1.
The lower of cost or market rule for inventory valuation must be applied to each
individual unit separately and not to major categories of inventory or to the
entire inventory.
A)
True
B) False
B) False
2.
A company had inventory on November 1 of 5 units at a cost of $20 each. On
November 2, they purchased 10 units at $22 each. On November 6 they purchased 6
units at $25 each. On November 5, 8 units were sold for $55 each. Using the
Weighted Average perpetual inventory method, what was the value of the inventory
on November 30?
A)
$322.72
B) $304.00
C) $404.00
D) $280.00
E) $276.00
B) $304.00
C) $404.00
D) $280.00
E) $276.00
3.
Monthly or quarterly statements are called interim statements because they are
prepared between the traditional annual statement dates.
A)
True
B) False
B) False
4.
Damaged and obsolete goods:
A)
Are never included in inventory
B) Are included in inventory at their net realizable value
C) Are assigned a value of zero
D) Are included in inventory at their full cost
E) Should be disposed of immediately
B) Are included in inventory at their net realizable value
C) Are assigned a value of zero
D) Are included in inventory at their full cost
E) Should be disposed of immediately
5.
GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign
costs to inventory and IFRS does not.
A)
True
B) False
B) False
6.
The assignment of costs to cost of goods sold and to inventory using specific
identification is the same for both the perpetual and periodic systems.
A)
True
B) False
B) False
7.
The inventory valuation method that tends to smooth out erratic changes in costs
is:
A)
Specific identification
B) WIFO
C) FIFO
D) LIFO
E) Weighted average
B) WIFO
C) FIFO
D) LIFO
E) Weighted average
8.
Given the following information, determine the cost of goods sold at December 31
using the LIFO perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A)
$282.15
B) $290.70
C) $281.25
D) $332.10
E) $210.30
B) $290.70
C) $281.25
D) $332.10
E) $210.30
9.
When LIFO is used with the periodic inventory system, cost of goods sold is
assigned costs from the most recent purchases at the point of each sale, rather
than from the most recent purchases for the period.
A)
True
B) False
B) False
10.
The four methods of inventory valuation are SIFO, FIFO, LIFO and average cost.
A)
True
B) False
B) False
11.
The FIFO inventory method assumes that costs for the most recently purchased
items are the first to be charged to the cost of goods sold.
A)
True
B) False
B) False
12.
Given the following events, what is the per-unit value of ending inventory on
November 30 if this company uses a weighted-average perpetual inventory system?
November 1: 5 units were purchased at $6 per unit.
November 12: 10 units were purchased at $7.50 per unit.
November 14: 7 units were sold for $14 per unit.
November 24: 12 units were purchased at $10 per unit.
November 1: 5 units were purchased at $6 per unit.
November 12: 10 units were purchased at $7.50 per unit.
November 14: 7 units were sold for $14 per unit.
November 24: 12 units were purchased at $10 per unit.
A)
$21.80
B) $8.80
C) $6.00
D) $13.00
E) $7.00
B) $8.80
C) $6.00
D) $13.00
E) $7.00
13.
Errors in the period-end inventory balances only have an impact on the current
period's records and financial statements.
A)
True
B) False
B) False
14.
Incidental costs most commonly added to the costs of inventory include import
duties, freight, storage and insurance.
A)
True
B) False
B) False
15.
The matching principle is used by some companies to avoid allocating incidental
inventory costs to cost of goods sold.
A)
True
B) False
B) False
16.
Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089
million and average inventory of $1,965 million. The inventory turnover equals:
A)
76.1 days
B) 4.51
C) 0.21
D) 4.79
E) 80.9 days
B) 4.51
C) 0.21
D) 4.79
E) 80.9 days
17.
Given the following information, determine the cost of ending inventory at
December 31 using the FIFO perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A)
$94.00
B) $51.75
C) $41.30
D) $83.22
E) $50.75
B) $51.75
C) $41.30
D) $83.22
E) $50.75
18.
Merchandise inventory includes:
A)
Only damaged goods
B) All goods in transit
C) Only items that are on the shelf
D) All goods on consignment
E) All goods owned by a company and held for sale
B) All goods in transit
C) Only items that are on the shelf
D) All goods on consignment
E) All goods owned by a company and held for sale
19.
If the seller is responsible for paying freight charges, then ownership of
inventory passes when goods arrive at their destination.
A)
True
B) False
B) False
20.
A company has the following per unit original costs and replacement costs for
its inventory:
Part A: 50 units with a cost of $5 and replacement cost of $4.50
Part B: 75 units with a cost of $6 and replacement cost of $6.50
Part C: 160 units with a cost of $3 and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company's ending inventory is:
Part A: 50 units with a cost of $5 and replacement cost of $4.50
Part B: 75 units with a cost of $6 and replacement cost of $6.50
Part C: 160 units with a cost of $3 and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company's ending inventory is:
A)
$1,180.00
B) $1180.00 or $1075.00, depending upon whether LCM is applied to individual items or to the inventory as a whole
C) $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items or the inventory as a whole
D) $1,075.00
E) $1,112.50
B) $1180.00 or $1075.00, depending upon whether LCM is applied to individual items or to the inventory as a whole
C) $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items or the inventory as a whole
D) $1,075.00
E) $1,112.50
