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Exam 6: Merchandise Inventory

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Question 101

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Which of the following statements regarding FIFO is incorrect?

A) Ending inventory is based on the costs of the most recent purchases.
B) FIFO is consistent with the physical movement of inventory for most companies.
C) The first units to come in are assumed to be the first units sold.
D) FIFO is a specific identification costing method because companies sell their oldest inventory first.

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

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Question 102

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List and briefly discuss three measures that can be taken to maintain good controls over merchandise inventory.

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Any three of the following are acceptabl...

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Question 103

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In computing the lower-of-cost-or-market,market value generally means the selling price.

A company that uses the periodic inventory provides the following information: 1) Beginning Inventory $12,000 2) Net Purchases $93,000 At the end of the period,the physical count of inventory reveals that $14,000 of inventory is on hand. What is the amount of cost of goods sold?

A higher days' sales in inventory is preferable.

Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

A company changes its inventory costing method each period in order to maximize net income.This is a violation of the consistency principle.

Companies often disclose that the LCM rule is followed in notes to their financial statements.

A company is uncertain whether a complex transaction should be recorded as a gain or loss.Under the conservatism principle,it should choose to treat it as a loss.

Using the LIFO method of inventory valuation will always produce the same results for cost of goods sold and ending inventory whether a company uses perpetual or periodic inventory costing methods.

Each inventory costing method matches the flow of inventory costs in a business and is used to determine ending inventory and cost of goods sold.

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for sales revenue.

Which of the following states that the business should use the same accounting methods from period to period?

Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases?

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for net income.

Which of the following is NOT an inventory costing method?

Which of the following principles states that a business should NOT report anticipated gains?

A company is uncertain whether a complex transaction should be recorded as an asset or an expense.Under the conservatism principle,it should choose to treat it as an asset.

Which of the following is the correct formula to calculate weighted-average unit cost for merchandise inventory?