Deck 8: Inventories: Cost Measurement and Flow Assumptions

Question 1

A retail firm would normally use an inventory account titled

A)Finished Goods Inventory
B)Merchandise Inventory
C)Goods in Process Inventory
D)Raw Materials Inventory

Answer 1

B

Question 2

Exhibit 8-1 Walters Co.purchased raw materials with a catalog price of $70, 000 on March 2, 2010.Credit terms of 4/20, n/60 applied.If Walters pays for the purchase on March 18, 2010, calculate what amount is recorded for inventory on March 2, 2010, using the method given.

-
Refer to Exhibit 8-1.Walters uses a perpetual inventory system and the net price method.

A)$42, 000
B)$56, 000
C)$67, 200
D)$70, 000

Answer 2

$67, 200

Question 3

Using the following letters to represent items:

P = Purchases (net)
C = Cost of goods sold
B = Beginning inventory
E = Ending inventory
Which equation is correct?

A)B - C + P = E
B)B - E = C + P
C)P - E = B + C
D)B = C - E + P

Answer 3

B - C + P = E

Question 4

Which one of the following statements is true?

A)Until goods are sold by the consignee, the consignor includes the goods in his/her inventory at cost less handling and shipping costs incurred in the delivery to the consignee.
B)When goods are sold on an installment plan, the seller retains title and continues to include them on his/her balance sheet until full payment has been received.
C)Title to goods may not pass before shipment occurs.
D)In accounting for inventory, economic substance should take precedence over legal form.

Question 5

Which of the following is not an advantage of a perpetual inventory system?

A)assists in the prevention of stockouts
B)requires less data processing effort than periodic systems
C)maintains up-to-date inventory and cost of goods sold balances
D)provides evidence of inventory shrinkage

Question 6

Exhibit 8-2 Walters Co.purchased raw materials with a catalog price of $70, 000 on March 2, 2010.Credit terms of 4/20, n/60 applied.Walters uses a perpetual inventory system and the net price method.

-
Refer to Exhibit 8-2.If Walters pays for the purchase on March 31, 2010, what amount is recorded in the purchase discounts lost account?

A)$ 0
B)$ 2, 800
C)$14, 000
D)$28, 000

Question 7

Exhibit 8-1 Walters Co.purchased raw materials with a catalog price of $70, 000 on March 2, 2010.Credit terms of 4/20, n/60 applied.If Walters pays for the purchase on March 18, 2010, calculate what amount is recorded for inventory on March 2, 2010, using the method given.

-
Refer to Exhibit 8-1.Walters uses a perpetual inventory system and the gross price method.

A)$42, 000
B)$56, 000
C)$67, 200
D)$70, 000

Question 8

A manufacturing company typically has how many inventory accounts?

A)1
B)2
C)3
D)4

Question 9

Black Company determined its December 31, 2010 inventory to be $1, 000, 000 based on a physical count priced at cost.It then determined the following additional information: Merchandise costing $90, 000, was shipped FOB shipping point from a vendor on December 30, 2010.This merchandise was received and recorded on January 5, 2011.
Goods costing $120, 000 were staged on the shipping dock and excluded from inventory although shipment was not made until January 4, 2011.The goods were billed to the customer FOB shipping point on December 30, 2010.
What is Black's ending inventory for its December 31, 2010 balance sheet?

A)$1, 000, 000
B)$1, 090, 000
C)$1, 120, 000
D)$1, 210, 000

Question 10

Near the end of 2010, Bruce Co.made the following purchases.The months involved in all cases are December 2010 and January 2011. $\begin{array}{llllll}&&\text { Date } & \text { Date } & \text { Date } & \text { Date } \\&&\text { Goods } & \text { Invoice } & \text { Goods } & \text { Invoice}\\\text { Amount } & \text { FOB } & \text { Shipped } & \text { Mailed } & \text { Rec'd } & \text { Rec'd }\\\$ 1,575 & \text { Destination } & 12 / 29 & 1 / 2 & 1 / 5 & 1 / 4 \\2,430 & \text { Shipping Point } & 1 / 2 & 12 / 29 & 1 / 4 & 12 / 30 \\1,890 & \text { ShippingPoint } & 12 / 28 & 1 / 2 & 1 / 3 & 1 / 4 \\2,700 & \text { Destination } & 12 / 29 & 12 / 27 & 1 / 2 & 12 / 28\end{array}$
What amount of the above purchases should be included in inventory at December 31, 2010?

A)$1, 575
B)$1, 890
C)$4, 320
D)$4, 575

Question 11

Phillips Corp.purchased raw materials with a catalog price of $60, 000.Credit terms of 3/15, n/60 apply.If Phillips uses the net price method, the purchase should be recorded at

A)$61, 800
B)$60, 000
C)$58, 200
D)$51, 000

Question 12

Exhibit 8-2 Walters Co.purchased raw materials with a catalog price of $70, 000 on March 2, 2010.Credit terms of 4/20, n/60 applied.Walters uses a perpetual inventory system and the net price method.

-
Refer to Exhibit 8-2.If Walters pays for the purchase on March 18, 2010, what amount is recorded in the purchase discounts taken account?

A)$ 0
B)$ 2, 800
C)$14, 000
D)$28, 000

Question 13

Which one of the following statements is not true?

A)A company using the periodic system does not maintain a continuous record of the physical quantities (or costs)of inventory on hand.
B)In the periodic system, the costs of acquisition of inventory are debited directly to an inventory account.
C)In the perpetual inventory system, recording in detailed subsidiary records can be in units only¾not in dollar costs.
D)When the perpetual system is used, a physical count still needs to be made periodically.

Question 14

The cost of goods sold can be determined only after a physical count of inventory on hand under the

A)perpetual inventory system
B)variable costing system
C)moving average system
D)periodic system

Question 15

Which one of the following types of costs is most likely to be included in determining the cost of inventory?

A)freight-in costs
B)freight-out costs
C)interest cost for amounts borrowed to finance the purchase of inventory
D)marketing costs

Question 16

Which one of the following types of costs should be included in the cost of a manufactured inventory?

A)abnormal spoilage
B)production supervisory salaries
C)interest costs
D)selling costs

Question 17

Which one of the following statements is true?

A)FOB destination means the buyer has legal title to the goods while they are in transit.
B)FOB shipping point means the seller has legal title to the goods while they are in transit.
C)FOB destination means the seller has legal title to the goods until they reach the buyer's place of business.
D)FOB shipping point means the buyer acquires legal title to the goods when they reach the buyer's place of business.

Question 18

A listing of the Montez Company's inventory items at the end of 2010 totals $95, 000.Included in this amount are the following items: $\text { Merchandise in transit as of } 12 / 31 / 2010 \text { purchased FOB }$
$\begin{array}{ll}\text { shipping point } & \$ 6,800 \\\text { Goods held by Montez as consignee from Nirvana } & 5,000 \\\text { Goods out on consignment, at cost plus } 50 \% \text { markup on cost } & 6,000\end{array}$
What is the dollar amount of Montez's 2010 ending inventory that should be reported on the balance sheet?

A)$83, 100
B)$86, 200
C)$87, 900
D)$88, 000

Question 19

Which one of the following statements is not true?

A)Under conditions of rising prices, the LIFO method results in lower income than the FIFO method.
B)In most cases, the FIFO method approximates the physical flow of items in inventory.
C)The LIFO method produces a higher ending inventory value than the FIFO method.
D)The FIFO method includes holding gains in income.

Question 20

A manufacturing firm would not normally have an account titled

A)Goods in Process Inventory
B)Raw Materials Inventory
C)Merchandise Inventory
D)Finished Goods Inventory

Question 21

Exhibit 8-4 RK, Inc.had the following activity for an inventory item during June:
$\begin{array}{lll}&&\text { Unit }\\&\text { Units }&\text { Cost }\\\text { Beginning inventory } & 50 & \$ 10 \\\text { Purchase (June 5) } & 10 & 16 \\\text { Purchase (June 15) } & 30 & 14 \\\text { Sale (June 20) } & 40 & \\\text { Sale (June 25) } & 20 &\\\text { Purchase (June 30) }&10& 20\end{array}$

- Refer to Exhibit 8-4.Assuming RK uses a periodic weighted average cost flow assumption, cost of goods sold for June would be

A)$512
B)$560
C)$768
D)$720

Question 22

Concerning purchase discounts, which one of the following statements is true?

A)Purchase discounts taken should be deducted from the acquisition cost of the inventory.
B)The net price method results in recording accounts payable at the maximum value of the liability that the company may be required to pay out.
C)Purchase discounts lost should be included in the cost of inventory.
D)An advantage of the gross price method is that it isolates purchase discounts lost and thus highlights inefficiencies.

Question 23

Which of the following inventory cost flow assumptions produces the same ending inventory values under both the periodic and perpetual systems?

A)FIFO
B)LIFO
C)average
D)dollar-value LIFO

Question 24

Which one of the following is not a disadvantage of the specific identification method of inventory costing?

A)It allows manipulation of profits.
B)It does not match expenses against revenues.
C)It is too expensive to use in complex manufacturing situations.
D)It is only practical where units are costly and easily distinguishable.

Question 25

La Brea, Inc.reported sales of $1, 200 in May and a gross profit of $370.The company had a May 1 inventory of 60 units that had a total cost of $300.May purchases and sales were as follows: $\begin{array}{llll}&\text { Purchases }&&\text { Sales }\\ \text { May } 7 & 40 \text { units } @ \$ 6 & \text { May } 2 & 20 \text { unit } \\10 & 20 \text { units } @ \$ 7 & 8 & 40 \text { units } \\18 & 40 \text { units } @ \$ 8 & 12 & 10 \text { unit } \\24 & 20 \text { units } @ \$ 9 & 20 & 20 \text { unit } \\28 & 20 \text { units } @ \$ 10 & 26 & 30 \text { unit }\end{array}$
La Brea, Inc., must use

A)LIFO perpetual
B)FIFO
C)weighted average
D)LIFO periodic

Question 26

Exhibit 8-3 Davilo Co.had the following inventory activity during April:
$\begin{array}{lll}&&\text { Unit }\\&\text { Units }&\text { Cost }\\\text { Beginning inventory } & 100 & \$ 8 \\\text { Purchase (Apri1 3) } & 60 & 12 \\\text { Sale (April 10) } & 80 & \\\text { Purchase (Apri1 18) } & 50 &15 \\\text { Purchase (Apri1 23) } & 80 &18 \\\text { Sale (Apri 28) } & 100 &\end{array}$

- Refer to Exhibit 8-3.Assuming Davilo uses a perpetual LIFO cost flow assumption, ending inventory at April 30 would be

A)$ 880
B)$ 920
C)$1, 090
D)$1, 890

Question 27

Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

A)FIFO and specific identification
B)LIFO and average cost
C)FIFO and average cost
D)LIFO and specific identification

Question 28

On May 1, Mikrotek, Inc.had 120 units of a certain software package that cost $6 apiece.During May, the following purchases were made: $\begin{array}{ll}\text { May 7 } & 60 \text { units @ } \$ 9.00 \\15 & 80 \text { units } @ \$ 12.00 \\21 & 140 \text { units@ } \$ 10.50\end{array}$
During May, 300 units were sold.If Mikrotek uses the weighted average method, the cost of ending inventory would be

A)$ 922.50
B)$2, 767.50
C)$ 937.50
D)$2, 182.50

Question 29

Mouton uses the moving average flow assumption.On July 1, there were 180 units on hand and the total inventory cost was $900.On July 10, 40 more units were purchased at a cost of $6 apiece.Sales included 20 units on July 3 and 60 units on July 17.What was the total cost of goods sold recorded for the units sold on July 17?

A)$728
B)$330
C)$100
D)$312

Question 30

Exhibit 8-3 Davilo Co.had the following inventory activity during April:
$\begin{array}{lll}&&\text { Units }\\& \text { Unit }&\text{cost}\\\text { Beginning inventory } & 100 & \$ 8 \\\text { Purchase (April 3) } & 60 & 12 \\\text { Sale (April 10) } & 80 & \\\text { Purchase (April 18) } & 50 & 15 \\\text { Purchase (April 23) } & 80 & 18 \\\text { Sale (April 28) } & 100 &\end{array}$


-Refer to Exhibit 8-3.Assuming Davilo uses a periodic LIFO cost flow assumption, ending inventory at April 30 would be

A)$ 880
B)$ 920
C)$1, 090
D)$1, 890

Question 31

Stabler, Inc.provided the following inventory transaction summary for January: $\begin{array}{lr}1/1&\text {Purchased 200 units@\$3.00 per unit. }\\1/15&\text { Sold 40 units. }\\1/21&\text {Purchased 300 units@\$5.00 per unit }\\1/31&\text { Purchased 40 urits@\$10.00 per unit}\\\end{array}$
In addition, it has been determined that Stabler's inventory at the beginning of the month was $400.00 (200 units).What was Stabler's cost per unit at the end of January, using the moving average method?

A)$3.00
B)$2.00
C)$4.00
D)$6.00

Question 32

Exhibit 8-3 Davilo Co.had the following inventory activity during April:
$\begin{array}{lll}&&\text { Units }\\& \text { Unit }&\text{cost}\\\text { Beginning inventory } & 100 & \$ 8 \\\text { Purchase (April 3) } & 60 & 12 \\\text { Sale (April 10) } & 80 & \\\text { Purchase (April 18) } & 50 & 15 \\\text { Purchase (April 23) } & 80 & 18 \\\text { Sale (April 28) } & 100 &\end{array}$

- Refer to Exhibit 8-3.Assuming Davilo uses a periodic FIFO cost flow assumption, ending inventory at April 30 would be

A)$ 880
B)$ 920
C)$1, 090
D)$1, 890

Question 33

Which one of the following types of costs is excluded from the cost of inventory that is routinely manufactured?

A)interest
B)raw materials
C)normal spoilage
D)insurance

Question 34

Which one of the following is not a disadvantage of the LIFO inventory cost flow assumption?

A)the impact of LIFO liquidation profits
B)failure to match the most recent costs with revenue
C)the possibility of income manipulation by management
D)impaired comparability between companies using LIFO

Question 35

The Elston Company uses a periodic inventory system.Relevant inventory information for the year follows: $\begin{array}{llr}1 / 1 & \text { Beginning inventory } & 20 \text { units@ } \$ 170 \text { per unit } \\5 / 23 & \text { Purchased } & 20 \text { units@ } \$ 125 \text { per unit} \\11 / 5 & \text { Purchased } & 400 \text { units@ } \$ 160 \text { per unit } \\11 / 18 & \text { Purchased } & 100 \text { units@ } \$ 175 \text { per unit }\end{array}$ At year-end, 50 units remain in inventory.What is the cost of the ending inventory on a LIFO basis?

A)$7, 500
B)$7, 100
C)$8, 750
D)$8, 450

Question 36

Exhibit 8-4 RK, Inc.had the following activity for an inventory item during June:
$\begin{array}{lll}&&\text { Unit }\\&\text { Units }&\text { Cost }\\\text { Beginning inventory } & 50 & \$ 10 \\\text { Purchase (June 5) } & 10 & 16 \\\text { Purchase (June 15) } & 30 & 14 \\\text { Sale (June 20) } & 40 & \\\text { Sale (June 25) } & 20 &\\\text { Purchase (June 30) }&10& 20\end{array}$

- Refer to Exhibit 8-4.Assuming RK uses a perpetual moving average cost flow assumption, ending inventory for June would be

A)$512
B)$560
C)$768
D)$720

Question 37

On July 1, Deuce Hardware, Inc.had an inventory of 300 gas grills costing $100 each.Purchases and sales during July are as follows: $\begin{array}{lll}\text {Date}&\text {Purchases}&\text {Sales}\\\text { July 3 } & & 100 @ \$ 125 \text { each } \\\text { July } 10 & 150 @ \$ 110 \text { each } \\\text { July } 17 & &150 @ \$ 130 \text { each }\\\text { July } 17 & 50 @ \$ 120 \text { each } &\end{array}$ What is the cost of Deuce's inventory on July 31 using the FIFO method?

A)$15, 000
B)$16, 000
C)$16, 500
D)$18, 000

Question 38

On June 1, Corona Company had 40 units of inventory at a cost of $6 each.June purchases and sales were as follows: $\begin{array}{llll}&\text { Purchases }&&\text { Sales }\\ \text { June } 5 & 10 \text { units } @ \$ 8 & \text { June } 4 & 20 \text { unit } \\12 & 20 \text { units } @ \$ 10 & 20 & 12 \text { unit }\\25& 10 \text { units } \$ 16\end{array}$
The cost of goods sold during June was $272.Corona must use:

A)FIFO
B)LIFO perpetual
C)weighted average
D)LIFO periodic

Question 39

Right Images Printing uses perpetual LIFO in valuing its inventory.The January 1 inventory amounted to 36 units at $6 each.Purchases and sales during January were as follows: $\begin{array}{llll}&\text { Purchases }&&\text { Sales }\\ \text { Jan. } 10 & 20 \text { units } @ \$ 8 & \text { Jan. } 5 & 10 \text { unit } \\17 & 24 \text { units } @ \$ 10 & 15 & 22 \text { unit }\end{array}$
The cost of the ending inventory was

A)$424
B)$312
C)$384
D)$336

Question 40

The purchases discounts taken account may appear in the accounting records if which one of the following methods is used to account for purchase discounts?

A)net price method
B)gross price method
C)allowance method
D)sales price method

Question 41

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar value LIFO is the

A)inventory-pool method
B)double-extension method
C)weighted-average method
D)link-chain method

Question 42

Trigger Corp.began business in 2010.On December 31, 2010, Trigger's single pool of inventory was valued at $300, 000, using the dollar-value LIFO inventory method.On December 31, 2011, the value of Trigger's inventory at current costs was $450, 000.The 2011 year-end cost index was 120.What was the value of Trigger's inventory at the end of 2011, using the dollar-value LIFO method?

A)$375, 000
B)$390, 000
C)$480, 000
D)$540, 000

Question 43

Which one of the following is an advantage of LIFO?

A)In periods of rising prices, less income taxes are paid.
B)In periods of rising prices, more holding gains are reported in net income.
C)Record keeping and financial statement preparation are easier.
D)Conservative income statements and balance sheet disclosures result from falling prices.

Question 44

Which one of the following is not an advantage of LIFO?

A)In periods of rising prices, less income taxes are paid.
B)In periods of rising prices, less holding gains are reported in net income.
C)Record keeping and financial statement preparation are easier.
D)Conservative income statements and balance sheet disclosures result from rising prices.

Question 45

Which one of the following is not an advantage of using the FIFO cost flow assumption?

A)produces lowest net income in periods of rising prices
B)provides a relevant ending inventory value
C)is not as susceptible to profit manipulation by management
D)does not produce unusual results when inventory liquidation occurs

Question 46

Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices?

A)FIFO periodic
B)LIFO periodic
C)FIFO perpetual
D)moving average

Question 47

In interim reporting, a LIFO liquidation requires the company to forecast the year-end

A)cost of goods sold
B)ending inventory
C)LIFO reserve
D)tax liability

Question 48

Maple Corp.uses dollar-value LIFO.Certain information follows: $\begin{array}{rrr}&\text { Ending Inventory- }\\\text { Year }&\text { Current Cost }&\text { Index }\\2010 & \$ 10,000 & 100 \\2011 & 11,845 & 103 \\2012 & 12,096 & 108 \\2013 & 13,090 & 110\end{array}$ Compute the ending 2013 inventory.

A)$11, 900
B)$11, 985
C)$12, 006
D)$12, 090

Question 49

Which of the following is not a disadvantage of using the FIFO cost flow assumption?

A)creates the highest outflow for income taxes during periods of rising prices
B)does not match current costs against current revenues
C)includes all the holding gains in income during periods of rising prices
D)provides a relevant ending inventory value

Question 50

Exhibit 8-5 Sully Provisions Co.switched from FIFO to LIFO on January 1, 2010, for external reporting and income tax purposes, while retaining FIFO for internal reports.On that date, the FIFO inventory equaled $360, 000.The ensuing three-year period resulted in the following:
$\begin{array}{lll}&\text { Inventory }&\text { Cost }\\\text {Date}&\text {Year-End Costs}&\text {Index}\\\text { December } 31,2010 & \$ 438,000 & 1.05 \\\text { December 31, } 2011 & 460,000 & 1.15 \\\text { December 31. } 2012 & 520,000 & 1.25\end{array}$


- Refer to Exhibit 8-5.The ending inventory at December 31, 2011, using the dollar-value LIFO method would be

A)$400, 000
B)$402, 000
C)$406, 000
D)$424, 000

Question 51

Which one of the following statements is true?

A)Income manipulation is difficult under LIFO.
B)Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.
C)Companies may use LIFO for tax purposes and FIFO in the financial statements.
D)In periods of declining prices, LIFO will result in the payment of lower income taxes.

Question 52

Which one of the following statements is false?

A)FOB shipping point means the buyer has legal title to the goods while they are in transit.
B)FOB shipping point means the buyer has legal title to the goods when they are shipped.
C)FOB destination means the seller has legal title to the goods until they reach the buyer's place of business.
D)FOB shipping point means the buyer acquires legal title to the goods when they reach the buyer's place of business.

Question 53

Titan Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices.What was the result of the change on ending inventory in the year of the change?

A)increased ending inventory
B)decreased ending inventory
C)no change in ending inventory
D)cannot determine from the information given

Question 54

A company uses a "LIFO reserve" because

A)internal reporting and GAAP reporting is not the same as tax reporting
B)internal reporting and GAAP reporting is the same as tax reporting
C)internal reporting is the same as GAAP reporting and tax reporting
D)internal reporting is not the same as GAAP reporting and tax reporting

Question 55

Which one of the following statements is true?

A)LIFO can be used with lower of cost or market.
B)On the balance sheet, LIFO reserves should be disclosed in the stockholders' equity section.
C)A change from FIFO to LIFO is disclosed as a cumulative effect change in accounting principle on the income statement.
D)Temporary LIFO liquidations can be ignored for costing purposes on interim statements.

Question 56

For the year in which the change takes place (assuming rising prices), adoption of a "just-in-time" inventory system will most likely result in a(n):

A)permanent increase in the size of the inventory
B)reduction in income taxes
C)increase in total assets
D)increase in income

Question 57

Typically, the impact of the "LIFO reserve" is to

A)increase cost of goods sold and decrease ending inventory
B)decrease cost of goods sold and decrease ending inventory
C)increase cost of goods sold and increase ending inventory
D)have no effect on cost of goods sold and ending inventory

Question 58

Exhibit 8-5 Sully Provisions Co.switched from FIFO to LIFO on January 1, 2010, for external reporting and income tax purposes, while retaining FIFO for internal reports.On that date, the FIFO inventory equaled $360, 000.The ensuing three-year period resulted in the following:
$\begin{array}{lll}&\text { Inventory }&\text { Cost }\\\text {Date}&\text {Year-End Costs}&\text {Index}\\\text { December } 31,2010 & \$ 438,000 & 1.05 \\\text { December 31, } 2011 & 460,000 & 1.15 \\\text { December 31. } 2012 & 520,000 & 1.25\end{array}$


-Refer to Exhibit 8-5.The ending inventory at December 31, 2012, using the dollar-value LIFO method would be

A)$422, 000
B)$402, 000
C)$426, 000
D)$420, 400

Question 59

Titan Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices.What was the result of the change on net income in the year of the change?

A)increased net income
B)decreased net income
C)no change in net income
D)cannot determine from the information provided

Question 60

Which of the following cannot be used as the "current cost" in dollar-value LIFO calculations?

A)the cost of the first acquisitions in a year
B)the cost of the last acquisitions in a year
C)the cost of the acquisitions in the middle of a year
D)the average cost of all acquisitions in a year

Question 61

An American company purchasing goods from a foreign supplier has to account for differences in currencies.This process is made easier

A)if sales are made in the local currency
B)if purchases are made in the local currency
C)if purchases are made in the foreign currency
D)because of the existence of exchange rates

Question 62

Cabinets-R-Us uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes.At the end of 2010, the following information was obtained from the inventory records:
$\begin{array}{lll}&2009&2010\\\text { Ending inventory, FIFO } & \$ 56,000 & \$ 66,250 \\\text { Ending inventory, LIFO } & 46,500 & 55,000\end{array}$ Required:
Prepare the necessary entry to convert to LIFO at the end of 2010.

Question 63

Management's choice to use LIFO or FIFO can make a financial analyst's efforts to compare companies difficult.The financial analyst's job is made easier because of

A)the requirement that the financial statements and tax return must use the same inventory valuation methodology
B)the fact that most companies in an industry use the specific identification method
C)the use of the weighed average method
D)the disclosure of the "LIFO reserve"

Question 64

An exchange gain occurs when the exchange rate

A)increases between the date a company records a payable from a purchase of inventory and the date of the cash payment
B)declines after the date a company pays its payable from a purchase of inventory
C)increases between the date a company records a receivable from a sale of inventory and the date of the cash payment
D)declines between the date a company records a receivable from a sale of inventory and date of the cash payment

Question 65

IFRS and GAAP are similar for all of the following inventory accounting standards except IFRS

A)do not allow the inclusion of overhead in inventory
B)have provisions for use of the LIFO cost flow assumption
C)exclude the weighted average approach to inventory valuation
D)require the same cost flow assumption for all inventories that are similar in nature and use

Question 66

Quicksilver adopted LIFO in January 1, 2010, when the inventory had a FIFO cost of $180, 000 ($10 per unit).At the end of 2010, inventory consisted of 18, 750 units at $12 per unit, and the ending inventory for 2011 consisted of 20, 000 units at $15 per unit.
Required:
a. Calculate the cost index to be used for 2010 and 2011 using the link-chain method.
b. Compute the endinginvent ory for 2010 and 2011 using dollar-value LIFO.

Question 67

The information below is provided for two inventory items held by Haskell, Inc.:
The company uses double-extension dollar-value LIFO with only one pool.
Required:
Calculate the December 31, 2010 ending inventory for Haskell using dollar-value LIFO.Round to the nearest dollar or to the nearest hundredth for decimals.

Question 68

The following information is available for Crystal Company:
$\begin{array}{lll}\text { Jan. } 1 & \text { Beginning inventory } & 15 \text { units } @ \$ 12.00 \text { each } \\\text { Jan. } 9 & \text { Purchase } & 10 \text { units } @ \$ 16.00 \text { each } \\\text { Jan. } 14 & \text { Sale } & 6 \text { units } \\\text { Jan. } 20 & \text { Purchase } & 6 \text { units } @ \$ 18.00 \text { each } \\\text { Jan } 26 & \text { Sale } & 9 \text { mits }\end{array}$
Required:
Answer the following questions for Crystal Company:
a. If FIFO is in use, what is the ending invent ory in doilars?
b. If periodic LIFO is in use, what is the cost of goods sold?
c. If moving average is in use, what is the ending inventory in dollars (round calculations to nearest cent)?
d. If weighted average is in use, what is the ending inventory in dollars (round unit cost to the nearest cent)

Question 69

On March 1, Sabine Electric bought $4, 400 of goods with terms of 3/15, n/45.
Required:
Fill in the blanks below with dollar amounts, if any are appropriate.
(Use the net method for items a.and b.below.)
a. If payment was made on March 15, you would debit Accounts Payable for $\$$$\underline{\quad\quad}$

b. If payment was made on April 3, you would debit Purchase Discounts Lost for $\$$$\underline{\quad\quad}$ (Use the gross method for c.and d.below.)
c.If payment is made on March 15 , you would credit Cash for $\$$$\underline{\quad\quad}$

d.Assuming no payment had yet been made, you would debit Purchase Discounts Lost for $\$$ $\underline{\quad\quad}$ in the adjusting entry at April 30 (fiscal vearench)

Question 70

Alabama Company (a U.S.company)purchases inventory from a Japanese company for 5, 000, 000 yen when the exchange rate is $.012.Alabama makes payment when the exchange rate is .013.When making the journal entry for payment, Alabama Company will record a

A)debit to Cash for $60, 000
B)credit to Cash for $60, 000
C)gain of $5, 000
D)loss of $5, 000

Question 71

Barber Company produces and sells only one product.The company began the year with inventory balances as follows: Raw Materials $51, 700, Goods in Process $12, 000, and Finished Goods $123, 500.During the year, the following activity occurred:
$\begin{array}{lc}\text { Raw material purchases } & \$ 32,500 \\\text { Direct labor } & 77,700 \\\text { Inclirect labor } & 38,000 \\\text { Office rent } & 24,000 \\\text { Factory rent } & 120,000 \\\text { Depreciation-Office machinery } & 15,000 \\\text { Depreciation-Equipment } & 25,000 \\\text { Applied manufacturing overhead } & 300,000 \\\text { Factory insurance } & 20,000 \\\text { Raw materials used } & 40,000 \\\text { Miscellaneous manufacturing overhead } & 94,600 \\\text { Cost of goods manufactured } & 421,000 \\\text { Cost of goods sold } & 405,800\end{array}$
Required:
Determine the ending balances for Raw Materials, Goods in Process, and Finished Goods.

Question 72

On October 17, Sedona Salon Supplies bought $42, 000 of goods with terms of 1/10, n/30.One-third of the bill was paid on October 24, and the rest of the bill was paid on October 31.
Required:
Journalize for October 24 as follows:
a. gross method of ac counting for purchase discounts
b. net method of accounting for purchase discounts

Question 73

Listed below are several terms connected with inventory valuation.Following the list is a series of descriptive statements.
Required:
Match the terms to their respective descriptive statements by placing the appropriate letter in the space provided

Question 74

On July 1, the Lavaca Company began business with the purchase of 250 units of inventory for $21, 625.During the month, Lavaca had the following inventory transactions:
$\begin{array}{ll}\text { Date }\\\text { July } 6 & \text { Purchased } 100 \text { units @ } \$ 75 \text { per unit. } \\11 & \text { Sold } 200 \text { units. } \\17 & \text { Sold 85 urits. } \\24 & \text { Purchased } 100 \text { units } @ \$ 125 \text { per unit } \\28 & \text { Purchased } 50 \text { units } @ \$ 110 \text { per unit. } \\30 & \text { Sold } 100 \text { unite }\end{array}$ Required:
Compute the cost of the inventory at the end of July under the following alternatives:
a. $\quad$ FlFO periodic
b. $\quad$ FIFO perpetual
c. $\quad$ LIFO periodic
d. $\quad$ LIFO perpetual
e. $\quad$ Weighted average (round unit costs to 2 decimal placess
f. $\quad$ Moving average (round unit costs to 2 decimal places)

Question 75

Revolution Hardware reported $300, 000 of inventory on December 31, 2010, based on a physical count.
Additional information is as follows:
Required:
Compute the correct amount of December 31, 2010, ending inventory for Revolution Hardware.

Question 76

On December 31, 2009, the current cost of the Greene Company's ending inventory was $10, 000 when the cost index was 100.On January 1, 2010, Greene adopted the dollar value LIFO method of inventory costing.Information from the company's ending inventory records is as follows:.
$\begin{array}{rll}&&\text { Ending Inventony }\\&\text {Cost}&\text {Reported at}\\\text { Year } &\text { Index } &\text { Dollar-Value LIFO }\\2010 & 110 & \$ 10,000 \\2011 & 125 & 15,500 \\2012 & 140 & 16,340\end{array}$ Required:
Determine the current cost of Greene's ending inventory for the years 2010, 2011, and 2012.

Question 77

Which inventory cost flow assumption is not allowed for financial reporting in many foreign countries?

A)specific identification
B)average
C)FIFO
D)LIFO

Question 78

IFRS do not allow the use of LIFO because it

A)would have to be allowed for tax reporting in each country
B)would result in too many overstatements of income
C)is clearly inconsistent with any presumed physical flow of inventory
D)would have to be the only method permitted

Question 79

Given the following information for Glade Company:
$\begin{array}{lll}\text { Jan. } 1 & \text { Beginning inventory } & 18 \text { units } @ \$ 4 \text { eacl } \\\text { Jan. } 7 & \text { Purchase } & 12 \text { units } @ \$ 5 \text { each } \\\text { Jan. } 10 & \text { Sale } & 14 \text { units } \\\text { Jan. } 17 & \text { Purchase } & 10 \text { units } @ \$ 6 \text { each } \\\text { Jan } 10 & \text { Sale } & 4 \text {units } \end{array}$ Required:

Answer the following questions for Glade Company:
a. If FIFO is in use, what is total ending invent ory in dollars?
b. If perpetual LIFO is in use, what is cost of goods sold for the month?
c. If weighted average is in use, what is enching inventory?
d. If moving average is in use what is the cost per urit sold for the Jamuary 10 sale

Question 80

At December 31, 2010, Johnson, Inc.had inventory on hand amounting to $270, 000.The following items were not included in this inventory:
Johnson sells at a gross profit of 25% on cost.
Required:
Compute the cost of ending inventory to be reported on the December 31, 2010, balance sheet.