1 The higher the value assigned to ending inventory, the lower the gross margin.
a. True b. False
2 The costs included in work in process and finished goods inventories would not contain manufacturing overhead costs.
a. True b. False
3 All of the following are inventory costing methods except
a. perpetual.
b. average-cost.
c. last-in, last-out.
d. specific identification.
4 Which of the following is an inventory valuation method?
a. Periodic
b. Lower-of-cost-or-market
c. Specific identification
d. Average-cost
5 Days' inventory on hand equals 365 divided by
a. cost of goods sold.
b. goods available for sale.
c. average inventory.
d. inventory turnover.
6 The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?
a. Matching
b. Materiality
c. Cost-benefit
d. Consistency
7 Goods held on consignment are
a. included as part of no one's ending inventory.
b. never owned by the consignee.
c. kept for sale on the premises of the consignor.
d. included in the consignee's ending inventory.
8 Which of the following terms best describes the assumption made in applying the four inventory methods?
a. Physical flow
b. Goods flow
c. Cost flow
d. Asset flow
9 Use this inventory information for the month of November to answer the following question.
Assuming that a periodic inventory system is used, what is cost of goods sold on a LIFO basis?
a. $15,472
b. $15,392
c. $7,408
d. $7,328
10 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?
a. $2,800
b. $2,880
c. $5,200
d. $5,120
11 Use this information to answer the following question.
A periodic inventory system is used.
Using LIFO, cost of goods sold is
a. $4,056.
b. $1,740.
c. $4,464.
d. $1,332.
12 Use this information to answer the following question.
A periodic inventory system is used.
Cost of goods sold under FIFO is
a. $904.
b. $858.
c. $474.
d. $852.
13 In a period of rising prices, which of the following inventory methods generally results in the highest gross margin figure?
a. LIFO
b. Cannot tell without more information
c. FIFO
d. Average-cost
14 Which inventory method generally results in the most realistic ending inventory figure?
a. Whichever method produces the highest ending inventory figure
b. Average-cost
c. FIFO
d. LIFO
15 Use this inventory information for the month of September to answer the following question.
Assuming that a perpetual inventory system is used, what is ending inventory on a FIFO basis?
a. $7,696
b. More information is needed
c. $3,664
d. $3,704
16 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?
a. More information is needed
b. $5,760
c. $5,440
d. $10,240
17 Which of the following inventory methods when used for income tax purposes must also be used for reporting purposes?
a. FIFO
b. Specific identification
c. LIFO
d. Average-cost
18 Short Exercise 6-8
Given the following information about purchases and sales during the year, compute the cost to be assigned to ending inventory under each of three methods: (a) average-cost, (b) FIFO, and (c) LIFO. Assume the periodic inventory system is used.
a. Average-cost $
b. FIFO $
c. LIFO $
19 Short Exercise 6-2
Use the following figures (stated in millions of dollars) to compute the inventory turnover and the days' inventory on hand: (Round answers to one decimal place).
a. Inventory turnover _________________ times
b. Days' inventory on hand _________________ days
20 In accounting for inventory, the assumed cost flow must match the physical goods flow.
a. True b. False