Deck 20: Accounting for Inventory

Question 1

The gross profit method of estimating inventory makes it possible to prepare monthly income statements without taking a physical inventory.

Answer 1

True

Question 2

FIFO is a method used to determine the quantity of each type of merchandise on hand.

Answer 2

False

Question 3

A merchandise inventory that is larger than needed may decrease net income.

Answer 3

True

Question 4

A merchandise inventory evaluated at the end of a fiscal period is known as a perpetual inventory.

Question 5

The cost of merchandise sold can be calculated by subtracting the cost of merchandise available for sale from the cost of ending inventory.

Question 6

Businesses frequently establish their fiscal year to end when inventory is at a minimum.

Question 7

A merchandise inventory that is smaller than needed may decrease net income.

Question 8

When the FIFO method is used, cost of merchandise sold is priced at

A) the average cost.
B) the earliest cost.
C) the most recent cost.
D) none of these.

Question 9

Stock records do not reflect

A) decreases in quantity on hand.
B) increases in quantity on hand.
C) the cost of the merchandise.
D) the balance on hand after each increase or decrease is recorded.

Question 10

In periods of rising costs, the inventory method which gives the lowest cost of merchandise sold is the

A) FIFO method.
B) LIFO method.
C) weighted-average method.
D) lower of cost or market inventory method.

Question 11

In periods of rising costs, the inventory method which gives the lowest possible ending inventory cost is the

A) FIFO method.
B) LIFO method.
C) weighted-average method.
D) lower of cost or market inventory method.

Question 12

The actual flow of inventory in a company

A) should influence the inventory costing method a company chooses.
B) must always be on a LIFO basis.
C) must match the inventory costing method a company chooses.
D) does not have to match the inventory costing method a company chooses.

Question 13

When the LIFO method is used, ending inventory units are valued at

A) the average cost.
B) the earliest cost.
C) the most recent cost.
D) none of these.

Question 14

When using the perpetual inventory method,

A) physical inventories are never taken.
B) day-to-day information about the quantity of merchandise on hand is not available.
C) it is not necessary to show the minimum balance on stock records.
D) a physical inventory should be taken at the end of the fiscal year.

Question 15

Calculating an accurate inventory cost to assure that gross profit and net income are reported correctly on the income statement is an application of the accounting concept

A) Adequate Disclosure.
B) Business Entity.
C) Consistent Reporting.
D) Perpetual Inventory.

Question 16

Companies that use a product's UPC code and a point-of-sale terminal

A) should still take a physical inventory at least once each fiscal year.
B) eliminate the need for a physical inventory.
C) are assured of totally accurate inventory records at all times.
D) none of these.

Question 17

Select the one term that best fits each definition

-Using the cost of merchandise purchased last to calculate the cost of merchandise sold first.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 18

Select the one term that best fits each definition

-Using the average cost of beginning inventory plus merchandise purchased during a fiscal period to calculate the cost of merchandise sold.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 19

Select the one term that best fits each definition

-A file of stock records for all merchandise on hand.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 20

Select the one term that best fits each definition

-A form used during a physical inventory to record information about each item of merchandise on hand.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 21

Select the one term that best fits each definition

-Estimating inventory by using the previous year's percentage of gross profit on operations.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 22

Select the one term that best fits each definition

-A form used to show the kind of merchandise, quantity received, quantity sold, and balance on hand.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 23

Select the one term that best fits each definition

-Using the lower of cost or market value to calculate the cost of ending merchandise inventory.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 24

Select the one term that best fits each definition

-The amount that must be paid to replace an asset.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method

Question 25

Select the one term that best fits each definition

-Using the cost of merchandise purchased first to calculate the cost of merchandise sold first.

A) first-in, first-out inventory costing method (FIFO)
B) gross profit method of estimating inventory
C) inventory record
D) last-in, first-out inventory costing method (LIFO)
E) lower of cost or market inventory costing method (LCM)
F) market value
G) stock ledger
H) stock record
I) weighted-average inventory costing method