Question 1: The cost flow method that often parallels the actual physical flow of merchandise is the

A. average-cost method. 

B. gross profit method. 

C. LIFO method.

D. FIFO method.

Answer; A. average-cost method. 

Question 2: Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

A. the cost of ending inventory and the cost of goods purchased during the year 

B. the difference between the costs of goods purchased and the cost of goods sold during the year 

C. the cost of beginning inventory and the cost of goods purchased during the year 

D. the cost of beginning inventory and the cost of ending inventory

Answer; C. the cost of beginning inventory and the cost of goods purchased during the year 

Question 3 

The selection of an appropriate inventory cost flow assumption for an individual company is made by 

A. The internal auditors. 

B. Management. 

C. The external auditors.

Answer; B. Management. 

Question 4

Fetherston Company’s goods in transit at December 31 include:

       sales made                  purchases made

(1)   FOB destination        (3)   FOB destination

(2)   FOB shipping point(4)   FOB shipping point

Which items should be included in Featherston’s inventory at December 31?

A. (1) and (4) 

B. (2) and (4) 

C. (2) and (3)

D. (1) and (3)

Answer; A. (1) and (4)

Question 5

Under the lower-of-cost-or-market basis in valuing inventory, market is defined as

A. Historical cost plus 10%. 

B. Current replacement cost. 

C. Selling price. 

D. Selling price less markup.

Answer; A. Historical cost plus 10%.

Question 6 

Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date, each computer has a current replacement cost of $400.What value should Switzer, Inc., have for the computers at the end of the year?

A. $3,200.   

B. $4,800. 

C. $7,200. 

D. $2,400.

Answer; A. $3,200.

Question 7

Romanoff Industries had the following inventory transactions occur during 2014:

UnitsCost/unit

2/1/14Purchase54$45

3/14/14Purchase93$47

5/1/14Purchase66$49

The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company’s gross profit using LIFO? (rounded to whole dollars)

A. $6,948 

B. $7,182 

C. $3,318    

D. $2,486

Answer; D. $2,486

Question 8 

Eneri Company’s inventory records show the following data:

 Units/Unit Cost

Inventory January: 15, 000$9.20

Purchases: June 1, 4500,8.00

November 8, 3,000, 7.00

A physical inventory on December 31 shows 2,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. Under the LIFO method, cost of goods sold is

A. $169,200.   

B. $84,600

C. $178,000. 

D. $28,000.

Answer; B. $84,600

Question 9

Indrisano’s Used Cars uses the specific identification method of costing inventory. During March, Indrisano purchased three cars for $12,000, $14,400,and $19,200, respectively. During March, two cars are sold for a total of $34,600. Indrisano determines that at March 31, the $14,400 car is still on hand. What is Indrisano’s gross profit for March?

A. $8,200. 

B. $3,400.   

C. $1000. 

D. $4,200.

Answer; A. $8,200

Question 10

Moroni Industries has the following inventory information.

July   1Beginning Inventory40 units at $120

         5Purchases              240 units at $112

      14Sale                      160 units

      21Purchases              120 units at $115

     30Sale                      140 units

Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis?

A. $33,960 

B. $33,980 

C. $11,500   

D. $11,520

Answer; D. $11,520

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