market.
D. Replacement cost.
E. Retail value.
103. The conservatism constraint:
A. Prescribes that when multiple estimates of amounts to be received or paid in the future are
equally likely, then the least optimistic amount should be used.
B. Prescribes that a company use the same accounting methods period after period.
C. Prescribes that revenues and expenses be reported in the period in which they are earned or
incurred.
D. Prescribes that all items of a material nature be included in financial statements.
E. Prescribes that all inventory items be reported at full cost.
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104. A company normally sells its product for $20 per unit. However, the selling price has
fallen to $15 per unit. This company’s current inventory consists of 200 units purchased at $16
per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this
company’s inventory at the lower of cost or market.
A. $2,550.
B. $2,600.
C. $2,700.
D. $3,000.
E. $3,200.
105. A company has the following per unit original costs and replacement costs for its
inventory:
Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $6.50
Part C: 160 units with a cost of $3, and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company’s ending inventory
is:
A. $1,180.00.
B. $1,075.00.
C. $1,075.00 or $1,112.50, depending upon whether LCM is applied to individual items or the
inventory as a whole.
D. $1,112.50.
E. $1,180.00 or $1,075.00, depending upon whether LCM is applied to individual items or to
the inventory as a whole.
106. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it
purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic
inventory method, what is the cost of the 12 units that were sold?
A. $120
B. $124
C. $128
D. $130
E. $140
107. A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, it
purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On
August 15, it sold 30 units. Using the FIFO periodic inventory method, what is the value of
the inventory at August 15 after the sale?
A. $140
B. $160
C. $210
D. $380
E. $590
108. A company had inventory of 10 units at a cost of $20 each on November 1. On
November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25
each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory
method, what was the cost of the 22 units sold?
A. $470
B. $490
C. $450
D. $570
E. $520
109. A company uses the periodic inventory system and had the following activity during the
current monthly period.
November 1: Beginning inventory of 100 units @ $20
November 5: Purchased 100 units @ $22
November 8: Purchased 50 units @ $23
November 16: Sold 200 units @ $45
November 19: Purchased 50 units @ $25
In a periodic inventory system, using the weighted-average inventory method, the company’s
ending inventory would be:
A. $2,000
B. $2,200
C. $2,250
D. $2,400
E. $4,400
110. A company sells a climbing kit and uses the periodic inventory system to account for its
merchandise. The beginning balance of the inventory and its transactions during January were
as follows:
January 1: Beginning balance of 18 units at $13 each
January 12: Purchased 30 units at $14 each
January 19: Sold 24 units at a selling price of $30 each
January 20: Purchased 24 units at $17 each
January 27: Sold 27 units at a selling price of $30 each
If the ending inventory is reported at $357, what inventory method was used?
A. LIFO.
B. FIFO.
C. Weighted average.
D. Specific identification.
E. Retail inventory method.
111. A company’s warehouse was destroyed by a tornado on March 15. The following
information was the only information that was salvaged:
1. Inventory, beginning: $28,000
2. Purchases for the period: $17,000
3. Sales for the period: $55,000
4. Sales returns for the period: $700
The company’s average gross profit ratio is 35%. What is the estimated cost of the lost
inventory?
A. $ 9,705.
B. $25,995.
C. $29,250.
D. $44,000.
E. $45,000.
112. A company reported the following information regarding its inventory.
Beginning inventory: cost is $70,000; retail is $130,000
Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory showed $105,000 worth of merchandise available at retail prices.
What is the cost of the ending inventory?
A. $ 48,300.
B. $ 56,700.
C. $ 56,441.
D. $ 78,300.
E. $105,000.
113. On September 30 a company needed to estimate its ending inventory to prepare its third
quarter financial statements. The following information is available:
Beginning inventory, July 1: $4,000
Net sales: $40,000
Net purchases: $41,000
The company’s gross margin ratio is 15%. Using the gross profit method, the cost of goods
sold would be:
A. $ 4,000.
B. $ 5,000.
C. $21,000.
D. $25,000.
E. $34,000.
114. A company that has operated with a 30% average gross profit ratio for a number of years
had $100,000 in sales during the first quarter of this year. If it began the quarter with $18,000
of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated
ending inventory by the gross profit method is:
A. $30,000.
B. $21,000.
C. $20,000.
D. $18,000.
E. $27,000.
115. On December 31, a company needed to estimate its ending inventory to prepare its fourth
quarter financial statements. The following information is currently available:
Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
This company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross
profit method would be:
A. $ 4,000.
B. $ 6,000.
C. $10,000.
D. $16,000.
E. $34,000.
116. Interim statements:
A. Are required by the Congress.
B. Are necessary to achieve full disclosure about a business’s operations.
C. Are usually monthly or quarterly statements prepared for periods of less than one year.
D. Require the use of the perpetual method for inventories.
E. Cannot be prepared if the company follows the conservatism principle.
117. Jackson Company has sales of $300,000 and cost of goods available for sale of
$270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory
under the gross profit method would be:
A. $60,000
B. $180,000
C. $30,000
D. $90,000
E. Impossible to determine from the information provided.
118. Georgia Peach Company reported net sales in June of the current year of $1,000,000. At
the beginning of June, the company reported beginning inventory of $368,000. Cost of goods
purchased during June amounted to $217,500. The company reported ending inventory at the
end of June of $226,750.
The company’s gross profit rate for June of the current year was:
A. 35.9%
B. 18.8%
C. 81.2%
D. 64.1%
E. Impossible to determine from the information provided.
119. On July 24 of the current year, The Georgia Peach Company experienced a natural
disaster that destroyed the company’s entire inventory. At the beginning of July, the company
reported beginning inventory of $226,750. Inventory purchased during July (until the date of
the disaster) was $197,800. Sales for the month of July through July 24 were $642,500.
Assuming the company’s typical gross profit ratio is 50%, estimate the amount of inventory
destroyed in the natural disaster.
A. $212,275
B. $103,300
C. $217,950
D. $321,250
E. $157,788
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120. Flaxco purchases inventory from overseas and incurs the following costs: the cost of the
merchandise is $50,000, credit terms are 2/10, n/30 that apply only to the $50,000; FOB
shipping point freight charges are $1,500; insurance during transit is $500; and import duties
are $1,000. Flaxco paid within the discount period and incurred additional costs of $1,200 for
advertising and $5,000 for sales commissions. Compute the cost that should be assigned to the
inventory.
A. $50,000
B. $53,000
C. $52,000
D. $51,500
E. $53,200
121. Some companies choose to avoid assigning incidental costs of acquiring merchandise to
inventory by recording them as expenses when incurred. The argument that supports this is
called:
A. The matching principle.
B. The materiality constraint.
C. The cost principle.
D. The conservation constraint principle.
E. The lower of cost or market principle.
122. All of the following statements related to goods on consignment are true except:
A. Goods on consignment are goods provided by the owner, call the consignor.
B. A consignee sells goods for the owner.
C. The consignor continues to own the consigned goods.
D. The consignee reports the goods in its inventory until sold.
E. The consignor reports the goods in its inventory until sold.
123. When purchase costs of inventory regularly decline, which method of inventory costing
will yield the lowest gross profit and income?
A. FIFO.
B. LIFO.
C. Weighted average.
D. Specific identification.
E. Gross margin.
124. When purchase costs of inventory regularly decline, which method of inventory costing
will yield the lowest cost of goods sold?
A. FIFO.
B. LIFO.
C. Weighted average.
D. Specific identification.
E. Gross margin.
125. IFRS reporting currently does not allow which method of inventory costing?
A. Specific identification.
B. FIFO.
C. LIFO.
D. Weighted average.
E. Lower of cost or market.
126. All of the following statements regarding U.S. GAAP and IFRS are true except?
A. Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs
making up merchandise inventory.
B. For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company
owns and holds for sale.
C. Both U.S. GAAP and IFRS require companies to write down inventory when its value falls
below the cost presently recorded.
D. Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition
cost.
E. With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted
upward beyond the original cost.
127. Pettis needs to determine its year-end inventory. The warehouse contains 20,000 units, of
which 3,000 were damaged by flood and cannot be sold. Another 2,000 units were purchased
and shipped FOB shipping point, and are in transit. The company also consigns goods and has
4,000 units at a consignee’s location. How many units should Pettis include in its year-end
inventory?
A. 29,000
B. 21,000
C. 23,000
D. 19,000
E. 26,000
128. Perch Company reported the following purchases and sales for its only product. Perch
uses a perpetual inventory system. Determine the cost assigned to the ending inventory using
FIFO.
Date Activities Units Acquired at Cost Units Sold at Retail
May 1 Beginning Inventory 150 units @ $10.00
5 Purchase 220 units @ $12.00
10 Sales 140 units @ $20.00
15 Purchase 100 units @ $13.00
24 Sales 150 units @ $21.00
A. $2,260
B. $3,180
C. $1,860
D. $3,580
E. $2,100
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129. Perch Company reported the following purchases and sales for its only product. Perch
uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using
FIFO.
Date Activities Units Acquired at Cost Units Sold at Retail
May 1 Beginning Inventory 150 units @ $10.00
5 Purchase 220 units @ $12.00
10 Sales 140 units @ $20.00
15 Purchase 100 units @ $13.00
24 Sales 150 units @ $21.00
A. $2,260
B. $3,180
C. $1,860
D. $3,580
E. $2,100
130. Perch Company reported the following purchases and sales for its only product. Perch
uses a perpetual inventory system. Determine the cost assigned to ending inventory using
LIFO.
Date Activities Units Acquired at Cost Units Sold at Retail
May 1 Beginning Inventory 150 units @ $10.00
5 Purchase 220 units @ $12.00
10 Sales 140 units @ $20.00
15 Purchase 100 units @ $13.00
24 Sales 150 units @ $21.00
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A. $2,260
B. $3,180
C. $1,860
D. $3,580
E. $2,100
131. Perch Company reported the following purchases and sales for its only product. Perch
uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using
LIFO.
Date Activities Units Acquired at Cost Units Sold at Retail
May 1 Beginning Inventory 150 units @ $10.00
5 Purchase 220 units @ $12.00
10 Sales 140 units @ $20.00
15 Purchase 100 units @ $13.00
24 Sales 150 units @ $21.00
A. $2,260
B. $3,180
C. $1,860
D. $3,580
E. $2,100
132. On May 1 of the current year, Peck Company experienced a 500 year flood which
destroyed the company’s entire inventory. The company had not completed its month end
reporting for April and must estimate the amount of inventory lost. At the beginning of April,
the company reported beginning inventory of $215,450. Inventory purchased during April
(until the date of the disaster) was $192,530. Sales for the month of April were $542,500.
Assuming the company’s typical gross profit ratio is 40%, estimate the amount of inventory
destroyed in the flood.
A. $87,480
B. $134,520
C. $109,980
D. $82,480
E. $81,480
133. Use the following information for Razor Company to compute inventory turnover for