Question 1 The following information applied to Frack Inc. for year 2:
Merchandise purchased for resale $400,000
Freight-in 10,000
Freight-out 5,000
Purchase returns 2,000
Frack's year 2 inventoriable cost was
a. $408,000
b. $404,000
c. $413,000
d. $400,000
Question 2 On December 28, year 2, Frack ManufacturingCo. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale
and delivery of the goods were as follows:
Packaging for shipment $1,000
Shipping 1,500
Special handling charges 2,000
These goods were received on December 31, year 2. In Frack's December 31, year 2 balance sheet, what amount of cost for these goods should be included in
inventory?
a. $53,500
b. $54,500
c. $52,000
d. $50,000
Question 3 The following information was taken fromFrack Co.'s accounting records for the year ended December 31, year 2:
Decrease in raw materials
inventory
$ 15,000
Increase in finished goods
inventory
35,000
Raw material purchased 430,000
Direct labor payroll 200,000
Factory overhead 300,000
Freight-out 45,000
There was no work in process inventory at the beginning or end of the year. Frack's year 2 cost of goods sold is
a. $950,000
b. $895,000
c. $955,000
d. $910,000
Question 4 How should the following costs affect a retailer's inventory?
a. Freight-in Interest on inventory loan No effect Increase
b. Freight-in Interest on inventory loan No effect No effect
c. Freight-in Interest on inventory loan Increase No effect
d. Freight-in Interest on inventory loan Increase Increase
Question 5 When allocating costs to inventory produced for the period, fixed overhead should be based upon
a. The actual amounts of goods produced during the period.
b. The highest production levels in the last three periods.
c. The lowest production level in the last three periods.
d. The normal capacity of production facilities.
Question 6 Flip Co. recorded the following inventory information during the month of January:
Units Unit cost Total cost Units on hand
Balance on 1/1 2,000 $1 $2,000 2,000
Purchased on 1/8 1,200 3 3,600 3,200
Sold on 1/23 1,800 1,400
Purchased on 1/28 800 5 4,000 2,200
Flip uses the LIFOmethod to cost inventory.What amount should Flip report as inventory on January 31 under each of the following methods of recording inventory?
A. Perpetual Periodic
$2,600 $2,600
b. Perpetual Periodic
$2,600 $5,400
c. Perpetual Periodic
$5,400 $2,600
d. Perpetual Periodic
$5,400 $5,400
Question 7 The weighted-average for the year inventory cost flow method is applicable to which of the following inventory systems?
a. Periodic Perpetual
No No
b. Periodic Perpetual
Yes Yes
c. Periodic Perpetual
No Yes
d. Periodic Perpetual
Yes No
Question 8 During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1/Y2 1,000 $1 $1,000 1,000
Purchased on1/7/Y2 600 3 1,800 1,600
Sold on 1/20/Y2 900
700
Purchased on1/25/Y2 400 5 2,000 1,100
Under the moving-average method, what amount should Flip report as inventory at January 31, year 2?
a. $3,900
b. $2,640
c. $3,300
d. $3,225
Question 9 Based on a physical inventory taken on December 31, year 2, Flip Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Flip
estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Flip's normal profit margin is 10%of sales. Under the lower
of cost or market rule, what amount should Flip report as chocolate inventory in its December 31, year 2 balance sheet?
a. $24,000
b. $26,000
c. $20,000
d. $28,000
Question 10 Reporting inventory at the lower of cost or market is a departure fromthe accounting principle of
a. Full disclosure
b. Conservatism
c. Consistency
d. Historical cost
Question 11 Flip Company had 150 units of product A on hand at January 1, year 2, costing $21 each. Purchases of productA during the month of January were as follows:
Units Unit cost
Jan.10 200 $22
18 250 23
28 100 24
A physical count on January 31, year 2, shows 250 units of product A on hand. The cost of the inventory at January 31, year 2, under the LIFO method is?
A. $5,850
B. $5,350
C. $5,250
D. $5,550
Question 12 During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1/Y2 1,000 $1 $1,000 1,000
Purchased on 1/7/Y2 600 3 1,800 1,600
Sold on 1/20/Y2 900 700
Purchased on1/25/Y2 400 5 2,000 1,100
Under the LIFO method, what amount should Flip report as inventory at January 31, year 2?
a. $1,300
b. $4,100
c. $3,900
d. $2,700
Question 13 A company decided to change its inventory valuation method fromFIFOto LIFO in a period of rising prices. What was the result of the change on ending inventory and net income inthe year of the change?
a. Ending Inventory Net Income
Increase Decrease
b. Ending Inventory Net Income
Increase Increase
c. Ending Inventory Net Income
Decrease Increase
d. Ending Inventory Net Income
Decrease Decrease
Question 14 Generally, which inventory costing method approximates most closely the current cost for each of the following?
a. Cost of Goods Sold Ending Inventory
LIFO LIFO
b.Cost of Goods Sold Ending Inventory
LIFO FIFO
c. Cost of Goods Sold Ending Inventory
FIFO FIFO
d. Cost of Goods Sold Ending Inventory
FIFO LIFO
Question 15 Flip Wholesalers stocks a changing variety of products.Which inventory costing method will be most likely to give Flip the lowest ending inventory when its product lines are subject
to specific price increases
a. Weighted-average.
b. Fifo periodic
c. Dollar-value LIFO.
d. Specific identification.
Question 16 Flip Company's accounting records indicated the following information:
Inventory, 1/1/Y2 $ 500,000
Purchases during year 2 2,500,000
Sales during year 2 3,200,000
a. $225,000
b. $175,000
c. $25,000
d. $100,000
Question 17 On July 1, year 2, Flip Development Co. purchased a tract of land for $1,200,000. Flip incurredadditional cost of $300,000 during the remainder of year 2 in preparing the land
for sale. The tract was subdivided into residential lots as follows:
Lot class Number of lots Sales price per lot
A 100 $24,000
B 100 16,000
C 200 10,000
Using the relative sales value method, what amount of costs should be allocated to the Class A lots?
a. $300,000
b. $720,000
c. $375,000
d. $600,000
Question 18
On October 20, year 2, Flip Co. consigned forty freezers to Floozy Co. for sale at $1,000 each and paid $800 in transportation costs. On December 30, year 2, Floozy reported the
of ten freezers and remitted $8,500. The remittance was net of the agreed 15%commission. What amount should Flip recognize as consignment sales revenue for year 2?
a. $ 8,500
b. $ 7,700
c. $ 10,000
d. $ 9,800