95) Inventory records for Marvin Company revealed the following:
Date
Transaction
Number of
Units
Unit Cost
Mar.
1
Beginning Inventory
1,000
$
7.20
Mar.
10
Purchase
600
7.25
Mar.
16
Purchase
800
7.30
Mar.
23
Purchase
600
7.35
Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming LIFO would
be:
A) $16,800.
B) $16,760.
C) $16,540.
D) $16,660.
96) Inventory records for Marvin Company revealed the following:
Date
Transaction
Number of
Units
Unit Cost
Mar.
1
Beginning Inventory
1,000
$
7.20
Mar.
10
Purchase
600
7.25
Mar.
16
Purchase
800
7.30
Mar.
23
Purchase
600
7.35
Marvin sold 2,300 units of inventory during the month. Ending inventory assuming
weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)
A) $5,087.
B) $5,107.
C) $5,077.
D) $5,005.
97) Inventory records for Marvin Company revealed the following:
Date
Transaction
Number of
Units
Unit Cost
Mar.
1
Beginning Inventory
1,000
$
7.20
Mar.
10
Purchase
600
7.25
Mar.
16
Purchase
800
7.30
Mar.
23
Purchase
600
7.35
Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming
weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)
A) $16,733.
B) $17,408.
C) $16,713.
D) $16,089.
98) The following information pertains to Julia & Company:
March
1
Beginning inventory = 30 units @ $5
March
3
Purchased 15 units @ $4
March
9
Sold 25 units @ $8
What is the ending inventory balance for Julia & Company assuming that it uses FIFO?
A) $125.
B) $100.
C) $110.
D) $85.
99) The following information pertains to Julia & Company:
March
1
Beginning inventory = 30 units @ $5
March
3
Purchased 15 units @ $4
March
9
Sold 25 units @ $8
What is the cost of goods sold for Julia & Company assuming it uses LIFO?
A) $125.
B) $100.
C) $110.
D) $85.
100) A company has the following inventory information for the year:
January 1 Beginning inventory = 100 units @ $10
March 15 Purchased 500 units @ $12
September 20 Purchased 800 units @ $15
Total sales for the year = 1,200 units
The company reports cost of goods sold of $16,000. Which inventory cost method is the company
using?
A) FIFO.
B) LIFO.
C) Weighted-average.
D) The answer cannot be determined with the information given.
101) Consider the following inventory transactions for September:
Beginning inventory
15
units
@
$
3.00
Purchase on September 12
20
units
@
$
3.50
Purchased on September 23
10
units
@
$
4.00
For the month of September, the company sold 35 units. What is cost of goods sold under the
weighted-average cost method? (Round weighted-average unit cost to 4 decimals)
A) $121.
B) $116.
C) $124.
D) $131.
102) FIFO is considered a balance-sheet approach for reporting inventory because it:
A) Better approximates the value of ending inventory.
B) Always results in a lower amount of inventory being reported.
C) Better approximates inventory cost necessary to generate revenue.
D) Always results in a higher amount of inventory being reported.
103) Which inventory method is better described as having a balance-sheet focus and why is it
considered as such?
A) FIFO; better approximates the value of ending inventory.
B) LIFO; better approximates the value of ending inventory.
C) LIFO; better approximates inventory cost necessary to generate revenue.
D) FIFO; better approximates inventory cost necessary to generate revenue.
104) LIFO is considered an income-statement approach for reporting inventory because it:
A) Always results in a higher amount of net income being reported.
B) Better approximates the value of ending inventory.
C) Better approximates inventory cost necessary to generate revenue.
D) Always results in a lower amount of net income being reported.
105) Which inventory method is better described as having an income-statement focus and why is
it considered as such?
A) FIFO; better approximates the value of ending inventory.
B) LIFO; better approximates the value of ending inventory.
C) LIFO; better approximates inventory cost necessary to generate revenue.
D) FIFO; better approximates inventory cost necessary to generate revenue.
106) Which inventory cost flow assumption more realistically matches the current cost of
inventory with current sales revenue?
A) FIFO.
B) LIFO.
C) Weighted-average.
D) Lower of cost and net realizable value.
107) The choice of inventory cost flow assumptions affects which of the following amounts?
A) Inventory.
B) Cost of goods sold.
C) Gross profit.
D) All of the other answers are affected by the inventory cost flow assumption.
108) In a period when inventory costs are rising, the inventory method that most likely results in
the highest ending inventory is:
A) Lower of cost and net realizable value.
B) Weighted-average cost.
C) FIFO.
D) LIFO.
109) In a period when inventory costs are falling, the lowest taxable income is most likely reported
by using the inventory method of:
A) Weighted-average.
B) LIFO.
C) Moving-average.
D) FIFO.
110) Which of the following is true regarding LIFO and FIFO?
A) In a period of decreasing costs, LIFO results in lower total assets than FIFO.
B) In a period of decreasing costs, LIFO results in lower net income than FIFO.
C) In a period of rising costs, LIFO results in lower net income than FIFO.
D) The amount reported for COGS is based on net realizable value of inventory if LIFO is used.
111) During periods when inventory costs are rising, cost of goods sold will most likely be:
A) Higher under FIFO than LIFO.
B) Higher under FIFO than average cost.
C) Lower under average cost than LIFO.
D) Lower under LIFO than FIFO.
112) In a period of rising costs, which inventory valuation method would a company likely choose
if they want to have the highest possible balance of inventory on the balance sheet?
A) Weighted-average cost.
B) FIFO.
C) LIFO.
D) Straight-line.
113) During periods when inventory costs are rising, ending inventory will most likely be:
A) Greater under LIFO than FIFO.
B) Less under average cost than LIFO.
C) Greater under average cost than FIFO.
D) Greater under FIFO than LIFO.
114) The LIFO conformity rule states that if LIFO is used for:
A) One class of inventory, it must be used for all classes of inventory.
B) Tax purposes, it must be used for financial reporting.
C) One company in an affiliated group, it must be used by all companies in an affiliated group.
D) Domestic companies, it must be used by foreign partners.
115) The primary reason for the popularity of LIFO is that it gives:
A) Better matching of physical flow and cost flow.
B) A lower income tax obligation when inventory costs are rising.
C) Simplified recordkeeping.
D) A simpler method to apply.
116) Which of the following is true concerning inventory cost flow assumptions?
A) LIFO produces higher net income than FIFO in a period of rising costs.
B) FIFO is an income-statement focus.
C) LIFO is a balance-sheet focus.
D) None of the other answers are true.
117) Which of the following is incorrect regarding LIFO and FIFO?
A) In a period of decreasing costs, FIFO will result in lower total assets than LIFO.
B) In a period of increasing costs, net income will be greater under FIFO than LIFO.
C) In a period of increasing costs, assets will be greater under LIFO than FIFO.
D) In a period of decreasing costs, LIFO will result in greater net income than FIFO.
118) Which inventory cost flow assumption generally results in the highest reported amount for
cost of goods sold when inventory costs are falling?
A) FIFO.
B) LIFO.
C) Weighted-average cost.
D) Straight-line.
119) The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is
referred to as the:
A) FIFO adjustment.
B) Inventory allowance.
C) LIFO reserve.
D) Net realizable value.
120) A company uses LIFO and reports ending inventory of $220,000. The company calculates its
LIFO reserve to be $70,000. For what amount would the company report ending inventory if it
instead had used FIFO?
A) $220,000.
B) $150,000.
C) $290,000.
D) $255,000.
121) A company uses FIFO for internal recordkeeping but LIFO for reporting ending inventory.
Ending inventory under FIFO is $80,000, and ending inventory under LIFO is $60,000. What is
the company’s LIFO reserve?
A) $20,000.
B) $60,000.
C) $80,000.
D) $140,000.
122) Which of the following considerations may influence a manager’s choice of the inventory
cost flow assumption for a company that experiences rising prices?
A) Compensation/bonus tied to reported income.
B) Meeting earnings targets.
C) Increase stock prices.
D) All of the other answers are considerations for the choice of inventory cost flow assumptions.
123) Which of the following accurately describes a company’s choice of inventory cost method?
A) A company can choose which inventory method it prefers, even if the method does not match
the actual physical flow of goods.
B) Once a company chooses a method, it is not allowed to frequently change to another one.
C) A company need not use the same method for all of its inventory.
D) All of the other answers are correct.
124) A perpetual inventory system measures cost of goods sold by:
A) Estimating the amount of inventory sold.
B) Making entries to the inventory account for each purchase and sale.
C) Counting inventory at the end of the period.
D) Debiting cost of goods sold for all purchases of inventory.
125) Using a perpetual inventory system, the purchase of inventory on account is recorded with a:
A) Debit to Inventory.
B) Debit to Cost of Goods Sold.
C) Debit to Accounts Payable.
D) Credit to Sales Revenue.
126) Using a perpetual inventory system, the sale of inventory on account is recorded with a:
A) Debit to Cost of Goods Sold.
B) Credit to Inventory.
C) Credit to Sales Revenue.
D) All of the other answers are recorded with the sale of inventory on account.
127) Beginning inventory is $142,000. During the period, a company has three purchases of
inventory with a cost of $75,000, $80,000, and $56,000. Also during the period, inventory with a
cost of $190,000 was sold to customers for $260,000. What is the ending balance of inventory?
A) $163,000.
B) $21,000.
C) $93,000.
D) $353,000.
128) Below is a T-account for inventory.
Inventory
Jan 1.
25,000
Mar. 25
58,000
62,000
Apr. 24
Sep. 30
72,000
69,000
Oct. 5
?
Which of the following is true?
A) Inventory sold during the year had a cost of $131,000.
B) The ending balance of inventory is $24,000.
C) Inventory purchases during the year had a cost of $130,000.
D) All of the other answer choices are correct.
129) In the first year of a company’s operations, it uses FIFO for internal recordkeeping but LIFO
for reporting ending inventory. Ending inventory under FIFO is $90,000, and ending inventory
under LIFO is $80,000. The company’s year-end LIFO adjustment would include:
A) A debit to inventory for $10,000.
B) A debit to cost of goods sold for $10,000.
C) A debit to inventory for $80,000.
D) A credit to cost of goods sold for $10,000.
130) Using a perpetual inventory system, the entry to record the return of inventory previously
purchased on account includes a:
A) Debit to Cost of Goods Sold.
B) Debit to Inventory.
C) Debit to Accounts Payable.
D) Credit to Sales Returns.
131) On May 1, a company purchased inventory costing $2,000 on account with terms 2/10, n/30.
On May 18, the company pays for this inventory and records which of the following using a
perpetual inventory system?
1.
Accounts Payable
2,000
Cash
2,000
2.
Accounts Payable
1,960
Inventory
40
Cash
2,000
3.
Accounts Payable
2,000
Inventory
40
Cash
1,960
4.
Cash
2,000
Accounts Payable
2,000
A) Option 1
B) Option 2
C) Option 3
D) Option 4
132) On May 1, a company purchased inventory costing $2,000 on account with terms 2/10, n/30.
On May 8, the company pays for this inventory and records which of the following using a
perpetual inventory system?
1.
Accounts Payable
2,000
Cash
2,000
2.
Accounts Payable
1,960
Inventory
40
Cash
2,000
3.
Accounts Payable
2,000
Inventory
40
Cash
1,960
4.
Cash
2,000
Accounts Payable
2,000
A) Option 1
B) Option 2
C) Option 3
D) Option 4
133) Danton Hardware Company uses a perpetual inventory system. How should Danton record
the return of inventory previously purchased on account for $200?
1.
Inventory
200
Accounts Payable
200
2.
Accounts Payable
200
Inventory
200
3.
Purchase Returns
200
Accounts Payable
200
4.
Accounts Payable
200
Purchase Returns
200
A) Option 1
B) Option 2
C) Option 3
D) Option 4
134) In a perpetual inventory system, the purchase of inventory is debited to:
A) Purchases.
B) Cost of Goods Sold.
C) Inventory.
D) Accounts Payable.
60
135) In a perpetual inventory system, the entry at the time of a sale to record the cost of the
inventory sold includes a:
A) Debit to Accounts Receivable.
B) Credit to Cost of Goods Sold.
C) Debit to Cost of Goods Sold.
D) Not recorded at the time of the sale.
136) A company sold inventory for $1,200 that was purchased for $700. The company records
which of the following when it sells the inventory using a perpetual inventory system?
A) No entry is required for cost of goods sold and inventory.
B) Debit Cost of Goods Sold $700; credit Inventory $700.
C) Debit Cost of Goods Sold $1,200; credit Inventory $1,200.
D) Debit Inventory $700; credit Cost of Goods Sold $700.