Question 1

The inventory method which results in the prices paid for earliest purchases assigned to cost of goods sold is:

Accepted Answer

First-in, first-out (FIFO) results in the oldest costs being assigned to cost of goods sold.

Question 2

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a FIFO basis, 200 units on hand on August 18 will consist of:

Accepted Answer

On a FIFO basis, 50 of the units on hand at August 18 would have been assigned a cost of $1.55 per unit and the remaining 150 units on hand at that date would have been assigned a cost of $1.62 per unit as follows:
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Question 3

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a LIFO basis, the 200 units in inventory at August 18 will consist of:

Accepted Answer

On a LIFO basis, 20 of the units in inventory at August 18 would have been assigned cost per unit of $1.62, 80 of the units on hand would have been assigned a cost per unit of $1.55 and the remaining 100 units in inventory on that date would have been assigned a unit cost of $1.40 as follows:
 11eb16ac_e028_5e9f_984d_337a47de7e80_TB6154_00

Question 4

The duties of the purchasing agent would include all of the following except:

Accepted Answer

The receiving clerk is responsible for counting and identifying the materials received.

Question 5

The form that serves as authorization to withdraw materials from the storeroom is known as the:

Accepted Answer

The materials requisition is prepared by the production department supervisor or an assistant and is presented to the storeroom keeper as authorization for the withdrawal of materials.

Question 6

The inventory method which results in the prices paid for the earliest purchases being assigned to inventory on hand at the end of the period is:

Accepted Answer

Last-in, first-out (LIFO) results in the oldest costs being assigned to ending inventory because the most recent costs are assigned to issues first.

Question 7

If a company receives a larger quantity of goods than had been ordered and keeps the excess for future use, a(n)______________ is prepared to notify the vendor of the amount of increase to accounts payable in the invoice.

Accepted Answer

A Debit or credit memorandum may be issued when the shipment of materials does not match the purchase order and the invoice. In this case, since more materials than ordered and billed were received, the company would issue a credit memorandum to increase accounts payable.

Question 8

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a LIFO basis, the March 16 issue will consist of:

Accepted Answer

On a LIFO basis, the 140 units issued on March 16 would have been assigned a cost of $1.55 per unit as follows:
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Question 9

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a FIFO basis, the March 16 issue will consist of:

Accepted Answer

On a FIFO basis, 20 of the units issued on March 16 would have been assigned a cost of $1.40 per unit and the remaining 120 units issued on that date would have been assigned a cost of $1.55 per unit as follows:
 11eb16ac_e027_c255_984d_e5962a7dca7e_TB6154_00

Question 10

In a period of rising prices, the use of which of the following cost flow methods would result in the lowest cost of goods sold?

Accepted Answer

Under the FIFO method, the earliest purchases, which were least the expensive, would be considered to be the goods sold. Thus, cost of goods sold would be lower.

Question 11

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a moving average basis, the 330 items in inventory on June 11 will have a unit cost of:

Accepted Answer

On a moving average basis, the 330 units in inventory on June 11 would be assigned a cost per unit of $1.5614 as follows:
 11eb16ac_e028_85b3_984d_71803dd4a217_TB6154_00 Average cost per unit for the June 11 inventory would be $1.5614 ($515.25 / 330 units).

Question 12

At the end of the period, the balance in the Materials account should represent

Accepted Answer

At the end of the period, the balance in the Materials account should represent the cost of materials on hand. Materials purchased increase the Materials account while materials that have been issued into production, which would be included in Work in Process, Finished Goods and Cost of Goods Sold, would have decreased the Materials account.

Question 13

The inventory method which results in the most recent cost being assigned to cost of goods sold is:

Accepted Answer

Last-in, first-out (LIFO) results in the most recent costs being assigned to cost of goods sold.

Question 14

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a moving average basis, the 140 units issued on March 16 will have a unit cost of:

Accepted Answer

On a moving average basis, the 140 units issued on March 16 would have a unit cost of $1.5125 as follows:
 11eb16ac_e028_85b1_984d_b774f656e987_TB6154_00 Average cost for both the February 8 and March 16 issue would be $1.5125 ($605 / 400 units).

Question 15

In a period of rising prices, the use of which of the following cost flow methods would result in the lowest tax liability?

Accepted Answer

Under the LIFO method, the most recent purchases, which were the most expensive, would be considered to be the goods sold. This would result in higher cost of goods sold, thus lower gross margins which in turn would result in lower income taxes.

Question 16

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a LIFO basis, the September 6 issue will consist of:

Accepted Answer

On a LIFO basis, 20 of the units issued on September 6 would have been assigned a cost of $1.62 per unit, 80 of the units issued would have been assigned a cost of $1.55 per unit and the remaining 10 units issued on that date would have been assigned a cost of $1.40 per unit.
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Question 17

The Bisset Corporation uses Raw Material A in a manufacturing process. Information as to balances on hand, purchases, and requisitions of Raw Material A is given in the following table. Raw Material A  If a perpetual inventory record of Raw Material A is maintained on a FIFO basis, the September 6 issue will consist of:

Accepted Answer

On a FIFO basis, 50 of the units issued on September 6 would have been assigned a cost of $1.55 per unit and the remaining 60 units issued on that date would have been assigned a cost of $1.62 per unit as follows:
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Question 18

When selecting a method of inventory costing, a company must consider all of the following except:

Accepted Answer

The flow of materials does not dictate the flow of costs. Companies must consider tax regulations and current economic conditions, including the rate of inflation, particularly as they relate to LIFO. In addition, companies that turn over inventory rapidly may not be as concerned as companies that hold inventory for longer periods of time as the impact of rising prices will not be as dramatic.

Question 19

The inventory method which results in the most recent costs being assigned to inventory on hand at the end of the period is:

Accepted Answer

First-in, first-out (FIFO) results in the most recent costs being assigned to ending inventory because the oldest costs are assigned to issues first.

Question 20

Listed below are steps of purchasing and receiving materials:
1) The receiving clerk prepares a receiving report.
2) Purchase requisitions are prepared to notify the purchasing agent that additional materials are needed.
3) The purchase of merchandise is recorded by the accounting department.
4) The purchasing agent completes a purchase order.
In which order would these events typically happen?

Accepted Answer

The storeroom keeper will prepare a purchase requisition to notify the purchasing agent that additional materials are needed. The purchasing agent will then complete a purchase order and send it to the vendor. When the goods are received, the receiving clerk will prepare a receiving report which is compared to the vendor's invoice and the purchase order. At that time, the accounting department will record the purchase of the inventory items in the general ledger.

Quiz 2: Accounting for Materials