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Test 6 - Chapter 6 Costing Test

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Grade 12 Accounting Midterm Prep
Claudia Voin
Quiz por Claudia Voin, atualizado more than 1 year ago
Claudia Voin
Criado por Claudia Voin mais de 9 anos atrás
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Resumo de Recurso

Questão 1

Questão
All of the following are inventory costing methods except for
Responda
  • specific unit cost method
  • weighted-average cost method
  • FIFO cost method
  • LIFO cost method

Questão 2

Questão
This method of accounting for inventory assumes that the units acquired earliest are sold or used first
Responda
  • specific identification method
  • first in, last out
  • last in, first out
  • first in, first out

Questão 3

Questão
This method of accounting for inventory assumes that the units acquired most recently are sold or used first
Responda
  • specific identification method
  • first in, last out
  • last in, first out
  • last in, last out

Questão 4

Questão
The cost at which an inventory item could be acquired today is the
Responda
  • market price
  • replacement cost
  • acquisition cost
  • none of the above

Questão 5

Questão
Inventory costing methods place primary reliance on assumptions about the flow of
Responda
  • goods
  • costs
  • resale prices
  • values

Questão 6

Questão
The selection of an appropriate inventory cost flow assumption for an individual company is made by
Responda
  • the external auditors
  • Canada Revenue Agency
  • the internal auditors
  • management

Questão 7

Questão
The primary goals of inventory management include
Responda
  • 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

Questão 8

Questão
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
Responda
  • $25
  • $35
  • $20
  • $10

Questão 9

Questão
Which of the following would not be affected by the choice of costing methods?
Responda
  • net sales
  • cost of goods sold
  • gross profit
  • net income

Questão 10

Questão
In periods of rising prices, the inventory method which results in the highest gross profit is
Responda
  • the FIFO method
  • the LIFO method
  • the average cost method
  • not determinable

Questão 11

Questão
In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?
Responda
  • average cost method
  • LIFO
  • FIFO
  • need more information to answer

Questão 12

Questão
Which inventory method generally results in cost allocated to ending inventory that will approximate their current cost?
Responda
  • LIFO
  • FIFO
  • average cost method
  • whichever method produces the highest ending inventory figure

Questão 13

Questão
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?
Responda
  • LIFO
  • average cost method
  • FIFO
  • physical inventory method

Questão 14

Questão
In periods of rising prices, LIFO will produce
Responda
  • higher net income than FIFO
  • the same net income as FIFO
  • lower net income than FIFO
  • higher net income than average cost method

Questão 15

Questão
Considerations that affect the selection of an inventory costing method do not include:
Responda
  • tax effects
  • balance sheet effects
  • income statement effects
  • perpetual versus periodic inventory system

Questão 16

Questão
The LCM rule for inventory is an example of the application of
Responda
  • conservatism principle
  • historical cost principle
  • materiality principle
  • economic entity principle

Questão 17

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

Questão 18

Questão
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?
Responda
  • understated, understated, no effect, no effect
  • understated, understated, understated, understated
  • understated, overstated, overstated, understated
  • overstated, overstated, understated, overstated

Questão 19

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

Questão 20

Questão
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?
Responda
  • 115 000
  • 150 000
  • 230 000
  • 300 000

Questão 21

Questão
Which inventory costing method generally results in the most recent costs being assigned to ending inventory?
Responda
  • LIFO
  • FIFO
  • average cost
  • all of the above

Questão 22

Questão
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
Responda
  • 12 000
  • 10 000
  • 9 000
  • 16 000

Questão 23

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

Questão 24

Questão
An adjustment to ending inventory under the LCM rule would be most likely to be recorded by a company that sells
Responda
  • plastic storage containers
  • paper clips
  • body lotion
  • designer clothes

Questão 25

Questão
When the LCM rule requires an inventory adjustment
Responda
  • 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

Questão 26

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

Questão 27

Questão
Which of the following companies would be least concerned about a low inventory ratio?
Responda
  • A fish market selling fish
  • A hardware company selling drywall screws
  • A dairy company selling butter and milk
  • A semiconductor company selling microchips

Questão 28

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

Questão 29

Questão
Which of the following inventory cost flow methods would an auto dealership most likely use for its new car sales?
Responda
  • FIFO
  • LIFO
  • AVG Cost
  • Specific Identification

Questão 30

Questão
In an inflationary environment in Canada, which inventory cost flow method will require the smallest cash payment for income taxes?
Responda
  • FIFO
  • LIFO
  • AVG Cost
  • not determinable

Questão 31

Questão
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)
Responda
  • (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

Questão 32

Questão
An overstatement of ending inventory results in an
Responda
  • overstatement of cost of goods sold
  • overstatement of gross profit
  • overstatement of sales revenue
  • understatement of net income

Questão 33

Questão
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?
Responda
  • $156 000
  • $250 000
  • $269 000
  • $375 000

Questão 34

Questão
The ? principle states that a company should use the same accounting methods and procedures from one period to the next.
Responda
  • conservatism
  • consistency
  • full disclosure
  • materiality

Questão 35

Questão
An undiscovered inventory error usually affects:
Responda
  • 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

Questão 36

Questão
When using the FIFO inventory method, the most recent inventory costs will be found on the
Responda
  • balance sheet
  • income statement
  • statement of OE
  • cash flow statement

Questão 37

Questão
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.
Responda
  • 150
  • 200
  • 350
  • none of the above

Questão 38

Questão
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.
Responda
  • 200
  • 350
  • 450
  • none of the above

Questão 39

Questão
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.
Responda
  • 200
  • 270
  • 300
  • none of the above

Questão 40

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

Questão 41

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

Questão 42

Questão
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?
Responda
  • $300
  • $1 875
  • $425
  • $2 000

Questão 43

Questão
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?
Responda
  • $375
  • $1 955
  • $2 125
  • $345

Questão 44

Questão
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?
Responda
  • $300
  • $1 875
  • $425
  • $2 000

Questão 45

Questão
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.
Responda
  • $2 000
  • $5 000
  • $7 000
  • none of the above

Questão 46

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

Questão 47

Questão
Which inventory method generally best follows the matching rule?
Responda
  • whichever method is used for tax purposes
  • average cost
  • FIFO
  • LIFO

Questão 48

Questão
During periods of declining prices, which inventory method probably will result in the lowest ending inventory?
Responda
  • average cost
  • specific ID
  • FIFO
  • LIFO

Questão 49

Questão
Insurance companies often verify the extent of inventory lost or destroyed by applying the
Responda
  • specific ID method
  • retail method
  • LCM method
  • gross profit method

Questão 50

Questão
Which of the following statement is true of inventory errors?
Responda
  • 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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