Question 1

Two companies report the same cost of goods available for sale but each employs a different inventory costing method.If the price of goods has increased during the period then the company using
A)LIFO will have the highest ending inventory.
B)FIFO will have the highest cost of goods sold.
C)FIFO will have the highest ending inventory.
D)LIFO will have the lowest cost of goods sold.

Accepted Answer

FIFO (First in First Out) method assumes that the first items purchased are the first ones sold. So the items that remain in inventory at the end of a period are assumed to be the most recently purchased ones and have the current, higher cost. Therefore, using the FIFO method will result in the highest ending inventory.

Question 2

M.Cornett is a corporation that sells breakfast cereal.Based on the accounts listed below what are M.Cornett's total trade receivables? $\begin{array}{lr}
\text { Income tax refund due } & \$ 500 \
\text { Advance due to the company from } & \
\text { the company president } & 300 \
\text { 3-month note due from } \mathrm{M} \text {. Cornett's main customer } & 2,000 \
\text { Interest due this month on the above note } & 100 \
\text { Due and unpaid from this month's sales } & 9,000 \
\text { Due and unpaid from last month's sales } & 1,000\
\end{array}$
A)$10000
B)$12000
C)$11000
D)$12900

Accepted Answer

The answer of M.Cornett is a corporation that sells breakfast...

Question 3

The specific identification method of costing inventories is used when the
A)physical flow of units cannot be determined.
B)company sells large quantities of relatively low-cost homogeneous items.
C)company sells large quantities of relatively low-cost heterogeneous items.
D)company sells a limited quantity of high-unit cost items.

Accepted Answer

The specific identification method is most appropriate when the company sells a limited quantity of high-unit cost items. This method involves identifying and tracking the cost of each individual unit in the inventory, which is practical only for high-unit cost items. Therefore, option D is the best choice. Options A, B, and C refer to situations where the physical flow of units is uniform and continuous, which makes it more appropriate to use other methods of costing inventories such as FIFO or LIFO.

Question 4

The managers of Hong Company receive performance bonuses based on the net income of the firm.Which inventory costing method are they likely to favor in periods of declining prices?
A)LIFO
B)Average-Cost
C)FIFO
D)Physical inventory method

Accepted Answer

The managers of Hong Company are likely to favor LIFO (Last-In, First-Out) inventory costing method in periods of declining prices. This is because LIFO assumes that the last units purchased are the first ones sold. So, when prices are declining, LIFO will assign the most recently purchased (and thus the most expensive) inventory to cost of goods sold. This results in a lower net income, which could lead to lower taxes and therefore greater cash flow. Additionally, lower net income means less money is paid in performance bonuses, which could motivate managers to select LIFO.

Question 5

The specific identification method of inventory costing
A)always maximizes a company's net income.
B)always minimizes a company's net income.
C)has no effect on a company's net income.
D)may enable management to manipulate net income.

Accepted Answer

The specific identification method of inventory costing can enable management to manipulate net income by choosing which specific items to sell or include in the cost of goods sold, and at what price. Therefore, it does not always maximize or minimize a company's net income, and it may have an effect on net income.

Question 6

Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?
A)LIFO
B)FIFO
C)Average cost method
D)Whichever method that produces the highest ending inventory figure

Accepted Answer

The FIFO method assumes that the first goods purchased are the first goods sold, which means that the ending inventory is made up of the most recent purchases. As a result, FIFO generally results in costs allocated to ending inventory that will approximate their current cost.

Question 7

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?
A)FIFO
B)LIFO
C)Average cost method
D)Income tax expense for the period will be the same under all assumptions.

Accepted Answer

LIFO assumes the latest inventory items are sold first, resulting in a higher cost of goods sold and lower ending inventory balance. This generally leads to a lower income tax expense in a period of increasing prices.

Question 8

In periods of rising prices the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the
A)FIFO method.
B)LIFO method.
C)average-cost method.
D)tax method.

Accepted Answer

The FIFO (First in First Out) method assumes that the oldest inventory items are sold first and the newest inventory items remain in inventory. During periods of rising prices, this method results in the inventory value on the balance sheet that is closest to current cost because it matches the older, lower cost inventory items with the corresponding revenue, leaving the newer higher cost inventory items in inventory. This leads to a higher cost of goods sold and a lower net income.

Question 9

In a period of rising prices which of the following inventory methods generally results in the lowest amount of net income?
A)Average cost method
B)LIFO method
C)FIFO method
D)Need more information to answer

Accepted Answer

LIFO method assumes that the most recent inventory purchases are sold first, which means that the cost of goods sold reflects the current higher prices. As a result, using LIFO method in a period of rising prices will result in a higher cost of goods sold and a lower net income compared to the other inventory methods.

Question 10

Which of the following receivables would not be classified as an "other receivable"? A)Advance to an employee B)Refundable income tax C)Notes receivable D)Interest receivable

Accepted Answer

Notes receivable are typically classified separately from other receivables on the balance sheet as they represent a more formalized form of debt obligation. Advance to an employee, refundable income tax, and interest receivable are examples of other receivables as they are not formalized debt instruments.

Question 11

Dobler Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows: $$\begin{array} { l l r r } 
& \underline { \text { Units } } & \underline{\text { Per unit price }} & \underline { \text { Total } } \
\text { Balance, } 1 / 1 / 2022 & 300 & \$ 5.00 & \$ 1,500 \
\text { Purchase, } 1 / 15 / 2022 & 150 & 5.30 & 795 \
\text { Purchase, } 1 / 28 / 2022 & 150 & 5.50 & 825
\end{array}$$ An end of the month (1/31/2022) inventory showed that 240 units were on hand.If the company uses FIFO and sells the units for $10 each what is the gross profit for the month?
A)$1782
B)$1818
C)$3600
D)$2400

Accepted Answer

FIFO (First-In, First-Out) assumes that the first units purchased are the first units sold. Therefore, the cost of goods sold for January is:300 units @ $5.00 = $1,500150 units @ $5.30 = $795Total cost of goods sold = $2,295Gross profit is calculated as:Sales revenue - Cost of goods soldSales revenue = 240 units @ $10 = $2,400Gross profit = $2,400 - $2,295 = $1782

Question 12

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant then the A)cost of goods sold of the companies will be identical. B)cost of goods purchased during the year will be identical. C)ending inventory of the companies will be identical. D)net income of the companies will be identical.

Accepted Answer

The answer of If companies have identical inventoriable costs but...

Question 13

Given equal circumstances and generally rising costs which inventory method will increase the tax expense the most?
A)FIFO
B)LIFO
C)Average cost
D)Income tax expense for the period will be the same under all assumptions.

Accepted Answer

The answer of Given equal circumstances and generally rising costs...

Question 14

The receivable that is usually evidenced by a formal instrument of credit is a(n)
A)trade receivable.
B)note receivable.
C)accounts receivable.
D)income tax receivable.

Accepted Answer

A note receivable is a written promise by a customer to pay a specific amount of money by a certain date. It is a formal instrument of credit which specifies the terms and conditions of the debt, including the interest rate, payment schedule, and maturity date. Accounts receivable, on the other hand, are typically open invoices that do not require a formal instrument of credit. Trade receivables and income tax receivables are also not usually evidenced by a formal instrument of credit.

Question 15

In a period of declining prices which of the following inventory methods generally results in the lowest balance sheet figure for inventory?
A)Average cost method
B)LIFO method
C)FIFO method
D)Need more information to answer

Accepted Answer

The answer of In a period of declining prices which...

Question 16

In periods of inflation phantom or paper profits may be reported as a result of using the
A)perpetual inventory method.
B)FIFO costing assumption.
C)LIFO costing assumption.
D)periodic inventory method.

Accepted Answer

During periods of inflation, the FIFO (First-In, First-Out) costing assumption can lead to reporting higher profits. This is because older, lower-cost inventory is used up first, leading to lower COGS (Cost of Goods Sold) and higher reported profits, which may not reflect the current replacement cost of the inventory, thus creating "phantom" or "paper" profits.

Question 17

Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic ending inventory.Which inventory costing method should Ace consider using?
A)Average-cost because all inventory costs will then represent an average amount.
B)Specific identification is the most realistic method because it involves the actual costs.
C)LIFO because ending inventory represents the earliest costs.
D)FIFO because ending inventory represents the latest costs.

Accepted Answer

The answer of Ace Company is a retailer operating in...

Question 18

Notes or accounts receivables that result from sales transactions are often called
A)sales receivables.
B)non-trade receivables.
C)trade receivables.
D)merchandise receivables.

Accepted Answer

Trade receivables are the amounts that a company expects to receive from its customers as a result of the sale of goods or services on credit terms. Non-trade receivables refer to amounts owed to the company that are not related to sales transactions, such as loans to employees or other companies. Sales receivables and merchandise receivables are not commonly used terms in accounting.

Question 19

Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?
A)Average-cost because all inventory costs will then represent an average amount.
B)Specific identification is the most realistic method because it involves the actual costs.
C)LIFO because the cost of goods sold represents the latest costs.
D)FIFO because the cost of goods sold represents the earliest costs.

Accepted Answer

The answer of Ace Company is a retailer operating in...

Question 20

Selection of an inventory costing method by management does not usually depend on A)the fiscal year end. B)income statement effects. C)balance sheet effects. D)tax effects.

Accepted Answer

The selection of an inventory costing method is not usually dependent on the fiscal year end. The other options, such as income statement effects, balance sheet effects, and tax effects, are commonly considered by management in choosing an inventory costing method.

Quiz 6: Reporting and Analyzing Long-Lived Assets

Two companies report the same cost of goods available for sale but each employs a different inventory costing method.If the price of goods has increased during the period then the company using

The specific identification method of costing inventories is used when the

The managers of Hong Company receive performance bonuses based on the net income of the firm.Which inventory costing method are they likely to favor in periods of declining prices?

The specific identification method of inventory costing

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

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?

In periods of rising prices the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

In a period of rising prices which of the following inventory methods generally results in the lowest amount of net income?

Which of the following receivables would not be classified as an "other receivable"?

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant then the

Given equal circumstances and generally rising costs which inventory method will increase the tax expense the most?

The receivable that is usually evidenced by a formal instrument of credit is a(n)

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

In periods of inflation phantom or paper profits may be reported as a result of using the

Ace Company is a retailer operating in an industry that experiences inflation (rising prices) .Ace wants the most realistic ending inventory.Which inventory costing method should Ace consider using?

Notes or accounts receivables that result from sales transactions are often called

Ace Company is a retailer operating in an industry that experiences inflation (rising prices) .Ace wants the most realistic cost of goods sold.Which inventory costing method should Ace consider using?

Selection of an inventory costing method by management does not usually depend on