Question 1

Which of the following statements is correct?

Accepted Answer

A)  FIFO reports lower income amounts than LIFO when prices are increasing.
B)  LIFO reports a higher income amount than FIFO when prices are increasing.
C)  LIFO reports a higher income amount than FIFO when prices are decreasing.
D)  LIFO reports the same amount of income as FIFO when prices are increasing.E) A) and B)
F) A) and C)

Question 2

What is the net adjustment to net income with respect to the determination of operating cash flows when inventory increases $100,000 and accounts payable increases $20,000?

Accepted Answer

A)  An increase of $120,000.
B)  A decrease of $120,000.
C)  An increase of $80,000.
D)  A decrease of $80,000E) A) and B)
F) A) and C)

Question 3

Sideline Company reported net income for 2010 of $70,000 and in 2011 of $84,000 (both after income taxes at a 30% rate).It was discovered in 2011 that the ending inventory for 2010 was understated by $2,000 (before any income tax effect).Calculate the correct net income (after income tax of 20%)for 2009 and 2010.

Accepted Answer

To calculate the correct net income for ...

Question 4

Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date  Transaction 1/1 Beginning Inventory 5/5 Purchase 8/10 Purchase 10/15 Purchase  Number of Units  Cost per Unit 100$800200$900300$1,000200$1,050\begin{array}{ll}\begin{array} { ll } 	ext { Date } & 	ext { Transaction } \1 / 1 & 	ext { Beginning Inventory } \5 / 5 & 	ext { Purchase } \8 / 10 & 	ext { Purchase } \10 / 15 & 	ext { Purchase }\end{array}\begin{array} { l l} 	ext { Number of Units } & 	ext { Cost per Unit } \100& \$ 800 \200 & \$ 900 \300 & \$ 1,000 \200 & \$ 1,050\end{array}\end{array} Date 1/15/58/1010/15​ Transaction  Beginning Inventory  Purchase  Purchase  Purchase ​ Number of Units 100200300200​ Cost per Unit $800$900$1,000$1,050​​ 
 During the year,750 laptop computers were sold. What was cost of goods sold using the LIFO cost flow assumption?

Accepted Answer

A)  $717,500
B)  $730,000
C)  $703,125
D)  $725,500 E) B) and C)
F) C) and D)

Question 5

At the end of 2010,a $5,000 understatement was discovered in the amount of the 2010 ending inventory as reflected in the perpetual inventory records.What were the 2010 effects of the $5,000 inventory error (before correction) ?

Accepted Answer

A)  Assets were understated by $5,000 and pretax income was understated by $5,000.
B)  Assets were understated by $5,000 and pretax income was overstated by $5,000.
C)  Cost of goods sold was understated by $5,000 and pretax income was understated by $5,000.
D)  Cost of goods sold was overstated by $5,000 and pretax income was overstated by $5,000.E) None of the above
F) A) and B)

Question 6

Which of the following statements is correct?

Accepted Answer

A)  The choice of an inventory costing method is dependent upon the actual physical flow of the inventory.
B)  LIFO should be used during a period of increasing prices when the objective is to maximize the ending inventory value on the balance sheet.
C)  FIFO should be used during a period of decreasing prices when the objective is to maximize the gross profit reported on the balance sheet.
D)  The average cost method will result in an ending inventory balance which is somewhere between LIFO and FIFO when inventory prices are changing.E) A) and B)
F) None of the above

Question 7

During periods of decreasing prices,use of the LIFO inventory method will result in a larger amount of inventory than will the use of the FIFO inventory method.

Accepted Answer

A) True 
 B)False

Question 8

RJ Corporation has provided the following information about one of their inventory items:

Date  Transaction 1/1 Beginning Inventory 6/6 Purchase 9/10 Purchase 11/15 Purchase  Number of Units  Cost per Unit 400$3,200800$3,6001,200$4,000800$4,200\begin{array}{ll}\begin{array} { ll } 	ext { Date } & 	ext { Transaction } \1 / 1 & 	ext { Beginning Inventory } \6 /6& 	ext { Purchase } \9 / 10 & 	ext { Purchase } \11/ 15 & 	ext { Purchase }\end{array}\begin{array} { l l} 	ext { Number of Units } & 	ext { Cost per Unit } \400& \$ 3,200 \800 & \$ 3,600 \1,200 & \$ 4,000 \800 & \$ 4,200\end{array}\end{array} Date 1/16/69/1011/15​ Transaction  Beginning Inventory  Purchase  Purchase  Purchase ​ Number of Units 4008001,200800​ Cost per Unit $3,200$3,600$4,000$4,200​​ 
 During the year,3,000 units were sold. What was ending inventory using the FIFO cost flow assumption?

Accepted Answer

A)  $640,000
B)  $840,000
C)  $960,000
D)  $880,000 E) None of the above
F) A) and C)

Question 9

Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Accepted Answer

A)  In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period.
B)  In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period.
C)  In a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only.
D)  In a periodic inventory system, the inventory account is increased for each purchase during the accounting period.E) C) and D)
F) All of the above

Question 10

Cash flow from operations increases by $1,000,000 when there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable.

Accepted Answer

A) True 
 B)False

Question 11

Atomic Company incorrectly recorded a December 2009 credit purchase of inventory during January 2010.Assuming that the December 31,2009 ending inventory was correctly determined,what is the effect of this error on the financial statements for the year ended December 31,2009?

Accepted Answer

A)  Net income is not affected.
B)  Stockholders' equity is not affected.
C)  Net income is overstated.
D)  Current assets are understated.E) A) and B)
F) None of the above

Question 12

A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Cost of goods available for sale is allocated between costs of goods sold and inventory at year-end.
B)  A purchase of inventory on credit increases both cost of goods available for sale and cost of goods sold.
C)  Purchases of inventory during a period less that period's cost of goods sold equals ending inventory regardless of the beginning inventory amount.
D)  Cost of goods available for sale equals ending inventory plus purchases.E) All of the above
F) None of the above

Question 14

Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date  Transaction 1/1 Beginning Inventory 5/5 Purchase 8/10 Purchase 10/15 Purchase  Number of Units  Cost per Unit 100$800200$900300$1,000200$1,050\begin{array}{ll}\begin{array} { ll } 	ext { Date } & 	ext { Transaction } \1 / 1 & 	ext { Beginning Inventory } \5 / 5 & 	ext { Purchase } \8 / 10 & 	ext { Purchase } \10 / 15 & 	ext { Purchase }\end{array}\begin{array} { l l} 	ext { Number of Units } & 	ext { Cost per Unit } \100& \$ 800 \200 & \$ 900 \300 & \$ 1,000 \200 & \$ 1,050\end{array}\end{array} Date 1/15/58/1010/15​ Transaction  Beginning Inventory  Purchase  Purchase  Purchase ​ Number of Units 100200300200​ Cost per Unit $800$900$1,000$1,050​​ 
 During the year,750 laptop computers were sold. What was ending inventory using the LIFO cost flow assumption?

Accepted Answer

A)  $40,000
B)  $52,500
C)  $60,000
D)  $55,000 E) B) and C)
F) A) and D)

Question 15

Given a particular set of facts and assumptions,the following pairs of amounts were computed using FIFO and LIFO.For each pair of amounts,indicate which amount resulted from applying FIFO,and which amount resulted from applying LIFO. A. Prices are increasing, ending inventory
is:
1. $\$ 20,650$
2. $\$ 19,400$
B. Prices are increasing, cost of goods sold is:
1. $\$ 10,650$
2. $\$ 9,400$
C. Prices are decreasing, ending inventory is:
1. $\$ 5,500$
2. $\$ 5,000$
D. Prices are decreasing, cost of goods sold is:
1. $\$ 6,200$
2. $\$ 7,000$

Accepted Answer

In inventory accounting, FIFO (First-In,...

Question 16

Manufactured goods transferred out of work in process are reported as finished goods on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

Jennings Company uses the periodic inventory system and applied FIFO inventory costing.At the end of the annual accounting period,December 31,2010,the accounting records for the best selling item in inventory showed:
 $$\begin{array} { l c c } 
 \text { Transactions }  & \text { Units } & \text { Unit Cost } \

\text { Beginning inventory, Jan. 1, } 2010 & 500 & \$ 100 \
\text { 1. Purchase, Feb. } 1 & 600 & 105 \
\text { 2. Sale, March } 15 \text { (sold at } \$ 20 \text { each) } & (700) & \
\text { 3. Purchase, May } 15 & 400 & 110 \
\text { 4. Sale, July } 31 \text { (sold at } \$ 25 \text { each) } & (500) &
\end{array}$$ Calculate the following:
 (round to the nearest dollar.)
1.Goods available for sale
2.Ending inventory
3.Cost of goods sold

Accepted Answer

To calculate the goods available for sal...

Question 18

Which of the following would not be a component of the year-end inventory balance?

Accepted Answer

A)  Freight-in costs
B)  Inventory inspection costs
C)  Inventory preparation costs
D)  Inventory related selling costsE) A) and B)
F) None of the above

Question 19

Which of the following statements does not accurately describe the lower of cost or market (LCM) valuation method?

Accepted Answer

A)  The journal entry to write-down inventory decreases gross profit.
B)  The journal entry to write-down inventory decreases current assets.
C)  The journal entry to write-down inventory does not affect income from operations.
D)  The journal entry to write-down inventory increases cost of goods sold.E) All of the above
F) A) and C)

Question 20

For each independent situation given below,determine the effect on pretax income for each.Enter "+" to indicate pretax income is overstated,"-" to indicate pretax income is understated,or "NA" to indicate that pretax income is not affected. $\begin{array} { c c c } & \text { Independent Situations } && \text { Effect on Pretax Income } \
 \end{array}$
$\begin{array} { c c c } &&&&&&&&&&&&&& \text { 2009 } && \text { 2010 } \
 \end{array}$
A.  2009 ending inventory is overstated. 
B. 2009 ending inventory is understated.
C. 2010 ending inventory is overstated.
D. 2010 beginning inventory is overstated
E. 2009 beginning inventory is understated.
F. 2010 beginning inventory is understated and 2010 ending inventory is understated by the same amount.

Accepted Answer

To determine the effect on pretax income...

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

Cash flow from operations increases by $1,000,000 when there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable.

Correct Answer
verified

Atomic Company incorrectly recorded a December 2009 credit purchase of inventory during January 2010.Assuming that the December 31,2009 ending inventory was correctly determined,what is the effect of this error on the financial statements for the year ended December 31,2009?

Correct Answer
verified

Correct Answer
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To determine the effect on pretax income...
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Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Correct Answer
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Correct Answer
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Which of the following would not be a component of the year-end inventory balance?

Correct Answer
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Correct Answer
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A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

Correct Answer
verified

During periods of decreasing prices,use of the LIFO inventory method will result in a larger amount of inventory than will the use of the FIFO inventory method.

Correct Answer
verified

Which of the following statements does not accurately describe the lower of cost or market (LCM) valuation method?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
To calculate the correct net income for ...
View Answer

What is the net adjustment to net income with respect to the determination of operating cash flows when inventory increases $100,000 and accounts payable increases $20,000?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Correct Answer
Answered by ExamLex AI
To calculate the goods available for sal...
View Answer

Correct Answer
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At the end of 2010,a $5,000 understatement was discovered in the amount of the 2010 ending inventory as reflected in the perpetual inventory records.What were the 2010 effects of the $5,000 inventory error (before correction) ?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Manufactured goods transferred out of work in process are reported as finished goods on the balance sheet.

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
In inventory accounting, FIFO (First-In,...
View Answer

Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

Cash flow from operations increases by $1,000,000 when there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable.

Correct AnswerverifiedShow Answer

Atomic Company incorrectly recorded a December 2009 credit purchase of inventory during January 2010.Assuming that the December 31,2009 ending inventory was correctly determined,what is the effect of this error on the financial statements for the year ended December 31,2009?

Correct AnswerverifiedShow Answer

Correct AnswerAnswered by ExamLex AITo determine the effect on pretax income...View AnswerShow Answer

Which of the following statements is correct regarding either the perpetual or periodic inventory systems?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would not be a component of the year-end inventory balance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

Correct AnswerverifiedShow Answer

During periods of decreasing prices,use of the LIFO inventory method will result in a larger amount of inventory than will the use of the FIFO inventory method.

Correct AnswerverifiedShow Answer

Which of the following statements does not accurately describe the lower of cost or market (LCM) valuation method?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerAnswered by ExamLex AITo calculate the correct net income for ...View AnswerShow Answer

What is the net adjustment to net income with respect to the determination of operating cash flows when inventory increases $100,000 and accounts payable increases $20,000?

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Which of the following statements is correct?

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Correct AnswerAnswered by ExamLex AITo calculate the goods available for sal...View AnswerShow Answer

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At the end of 2010,a $5,000 understatement was discovered in the amount of the 2010 ending inventory as reflected in the perpetual inventory records.What were the 2010 effects of the $5,000 inventory error (before correction) ?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Manufactured goods transferred out of work in process are reported as finished goods on the balance sheet.

Correct AnswerverifiedShow Answer

Correct AnswerAnswered by ExamLex AIIn inventory accounting, FIFO (First-In,...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
Answered by ExamLex AI
To determine the effect on pretax income...
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Correct Answer
Answered by ExamLex AI
To calculate the correct net income for ...
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Correct Answer
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Correct Answer
Answered by ExamLex AI
To calculate the goods available for sal...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
Answered by ExamLex AI
In inventory accounting, FIFO (First-In,...
View Answer