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In a period when inventory costs are rising,the inventory method that most likely results in the highest ending inventory is:


A) Lower of cost and net realizable value.
B) Weighted-average cost.
C) FIFO.

D) A) and C)
E) All of the above

Correct Answer

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The type of income statement that reports a series of subtotals such as gross profit,operating income,and income before taxes is a ______ income statement.


A) Single-step
B) Subtotaled
C) Multiple-step

D) B) and C)
E) A) and C)

Correct Answer

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Bill Inc.'s correct ending balance for the inventory account at the end of 2018 should be $5,000,but the company incorrectly stated it as $3,000.In 2019,Bill correctly recorded its ending balance of the inventory account.Which one of the following is true?


A) Gross profit is overstated by $2,000 in 2018.
B) Retained earnings are understated by $2,000 in 2019.
C) Gross profit is overstated by $2,000 in 2019.

D) None of the above
E) B) and C)

Correct Answer

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Using a perpetual inventory systems,the sale of inventory on account is recorded with a:


A) Debit to Cost of Goods Sold.
B) Credit to Inventory.
C) Credit to Sales Revenue.
D) All of the other answers are recorded with the sale of inventory on account.

E) A) and C)
F) B) and D)

Correct Answer

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If a company understates its count of ending inventory in Year 1,which of the following is true?


A) Costs of goods sold is understated at the end of Year 1.
B) Profit is correct in Year 2.
C) The balance of retained earnings is overstated at the end of Year 1.
D) The balance of retained earnings is correct at the end of Year 2.

E) B) and D)
F) All of the above

Correct Answer

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The lower of cost and net realizable value method for inventory was developed to:


A) Avoid reporting inventory at an amount that exceeds the benefits it provides.
B) Provide an alternative to the FIFO,LIFO,and weighted-average methods.
C) Prevent the company from selling the inventory below its original cost.

D) A) and B)
E) All of the above

Correct Answer

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Which of the following is incorrect regarding LIFO and FIFO?


A) In a period of decreasing costs,FIFO will result in lower total assets than LIFO.
B) In a period of increasing costs,net income will be greater under FIFO than LIFO.
C) In a period of increasing costs,assets will be greater under LIFO than FIFO.

D) All of the above
E) A) and B)

Correct Answer

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Consider the following inventory data: What is the average days in inventory for the year?  Beginning inventory $150,000 Ending inventory 100,000 Purchases 310,000\begin{array} { | l | r | } \hline \text { Beginning inventory } & \$ 150,000 \\\hline \text { Ending inventory } & 100,000 \\\text { Purchases } & 310,000 \\\hline\end{array}


A) 126.7 days.
B) 101.4 days.
C) 152.0 days.

D) All of the above
E) B) and C)

Correct Answer

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During periods when inventory costs are rising,ending inventory will most likely be:


A) Greater under LIFO than FIFO.
B) Less under average cost than LIFO.
C) Greater under average cost than FIFO.
D) Greater under FIFO than LIFO.

E) A) and B)
F) All of the above

Correct Answer

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Income before income taxes equals operating income plus nonoperating revenues less nonoperating expenses.

A) True
B) False

Correct Answer

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Using a perpetual inventory system,the entry to record the return of inventory previously purchased on account includes a:


A) Debit to Cost of Goods Sold.
B) Debit to Inventory.
C) Debit to Accounts Payable.

D) All of the above
E) A) and B)

Correct Answer

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The inventory cost flow assumption that results in a random mixture of goods being included in the balance of inventory and cost of goods sold is:


A) FIFO.
B) LIFO.
C) Weighted-average.

D) B) and C)
E) A) and B)

Correct Answer

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Beginning inventory is $40,000.Purchases of inventory during the year are $200,000.Ending inventory is $100,000.What is cost of goods sold?


A) $340,000.
B) $240,000.
C) $260,000.
D) $140,000.

E) C) and D)
F) B) and D)

Correct Answer

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The cost of the goods that a company sold during a period is shown in its financial statements as ___________ and the cost of the goods that a company still has on hand at the end of the year is shown in the financial statements as ____________.


A) Cost of goods sold;inventory
B) Goods on hand;inventory expense
C) Inventory;cost of goods sold

D) All of the above
E) A) and B)

Correct Answer

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Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Ending inventory assuming LIFO would be:  Date  Transaction  Number of Units  Unit Cost  Apr. 1 Beginning inventory 500$2.40 Apr. 20  Purchase 4002.50\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Apr. } 1 & \text { Beginning inventory } & 500 & \$ 2.40 \\\text { Apr. 20 } & \text { Purchase } & 400 & 2.50 \\\hline\end{array}


A) $500.
B) $490.
C) $470.
D) $480.

E) A) and B)
F) A) and C)

Correct Answer

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If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2,which one of the following is true?


A) Net income is overstated in year 2.
B) Cost of goods sold is overstated in year 1.
C) Net income is understated in year 1.
D) Retained earnings is overstated in year 1.

E) None of the above
F) C) and D)

Correct Answer

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Anthony Corporation reported the following amounts for the year: Anthony's inventory turnover ratio is:  Net sales $296,000 Cost of goods sold 138,000 Average inventory 50,000\begin{array} { | l | r | } \hline \text { Net sales } & \$ 296,000 \\\hline \text { Cost of goods sold } & 138,000 \\\text { Average inventory } & 50,000 \\\hline\end{array}


A) 2.42.
B) 2.76.
C) 3.21.

D) B) and C)
E) None of the above

Correct Answer

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In a perpetual inventory system,the purchase of inventory is debited to:


A) Purchases.
B) Cost of Goods Sold.
C) Inventory.

D) B) and C)
E) All of the above

Correct Answer

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Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Cost of goods sold assuming LIFO would be:  Date  Transaction  Number of Units  Unit Cost  Apr. 1  Beginning inventory 500$2.40 Apr. 20  Purchase 4002.50\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Apr. 1 } & \text { Beginning inventory } & 500 & \$ 2.40 \\\text { Apr. 20 } & \text { Purchase } & 400 & 2.50 \\\hline\end{array}


A) $1,730.
B) $1,700.
C) $1,720.

D) A) and B)
E) A) and C)

Correct Answer

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The LIFO difference (reserve)is the additional amount of inventory a company would report if it used FIFO instead of LIFO.

A) True
B) False

Correct Answer

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