1
Created by Boundless
The biggest reason companies chose to use the LIFO method to value their
inventory was because:
A
it most closely follows the natural flow of production
B
it most closely matched cost with the items purchased
C
it reduced their income taxes
D
it was easier
2
Created by Boundless
Wages paid to an employee who works directly on the product being
manufactured is an example of a:
A
direct labor cost
B
overhead cost
C
production cost
D
indirect labor cost
3
Created by Boundless
Items that are not yet complete or awaiting further production are classified as:
A
finished goods
B
goods for resale
C
work in process
D
4
raw material
Created by Boundless
Which of these is a rationale for keeping inventory?
A
all of these
B
economies of scale
C
uncertainty
D
lead time
5
Created by Boundless
An company would classify an item returned unused/unopened as:
A
defective goods
B
returned goods that are salable
C
discounted goods
D
returned goods
6
Created by Boundless
When is a physical inventory performed?
A
prior to issuing the balance sheet
B
when an inventory item cannot be found
C
once a year
D
when theft is suspected
7
Created by Boundless
A measurement error in inventory will result in a company calculating what
incorrectly?
A
the final cost of inventory
B
the amount of cash on hand
C
the cost of goods sold
D
the amount of inventory on hand
8
Created by Boundless
An overstatement of ending inventory, ultimately, results in an:
9
A
overstatement of cash
B
understatement of sales
C
overstatement of income
D
understatement of income
Created by Boundless
Counting a selected subset of inventory on a specific day is known as:
A
a cycle count
B
random inventory
C
monthly inventory
D
a physical inventory
10
Created by Boundless
Which inventory system only adjusts the inventory and cost of goods sold at the
time of a physical inventory?
A
perpetual inventory system
B
periodic inventory system
C
yearly inventory system
D
non-continous inventory system
11
Created by Boundless
In a perpetual inventory system, the book inventory and the physical count are:
A
book inventory is higher
B
never compared
C
exactly the same (with a small error margin)
D
physical inventory is higher
12
Created by Boundless
During which phase does the team count a specific inventory?
A
planning
B
analysis
C
execution
D
beginning
13
Created by Boundless
What are the results of the physical count are compared to?
A
last year's count
B
the computer (or book) count
C
balance sheet value
D
last quarter's count
14
Created by Boundless
If a business always identifies the total amount of its inventory on hand, it is in fact
using a:
A
periodic inventory system
B
perpetual inventory system
C
none of these answers
D
15
physical inventory system
Created by Boundless
The FIFO method is best for companies with what type of products?
A
items that become obsolete quickly
B
items for retail sale
C
items for manufactoring
D
items subject to spoilage
16
Created by Boundless
Which of the inventory valuation methods is the easiest to calculate?
A
FIFO
B
weighted average cost
C
average cost
D
LIFO
17
Created by Boundless
What is the best way to value inventory?
A
by relying on the accounting records
B
by performing a physical inventory
C
by calculating the cost of inventory
D
by estimating the cost of inventory
18
Created by Boundless
What method can be used to calculate ending inventory cost?
A
final inventory cost method
B
ending inventory cost method
C
moving average cost method
D
average inventory cost method
19
Created by Boundless
In LIFO, what items are recorded as sold first?
A
the most recently produced items
B
the items produced only in that period
C
the oldest produced items
D
the items produced at the end of last period
20
Created by Boundless
What is calculated by dividing total cost of goods available for sale / by the total
units available for sale?
A
cost of goods available
B
average cost of goods available for sale
C
average cost of retail goods
D
average cost of goods sold
21
Created by Boundless
Dividing total cost of goods available for sale by the total units available for sale
gives you?
A
a simple average unit cost
B
a weighted average unit cost
C
a cost of goods for one item
D
an average unit cost
22
Created by Boundless
What does the gross profit method assume?
23
A
that the profit ratio fluctuates during the period
B
that the profit ratio is accurate
C
that the profit ratio remains stable during the period
D
that the profit ratio is the same as last year
Created by Boundless
The difference between the cost of inventory calculated under the FIFO and LIFO
methods is known as?
A
LIFO reserve
B
FIFO balance
C
FIFO reserve
D
LIFO balance
24
Created by Boundless
A company using FIFO would have inventory that consists of:
A
the oldest purchases
B
the current month's purchases
C
the most recent purchases
D
the year's purchases
25
Created by Boundless
During periods of inflation, which inventory valuation method gives the most
accurate value for ending inventory?
A
Weighted average cost
B
LIFO
C
average cost
FIFO
D
26
Created by Boundless
Which of these is a characteristic of the the specific identification method?
A
often impossible
B
perfect matching of costs of goods to goods sold
C
all of these answers
D
keeps track of the cost of each, specific good sold
27
Created by Boundless
Which method uses the most relevant cost for the income statement?
A
average cost
B
FIFO
C
LIFO
D
specific identification
28
Created by Boundless
Under the specific identification inventory must be assigned?
A
a purchase date
B
a control number
C
a serial number or identification tag
D
29
a valuation number
Created by Boundless
Under specific identification companies do a detailed physical count, which helps
them determine?
A
how many total inventory items remain
B
how much cost of goods to report
C
how many of each good bought on a specific date remain
D
how much inventory to report
30
Created by Boundless
Specific Identification is the most theoretically sound inventory method because:
A
it provides the highest cost of goods sold
B
it provides the most precise matching of costs
C
it provides the lowest cost of goods sold
D
it provides the closest to market value
31
Created by Boundless
Which cost accounting method is best for companies that engage in the purchase
and sale of large items such as cars?
A
specific identification
B
LIFO
C
FIFO
D
weighted average
32
Created by Boundless
Which inventory method has the assumed flow of costs correspond with the
normal flow of goods?
A
LIFO
B
none of these
C
specific identification
D
FIFO
33
Created by Boundless
Using the information listed below, what is the cost of goods sold for Com Health
Care, if the company is using a periodic inventory system? Sales revenue:
$1,550,000 Beginning inventory: $300,000 Ending inventory: $470,000 Purchases:
$910,000
A
940000
B
2290000
C
640000
D
740000
34
Created by Boundless
The cost of goods sold for a business was $74,300. If this business had beginning
inventory of $55,000, ending inventory of $31,700, and a gross profit of $41,000,
net sales would have been _______________, and purchases would have been
_______________.
A
$51,000; $106,000
B
$115,300; $51,000
C
$106,000; $115,300
D
$115,000; $106,000
35
Created by Boundless
Using LIFO, when would a company would pay lower taxes?
A
during all periods
B
during recessions
C
during periods of deflation
D
during periods of inflation
36
Created by Boundless
When a company liquidates its older LIFO inventory that is known as:
A
pre liquidation sale
B
unit liquidation
C
LIFO liquidation
D
inventory liquidation
37
Created by Boundless
Another term for the LIFO Reserve is:
A
valuation of LIFO
B
LIFO valuation to FIFO
C
LIFO revalue
D
revaluation to LIFO
38
Created by Boundless
Who may petition the court for compulsory liquidation of a company?
A
the Secretary of State
B
the company itself
C
all of these answers
D
A creditor with a prima facie case
39
Created by Boundless
Which of these is an example of a normalization method?
A
discretionary adjustments
B
comparability adjustments
C
non-operating adjustments
D
all of these answers
40
Created by Boundless
In LIFO, stock on hand is NOT valued at current market value, which causes it to
be what on the balance sheet?
A
at actual value
B
understated
C
over stated
D
either over or understated
41
Created by Boundless
When prices are rising the dollar-value method will show an increased?
42
A
profit margin
B
inventory value
C
net income
D
cost of goods sold
Created by Boundless
A company using the LIFO method generally reports what lower due to the effects
of inflation?
A
cost of goods sold
B
profit margin
C
net income
D
taxable income
43
Created by Boundless
Which method of liquidation is also known as shareholders' liquidation?
A
bankruptcy liquidation
B
voluntary liquidation
C
compulsory liquidation
D
corporate liquidation
44
Created by Boundless
Which two countries are the only ones to use the LIFO method?
A
U.S and Japan
B
U.S and Canda
C
Japan and England
D
U.S and Germany
45
Created by Boundless
How are all the figures in dollar-value LIFO presented?
A
in dollar amounts
B
in adjusted dollars
C
in inventory units
D
in non-dollars
46
Created by Boundless
In LIFO, the recorded amount of inventory is not a accurate reflection of cost, if a
LIFO company is compared to a FIFO company what occurs?
A
reduced comparability
B
uneven valuation
C
uneven comparability
D
reduced valuation
47
Created by Boundless
A credit balance in the LIFO Reserve account occurs during:
A
times of deflation
B
times of inflation
C
times of increased costs
D
48
times of decreased costs
Created by Boundless
The retail inventory method allows a business to calculate what?
A
an estimated cost of goods sold
B
an estimated inventory cost
C
an estimated ending inventory balance
D
an accurate inventory cost
49
Created by Boundless
How is the cost/retail price ratio calculated?
A
cost of goods sold / the retail price of goods available for
sale
B
cost of goods sold / retail price
C
cost of goods sold / selling price of goods available for sale
D
cost of goods sold / total revenue
50
Created by Boundless
Under Lower of Cost or Market when are inventory items are written down to
market value?
A
when market value is more than the cost of the items
B
when market value is less than the cost of the items
C
when the inventory has unsellable items in it
D
when converting to market value will result in a loss on the
financial statements
51
Created by Boundless
When must a company must recognize the loss?
A
in the quarter after the loss
B
in the period after the loss
C
in the period it occured
D
up to one year after the loss
52
Created by Boundless
The formula 365 days/Inventory Turnover Ratio represents?
53
A
how long it takes a customer to pay for their order
B
how long the individual parts sit on the shelf
C
how long it takes an order to be completed
D
the number of days in a year it takes to sell the inventory
Created by Boundless
If prices are falling, the gross profit of a company using FIFO will be:
similar to a company using LIFO
A
B
unaffected by the falling prices
C
higher
D
lower
54
Created by Boundless
The number of times inventory is sold or used in a time period is known as:
A
the inventory efficiency ratio
B
the inventory conversion ratio
C
the inventory turnover ratio
D
the inventory use ratio
55
Created by Boundless
A reseller of goods is most likely to use what type of inventory method?
56
A
the FIFO method
B
the LIFO method
C
the retail inventory method
D
the Dollar Value LIFO method
Created by Boundless
The LIFO reserve represents the difference in a company's inventory value
calculated under the LIFO method versus:
A
the value calculated under average weight method
B
the value calculated under fair market conditions
C
the value calculated under the FIFO method
D
the value calculated under specific identification
57
Created by Boundless
Which of these represents the equation to calculate inventory turnover?
A
sales x inventory
B
Cost of goods sold/average inventory
C
cost of goods sold/sales
D
cost of goods sold x inventory
58
Created by Boundless
Inventory is classified as what type of account on the balance sheet?
A
long-term asset B
current asset C
non-current asset D
contra-asset 59
Created by Boundless
Essentially, the LIFO Reserve represents?
A
additional inventory value
B
non-taxable income
C
deferred taxable income
D
unreported income