Deck 6: Reporting and Analyzing Long-Lived Assets

Question 1

Goods held on consignment should be included in the consignor's ending inventory.

Answer 1

True

Question 2

Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.

Answer 2

False

Question 3

If the unit price of inventory is increasing during a period a company using the LIFO inventory method will show lower gross profit for the period than if it had used the FIFO inventory method.

Answer 3

True

Question 4

A manufacturer's inventory consists of raw materials work in process and finished goods.

Question 5

When the terms of sale are FOB shipping point legal title to the goods remains with the seller until the goods reach the buyer.

Question 6

If the ownership of merchandise passes to the buyer when the seller ships the merchandise the terms are stated as FOB destination.

Question 7

Raw materials inventories are the goods that a manufacturing company has completed and are ready to be sold to customers.

Question 8

If a company has no beginning inventory and the unit cost of inventory items does not change during the year the value assigned to the ending inventory will be the same under LIFO and average cost flow assumptions.

Question 9

In accounting for inventory the assumed flow of costs must match the physical flow of goods.

Question 10

Inventory methods such as FIFO and LIFO deal more with the flow of costs than with the flow of goods.

Question 11

The First-in First-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

Question 12

If prices never changed then there would be no need for alternative inventory cost flow assumptions.

Question 13

Under a periodic inventory system the merchandise on hand at the end of the period is determined by a physical count of the inventory.

Question 14

The specific identification method of inventory valuation is desirable when a company sells a large number of low-cost items.

Question 15

Goods in transit shipped FOB shipping point should be included in the buyer's ending inventory.

Question 16

Goods that have been purchased FOB destination but are in transit should be excluded from a physical count of goods by the buyer.

Question 17

The average-cost inventory method relies on a simple average calculation.

Question 18

Consigned goods are held for sale by one party although ownership of the goods is retained by another party.

Question 19

If a company has no beginning inventory and the unit price of inventory is increasing during a period the cost of goods available for sale during the period will be the same under the LIFO and FIFO inventory methods.

Question 20

The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale.

Question 21

In periods of falling prices LIFO will result in a higher ending inventory valuation than FIFO.

Question 22

Under the accounts receivable aging method the balance in Allowance for Doubtful Accounts must be considered carefully prior to adjusting for estimated uncollectible accounts.

Question 23

Advances to employees are referred to as accounts receivable.

Question 24

Trade receivables occur when two companies trade or exchange notes receivables.

Question 25

Trade receivables can be an account receivable or a note receivable.

Question 26

The percentage of receivables basis of estimating uncollectible accounts ignores the existing balance in the allowance account when the bad debt adjustment is recorded.

Question 27

The allowance method of accounting for bad debts violates the expense recognization.

Question 28

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Question 29

Uncollectible accounts must be estimated because it is not possible to know which accounts will not be collected.

Question 30

The LIFO inventory method agrees with the actual physical movement of goods in most businesses.

Question 31

Use of the LIFO inventory valuation method enables a company to report paper or phantom profits.

Question 32

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid the greater the probability that it will eventually be collected.

Question 33

Under the direct write-off method no attempt is made to match bad debt expense to sales revenues in the same accounting period.

Question 34

Accounts receivable are the result of cash and credit sales.

Question 35

When using the allowance method bad debt expense is recorded when an individual customer defaults.

Question 36

Accounts receivable are one of a company's least liquid assets.

Question 37

In periods of falling prices FIFO will result in a larger net income than the LIFO method.

Question 38

Allowance for Doubtful Accounts is decreased under the direct write-off method when an account is determined to be uncollectible.

Question 39

If a company uses the allowance method to account for uncollectible accounts the company records a write-off to an uncollectible account that only involves balance sheet accounts.

Question 40

Other receivables include non-trade receivables such as loans to company officers.

Question 41

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.

Question 42

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination
(2) FOB shipping point
And purchases made
(3) FOB destination
(4) FOB shipping point.
Which items should be included in Tidwell's inventory at December 31?

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

Question 43

The factor which determines whether or not goods should be included in a physical count of inventory is

A)physical possession.
B)legal title.
C)management's judgment.
D)whether or not the purchase price has been paid.

Question 44

Cash realizable value is determined by subtracting Allowance for Doubtful Accounts from Net Sales.

Question 45

If bad debt losses are significant the direct write-off method is acceptable for financial reporting purposes.

Question 46

Bad debt losses are a cost of selling on credit.

Question 47

The term "FOB" denotes

A)free on board.
B)freight on board.
C)free only (to) buyer.
D)freight charge on buyer.

Question 48

When is a physical inventory usually taken?

A)When goods are not being sold or received.
B)When the company has its greatest amount of inventory.
C)At the end of the company's fiscal year.
D)When the company has its greatest amount of inventory and at the end of the company's fiscal year.

Question 49

Goods held on consignment are

A)never owned by the consignee.
B)included in the consignee's ending inventory.
C)kept for sale on the premises of the consignor.
D)included as part of no one's ending inventory.

Question 50

An inventory turnover that is too high may indicate that the company is losing sales opportunities because of inventory shortages.

Question 51

When using the allowance method year-end adjustments for bad debt expense must be made.

Question 52

If goods in transit are shipped FOB destination

A)the seller has legal title to the goods until they are delivered.
B)the buyer has legal title to the goods until they are delivered.
C)the transportation company has legal title to the goods while the goods are in transit.
D)no one has legal title to the goods until they are delivered.

Question 53

Under the allowance method the cash realizable value of receivables is the same both before and after an account has been written off.

Question 54

The direct write-off method of recognizing uncollectible accounts is not in accordance with good accounting practice.

Question 55

Which of the following should not be included in the physical inventory of a company?

A)Goods held on consignment from another company.
B)Goods in transit from another company shipped FOB shipping point.
C)Goods shipped on consignment to another company.
D)All of these answer choices should be included.

Question 56

When the allowance method is used the write-off of an account receivable results in an expense at the time of write-off.

Question 57

Manufactured inventory that has begun the production process but is not yet completed is

A)work in process.
B)raw materials.
C)merchandise inventory.
D)finished goods.

Question 58

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Question 59

Under the allowance method Bad Debt Expense is increased when an account is deemed uncollectible and must be written off.

Question 60

An aging schedule is prepared only for old accounts receivables that have been past due for more than one year.

Question 61

Orange-Aide Company has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 40 \text { units at } \$ 20 & \$ 800 \\7 & \text { Purchases } & 140 \text { units at } \$ 21 & 2,940 \\22 & \text { Purchases } & 20 \text { units at } \$ 22 & 440\\&&&\$4,180\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 50 units on hand.Using the average cost method the value of ending inventory is

A)$1070
B)$1045 c $1050
D $1100

Question 62

Charlene Cosmetics Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 1,040 \\\text { June } & 10 & 200 \text { units } & 1,560 \\\text { June } & 15 & 200 \text { units } & 1,680 \\\text { June } & 28 & 150 \text { units } & 1,320 \\& & & \$ 5,600 \\\hline\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.Using the average cost method the amount allocated to the ending inventory on June 30 is

A)$1639.
B)$1824.
C)$1764.
D)$1680.

Question 63

Noise Makers Inc.has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \\7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \\22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\\&&&\$3,000\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the average cost method the value of ending inventory is

A)$930.
B)$960.
C)$976.
D)$990.

Question 64

A company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 990 \\\text { June } & 10 & 200 \text { units } & 1,344 \\\text { June } & 15 & 200 \text { units } & 1,368 \\\text { June } & 28 & 150 \text { units } & 1,062 \\& & & \$ 4,764\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.Using the average-cost method the amount allocated to the ending inventory on June 30 is

A)$1361.
B)$1416.
C)$1320.
D)$1344.

Question 65

At December 31 2022 Howell Company's inventory records indicated a balance of $878000.Upon further investigation it was determined that this amount included the following: $168000 in inventory purchases made by Howell shipped from the seller 12/27/22 terms FOB destination but not due to be received until January 2
$111000 in goods sold by Howell with terms FOB destination on December 27.The goods are not expected to reach their destination until January 6.
$9000 of goods received on consignment from Westwood Company
What is Howell's correct ending inventory balance at December 31 2022?

A)$710000
B)$869000
C)$590000
D)$701000

Question 66

At December 31 2022 Mohling Company's inventory records indicated a balance of $632000.Upon further investigation it was determined that this amount included the following: $112000 in inventory purchases made by Mohling shipped from the seller 12/27/22 terms FOB destination but not due to be received until January 2
$74000 in goods sold by Mohling with terms FOB destination on December 27.The goods are not expected to reach their destination until January 6
$6000 of goods received on consignment from Dollywood Company
What is Mohling's correct ending inventory balance at December 31 2022?

A)$520000
B)$626000
C)$440000
D)$514000

Question 67

Reeves Company is taking a physical inventory on March 31 the last day of its fiscal year.Which of the following must be included in this inventory count?

A)Goods in transit to Reeves FOB destination
B)Goods that Reeves is holding on consignment for Parker Company
C)Goods in transit that Reeves has sold to Smith Company FOB shipping point
D)Goods that Reeves is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due

Question 68

A company purchased inventory as follows: 200 units at $6.00
300 units at $6.60
The average unit cost for inventory is

A)$6.00.
B)$6.30.
C)$6.36.
D)$6.60.

Question 69

Olympus Climbers Company has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \\7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \\22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\\&&&\$3,000\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the FIFO inventory method the amount allocated to cost of goods sold for July is

A)$930.
B)$990.
C)$2010.
D)$2070.

Question 70

Quark Inc.just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 990 \\\text { June } & 10 & 200 \text { units } & 1,344 \\\text { June } & 15 & 200 \text { units } & 1,368 \\\text { June } & 28 & 150 \text { units } & 1,062 \\& & & \$ 4,764\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.Using the FIFO inventory method the amount allocated to ending inventory for June is

A)$1326.
B)$1320.
C)$1404.
D)$1416.

Question 71

Radical Radials Company has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \\7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \\22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\\&&&\$3,000\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the LIFO inventory method the amount allocated to ending inventory for July is

A)$930
B)$912
C)$960
D)$1056.

Question 72

Alpha First Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 1,040 \\\text { June } & 10 & 200 \text { units } & 1,560 \\\text { June } & 15 & 200 \text { units } & 1,680 \\\text { June } & 28 & 150 \text { units } & 1,320 \\& & & \$ 5,600 \\\hline\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.Using the LIFO inventory method the value of the ending inventory on June 30 is

A)$1456
B)$1508
C)$1848
D)$1824

Question 73

Quiet Phones Company has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \\7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \\22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\\&&&\$3,000\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the LIFO inventory method the amount allocated to cost of goods sold for July is

A)$930.
B)$990.
C)$2010.
D)$2070.

Question 74

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

A)goods.
B)costs.
C)resale prices.
D)values.

Question 75

Baker Bakery Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 1,040 \\\text { June } & 10 & 200 \text { units } & 1,560 \\\text { June } & 15 & 200 \text { units } & 1,680 \\\text { June } & 28 & 150 \text { units } & 1,320 \\& & & \$ 5,600 \\\hline\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.Using the FIFO inventory method the amount allocated to ending inventory for June is

A)$1456
B)$1508
C)$1824
D)$1848

Question 76

Manufacturers usually classify inventory into all the following general categories except:

A)work in process
B)finished goods
C)merchandise inventory
D)raw materials

Question 77

Echo Sound Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 1,040 \\\text { June } & 10 & 200 \text { units } & 1,560 \\\text { June } & 15 & 200 \text { units } & 1,680 \\\text { June } & 28 & 150 \text { units } & 1,320 \\& & & \$ 5,600 \\\hline\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand.The inventory method which results in the highest gross profit for June is

A)the FIFO method.
B)the LIFO method.
C)the average cost method.
D)not determinable.

Question 78

Atom Company just began business and made the following four inventory purchases in June: $$\begin{array} { r r r r } \text { June } & 1 & 150 \text { units } & \$ 990 \\\text { June } & 10 & 200 \text { units } & 1,344 \\\text { June } & 15 & 200 \text { units } & 1,368 \\\text { June } & 28 & 150 \text { units } & 1,062 \\& & & \$ 4,764\end{array}$$ A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.Using the LIFO inventory method the value of the ending inventory on June 30 is

A)$1326.
B)$1320.
C)$1404.
D)$1416.

Question 79

Pop-up Party Favors Inc.has the following inventory data: $$\begin{array} { r l r r } \text { July } 1 & \text { Beginning inventory } & 30 \text { units at } \$ 19 & \$ 570 \\7 & \text { Purchases } & 105 \text { units at } \$ 20 & 2,100 \\22 & \text { Purchases } & 15 \text { units at } \$ 22 &330\\&&&\$3,000\end{array}$$ A physical count of merchandise inventory on July 31 reveals that there are 48 units on hand.Using the FIFO inventory method the amount allocated to ending inventory for July is

A)$930.
B)$990.
C)$960.
D)$1056.

Question 80

The LIFO inventory method assumes that the cost of the latest units purchased is

A)the last to be allocated to cost of goods sold.
B)the first to be allocated to ending inventory.
C)the first to be allocated to cost of goods sold.
D)not allocated to cost of goods sold or ending inventory.