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Grade 12 Accounting Midterm Prep

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Test 6 - Chapter 6 Costing Test

Frage 1 von 50

1

All of the following are inventory costing methods except for

Wähle eine der folgenden:

  • specific unit cost method

  • weighted-average cost method

  • FIFO cost method

  • LIFO cost method

Erklärung

Frage 2 von 50

1

This method of accounting for inventory assumes that the units acquired earliest are sold or used first

Wähle eine der folgenden:

  • specific identification method

  • first in, last out

  • last in, first out

  • first in, first out

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Frage 3 von 50

1

This method of accounting for inventory assumes that the units acquired most recently are sold or used first

Wähle eine der folgenden:

  • specific identification method

  • first in, last out

  • last in, first out

  • last in, last out

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Frage 4 von 50

1

The cost at which an inventory item could be acquired today is the

Wähle eine der folgenden:

  • market price

  • replacement cost

  • acquisition cost

  • none of the above

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Frage 5 von 50

1

Inventory costing methods place primary reliance on assumptions about the flow of

Wähle eine der folgenden:

  • goods

  • costs

  • resale prices

  • values

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Frage 6 von 50

1

The selection of an appropriate inventory cost flow assumption for an individual company is made by

Wähle eine der folgenden:

  • the external auditors

  • Canada Revenue Agency

  • the internal auditors

  • management

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Frage 7 von 50

1

The primary goals of inventory management include

Wähle eine der folgenden:

  • maintaining a sufficient quantity of inventory to keep customers satisfied

  • maintaining a sufficient quality of inventory to keep customers satisfied

  • minimizing the costs associated with maintaining inventories

  • all of the above

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Frage 8 von 50

1

A company just starting in business purchased three inventory items at the following prices: first purchase, $80; second purchase, $95; third purchase, $85. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

Wähle eine der folgenden:

  • $25

  • $35

  • $20

  • $10

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Frage 9 von 50

1

Which of the following would not be affected by the choice of costing methods?

Wähle eine der folgenden:

  • net sales

  • cost of goods sold

  • gross profit

  • net income

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Frage 10 von 50

1

In periods of rising prices, the inventory method which results in the highest gross profit is

Wähle eine der folgenden:

  • the FIFO method

  • the LIFO method

  • the average cost method

  • not determinable

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Frage 11 von 50

1

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Wähle eine der folgenden:

  • average cost method

  • LIFO

  • FIFO

  • need more information to answer

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Frage 12 von 50

1

Which inventory method generally results in cost allocated to ending inventory that will approximate their current cost?

Wähle eine der folgenden:

  • LIFO

  • FIFO

  • average cost method

  • whichever method produces the highest ending inventory figure

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Frage 13 von 50

1

The managers of Sera Company receive performance bonuses based on the net profit of the firm. Which inventory costing method are they likely to favour in periods of declining prices?

Wähle eine der folgenden:

  • LIFO

  • average cost method

  • FIFO

  • physical inventory method

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Frage 14 von 50

1

In periods of rising prices, LIFO will produce

Wähle eine der folgenden:

  • higher net income than FIFO

  • the same net income as FIFO

  • lower net income than FIFO

  • higher net income than average cost method

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Frage 15 von 50

1

Considerations that affect the selection of an inventory costing method do not include:

Wähle eine der folgenden:

  • tax effects

  • balance sheet effects

  • income statement effects

  • perpetual versus periodic inventory system

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Frage 16 von 50

1

The LCM rule for inventory is an example of the application of

Wähle eine der folgenden:

  • conservatism principle

  • historical cost principle

  • materiality principle

  • economic entity principle

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Frage 17 von 50

1

Which of these would cause the inventory turnover ratio to increase the most

Wähle eine der folgenden:

  • increasing the amount of inventory on hand

  • keeping the amount of inventory on hand constant but increasing sales

  • keeping the amount of inventory on hand constant but decreases sales

  • decreasing the amount of inventory on hand but increasing sales

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Frage 18 von 50

1

Wonder Corp. failed to record the purchase of merchandise on account. As a result, ending inventory was understated. What is the effect of these errors on assets, liabilities, capital, and net income, respectively?

Wähle eine der folgenden:

  • understated, understated, no effect, no effect

  • understated, understated, understated, understated

  • understated, overstated, overstated, understated

  • overstated, overstated, understated, overstated

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Frage 19 von 50

1

The specific ID method would probably be most appropriate for which of the following goods?

Wähle eine der folgenden:

  • boxes of brass 4-inch drywall screws at Home Depot

  • bottles of suntan lotion in Wal-Mart's central warehouse

  • sets of tires at the Goodyear plant

  • diamond necklaces at a Tiffany's & Co. jewelry store

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Frage 20 von 50

1

Gerber Department Store utilizes the retail inventory method. Gerber's beginning inventory cost $140 000 and retailed for $280 000. Purchases for the period amounted to $390 000 and were priced to sell at twice that amount. Sales for the period, at retail, were $600 000. How much is the cost of ending inventory?

Wähle eine der folgenden:

  • 115 000

  • 150 000

  • 230 000

  • 300 000

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Frage 21 von 50

1

Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Wähle eine der folgenden:

  • LIFO

  • FIFO

  • average cost

  • all of the above

Erklärung

Frage 22 von 50

1

The 2014 records of Thompson Co. showed beginning inventory, $6 000; cost of goods sold, $14 000; and ending inventory, $8 000. The cost of purchases for 2014 was

Wähle eine der folgenden:

  • 12 000

  • 10 000

  • 9 000

  • 16 000

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Frage 23 von 50

1

Which of the following statements is true with regards to all inventory costing methods?

Wähle eine der folgenden:

  • The ending inventory balance and cost of goods sold move in the same direction

  • The ending inventory balance and cost of total assets move in the opposite direction

  • The ending inventory balance and net income move in the same direction

  • all of the above

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Frage 24 von 50

1

An adjustment to ending inventory under the LCM rule would be most likely to be recorded by a company that sells

Wähle eine der folgenden:

  • plastic storage containers

  • paper clips

  • body lotion

  • designer clothes

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Frage 25 von 50

1

When the LCM rule requires an inventory adjustment

Wähle eine der folgenden:

  • the adjustment usually, but not always, reduces the book value of inventory

  • the write off is usually reported as a selling expense or part of cost of goods sold

  • the inventory adjustment is recorded in a contra-revenue account called sales allowances

  • all of the above

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Frage 26 von 50

1

A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory buildup is occurring because

Wähle eine der folgenden:

  • goods are not selling as fast as anticipated

  • the company is expecting to sell more in the future

  • goods are selling, but it is taking longer to collect payment

  • goods cannot be shipped fast enough

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Frage 27 von 50

1

Which of the following companies would be least concerned about a low inventory ratio?

Wähle eine der folgenden:

  • A fish market selling fish

  • A hardware company selling drywall screws

  • A dairy company selling butter and milk

  • A semiconductor company selling microchips

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Frage 28 von 50

1

Because LIFO uses older costs for inventory, in times of rising prices:

Wähle eine der folgenden:

  • LIFO results in a higher book value of inventory and lower inventory turnover ratio than FIFO

  • LIFO results in a lower book value of inventory and a lower inventory turnover ratio than FIFO

  • LIFO results in a higher book value of inventory and a higher inventory turnover ratio than FIFO

  • LIFO results in a lower book value of inventory and a higher inventory turnover ratio than FIFO

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Frage 29 von 50

1

Which of the following inventory cost flow methods would an auto dealership most likely use for its new car sales?

Wähle eine der folgenden:

  • FIFO

  • LIFO

  • AVG Cost

  • Specific Identification

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Frage 30 von 50

1

In an inflationary environment in Canada, which inventory cost flow method will require the smallest cash payment for income taxes?

Wähle eine der folgenden:

  • FIFO

  • LIFO

  • AVG Cost

  • not determinable

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Frage 31 von 50

1

Carrington Company applies the LCM rule to each individual item in its ending inventory. The company determines that it must write down its inventory by $4 000. Which of the following answers reflects how this would effect the statements? (Assets = Liabilities + Equity; Revenue - Expenses = Net Income)

Wähle eine der folgenden:

  • (4 000) = n/a + (4 000); n/a - 4 000 = (4 000)

  • (4 000) = 4 000 + n/a; n/a - 4 000 = (4 000)

  • (4 000) = n/a + (4 000); n/a - n/a = n/a

  • 4 000 = n/a + 4 000; 4 000 - n/a = 4 000

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Frage 32 von 50

1

An overstatement of ending inventory results in an

Wähle eine der folgenden:

  • overstatement of cost of goods sold

  • overstatement of gross profit

  • overstatement of sales revenue

  • understatement of net income

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Frage 33 von 50

1

The following info is from the 2014 accounting records of Odom Company: Sales Revenue = $625 000; Beginning Inventory = $254 000; Purchases = $366 000; Historical Gross Profit Margin = 40%
What is the estimated gross profit?

Wähle eine der folgenden:

  • $156 000

  • $250 000

  • $269 000

  • $375 000

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Frage 34 von 50

1

The ? principle states that a company should use the same accounting methods and procedures from one period to the next.

Wähle eine der folgenden:

  • conservatism

  • consistency

  • full disclosure

  • materiality

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Frage 35 von 50

1

An undiscovered inventory error usually affects:

Wähle eine der folgenden:

  • two reporting periods

  • the balance sheet of the first period but not the balance sheet of the second period

  • the income statements of both periods

  • all of the above are true

Erklärung

Frage 36 von 50

1

When using the FIFO inventory method, the most recent inventory costs will be found on the

Wähle eine der folgenden:

  • balance sheet

  • income statement

  • statement of OE

  • cash flow statement

Erklärung

Frage 37 von 50

1

Use the following info for this question: Beginning Inventory: 10 units, $10 each; January 20 Purchase: 10 units, $20 each; January 30 Purchase: 5 units, $30 each. 15 of the 25 are sold. Calculate cost of goods sold using FIFO.

Wähle eine der folgenden:

  • 150

  • 200

  • 350

  • none of the above

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Frage 38 von 50

1

Use the following info for this question: Beginning Inventory: 10 units, $10 each; January 20 Purchase: 10 units, $20 each; January 30 Purchase: 5 units, $30 each. 15 of the 25 are sold. Calculate cost of goods sold using LIFO.

Wähle eine der folgenden:

  • 200

  • 350

  • 450

  • none of the above

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Frage 39 von 50

1

Use the following info for this question: Beginning Inventory: 10 units, $10 each; January 20 Purchase: 10 units, $20 each; January 30 Purchase: 5 units, $30 each. 15 of the 25 are sold. Calculate cost of goods sold using average cost.

Wähle eine der folgenden:

  • 200

  • 270

  • 300

  • none of the above

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Frage 40 von 50

1

In a period of rising prices, all of the following statements are true regarding LIFO except:

Wähle eine der folgenden:

  • most recent inventory costs are allocated to cost of goods sold

  • ending inventory is generally undervalued

  • the ending inventory figure represents replacement value

  • all of the above are true

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Frage 41 von 50

1

In a period of falling prices, all of the following statements are true regarding FIFO except:

Wähle eine der folgenden:

  • the units purchased earlier in the period are allocated to cost of goods sold

  • the lower priced units are allocated to ending inventory

  • the ending inventory figure represents replacement value

  • net income is generally higher

Erklärung

Frage 42 von 50

1

Use the following information:
May 1 Beginning Inventory: 50 units @ $20
May 7 Purchases: 40 units @ $25
May 18 Sales: 60 units
May 22 Purchases: 10 units @ $30
May 29 Sales: 25 units
What is the ending inventory using the LIFO method?

Wähle eine der folgenden:

  • $300

  • $1 875

  • $425

  • $2 000

Erklärung

Frage 43 von 50

1

Use the following information:
May 1 Beginning Inventory: 50 units @ $20
May 7 Purchases: 40 units @ $25
May 18 Sales: 60 units
May 22 Purchases: 10 units @ $30
May 29 Sales: 25 units
What is the ending inventory using the AVG cost method?

Wähle eine der folgenden:

  • $375

  • $1 955

  • $2 125

  • $345

Erklärung

Frage 44 von 50

1

Use the following information:
May 1 Beginning Inventory: 50 units @ $20
May 7 Purchases: 40 units @ $25
May 18 Sales: 60 units
May 22 Purchases: 10 units @ $30
May 29 Sales: 25 units
What is the ending inventory using the FIFO method?

Wähle eine der folgenden:

  • $300

  • $1 875

  • $425

  • $2 000

Erklärung

Frage 45 von 50

1

Use the following info to compute gross profit. Sales price of merchandise sold to customers is $10 000, beginning inventory $1 000, inventory purchases $4 000, and cost of goods sold $3 000.

Wähle eine der folgenden:

  • $2 000

  • $5 000

  • $7 000

  • none of the above

Erklärung

Frage 46 von 50

1

Errors may arise in the process of counting inventory. Assume some inventory is accidentally counted twice. All of the following statements are true except:

Wähle eine der folgenden:

  • this accounting period's cost of goods sold will be overstated

  • this accounting period's net income will be overstated

  • next accounting period's net income will be understated

  • next accounting period's ending OE will be correct

Erklärung

Frage 47 von 50

1

Which inventory method generally best follows the matching rule?

Wähle eine der folgenden:

  • whichever method is used for tax purposes

  • average cost

  • FIFO

  • LIFO

Erklärung

Frage 48 von 50

1

During periods of declining prices, which inventory method probably will result in the lowest ending inventory?

Wähle eine der folgenden:

  • average cost

  • specific ID

  • FIFO

  • LIFO

Erklärung

Frage 49 von 50

1

Insurance companies often verify the extent of inventory lost or destroyed by applying the

Wähle eine der folgenden:

  • specific ID method

  • retail method

  • LCM method

  • gross profit method

Erklärung

Frage 50 von 50

1

Which of the following statement is true of inventory errors?

Wähle eine der folgenden:

  • if the error counterbalances, it does not have to be disclosed

  • a counterbalancing error impacts on two income statements and one balance sheet

  • a counterbalancing error impacts on two balance sheets and one income statement

  • none of the above are true

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