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Grade 12 Accounting Midterm Prep

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Claudia Voin
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Test 6 - Chapter 6 Costing Test

Pregunta 1 de 50

1

All of the following are inventory costing methods except for

Selecciona una de las siguientes respuestas posibles:

  • specific unit cost method

  • weighted-average cost method

  • FIFO cost method

  • LIFO cost method

Explicación

Pregunta 2 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • specific identification method

  • first in, last out

  • last in, first out

  • first in, first out

Explicación

Pregunta 3 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • specific identification method

  • first in, last out

  • last in, first out

  • last in, last out

Explicación

Pregunta 4 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • market price

  • replacement cost

  • acquisition cost

  • none of the above

Explicación

Pregunta 5 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • goods

  • costs

  • resale prices

  • values

Explicación

Pregunta 6 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • the external auditors

  • Canada Revenue Agency

  • the internal auditors

  • management

Explicación

Pregunta 7 de 50

1

The primary goals of inventory management include

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 8 de 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

Selecciona una de las siguientes respuestas posibles:

  • $25

  • $35

  • $20

  • $10

Explicación

Pregunta 9 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • net sales

  • cost of goods sold

  • gross profit

  • net income

Explicación

Pregunta 10 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • the FIFO method

  • the LIFO method

  • the average cost method

  • not determinable

Explicación

Pregunta 11 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • average cost method

  • LIFO

  • FIFO

  • need more information to answer

Explicación

Pregunta 12 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • LIFO

  • FIFO

  • average cost method

  • whichever method produces the highest ending inventory figure

Explicación

Pregunta 13 de 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?

Selecciona una de las siguientes respuestas posibles:

  • LIFO

  • average cost method

  • FIFO

  • physical inventory method

Explicación

Pregunta 14 de 50

1

In periods of rising prices, LIFO will produce

Selecciona una de las siguientes respuestas posibles:

  • higher net income than FIFO

  • the same net income as FIFO

  • lower net income than FIFO

  • higher net income than average cost method

Explicación

Pregunta 15 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • tax effects

  • balance sheet effects

  • income statement effects

  • perpetual versus periodic inventory system

Explicación

Pregunta 16 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • conservatism principle

  • historical cost principle

  • materiality principle

  • economic entity principle

Explicación

Pregunta 17 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 18 de 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?

Selecciona una de las siguientes respuestas posibles:

  • understated, understated, no effect, no effect

  • understated, understated, understated, understated

  • understated, overstated, overstated, understated

  • overstated, overstated, understated, overstated

Explicación

Pregunta 19 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 20 de 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?

Selecciona una de las siguientes respuestas posibles:

  • 115 000

  • 150 000

  • 230 000

  • 300 000

Explicación

Pregunta 21 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • LIFO

  • FIFO

  • average cost

  • all of the above

Explicación

Pregunta 22 de 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

Selecciona una de las siguientes respuestas posibles:

  • 12 000

  • 10 000

  • 9 000

  • 16 000

Explicación

Pregunta 23 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 24 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • plastic storage containers

  • paper clips

  • body lotion

  • designer clothes

Explicación

Pregunta 25 de 50

1

When the LCM rule requires an inventory adjustment

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 26 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 27 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • A fish market selling fish

  • A hardware company selling drywall screws

  • A dairy company selling butter and milk

  • A semiconductor company selling microchips

Explicación

Pregunta 28 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 29 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • FIFO

  • LIFO

  • AVG Cost

  • Specific Identification

Explicación

Pregunta 30 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • FIFO

  • LIFO

  • AVG Cost

  • not determinable

Explicación

Pregunta 31 de 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)

Selecciona una de las siguientes respuestas posibles:

  • (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

Explicación

Pregunta 32 de 50

1

An overstatement of ending inventory results in an

Selecciona una de las siguientes respuestas posibles:

  • overstatement of cost of goods sold

  • overstatement of gross profit

  • overstatement of sales revenue

  • understatement of net income

Explicación

Pregunta 33 de 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?

Selecciona una de las siguientes respuestas posibles:

  • $156 000

  • $250 000

  • $269 000

  • $375 000

Explicación

Pregunta 34 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • conservatism

  • consistency

  • full disclosure

  • materiality

Explicación

Pregunta 35 de 50

1

An undiscovered inventory error usually affects:

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 36 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • balance sheet

  • income statement

  • statement of OE

  • cash flow statement

Explicación

Pregunta 37 de 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.

Selecciona una de las siguientes respuestas posibles:

  • 150

  • 200

  • 350

  • none of the above

Explicación

Pregunta 38 de 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.

Selecciona una de las siguientes respuestas posibles:

  • 200

  • 350

  • 450

  • none of the above

Explicación

Pregunta 39 de 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.

Selecciona una de las siguientes respuestas posibles:

  • 200

  • 270

  • 300

  • none of the above

Explicación

Pregunta 40 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 41 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 42 de 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?

Selecciona una de las siguientes respuestas posibles:

  • $300

  • $1 875

  • $425

  • $2 000

Explicación

Pregunta 43 de 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?

Selecciona una de las siguientes respuestas posibles:

  • $375

  • $1 955

  • $2 125

  • $345

Explicación

Pregunta 44 de 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?

Selecciona una de las siguientes respuestas posibles:

  • $300

  • $1 875

  • $425

  • $2 000

Explicación

Pregunta 45 de 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.

Selecciona una de las siguientes respuestas posibles:

  • $2 000

  • $5 000

  • $7 000

  • none of the above

Explicación

Pregunta 46 de 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:

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

Pregunta 47 de 50

1

Which inventory method generally best follows the matching rule?

Selecciona una de las siguientes respuestas posibles:

  • whichever method is used for tax purposes

  • average cost

  • FIFO

  • LIFO

Explicación

Pregunta 48 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • average cost

  • specific ID

  • FIFO

  • LIFO

Explicación

Pregunta 49 de 50

1

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

Selecciona una de las siguientes respuestas posibles:

  • specific ID method

  • retail method

  • LCM method

  • gross profit method

Explicación

Pregunta 50 de 50

1

Which of the following statement is true of inventory errors?

Selecciona una de las siguientes respuestas posibles:

  • 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

Explicación

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