Ch.8 Quiz

Instructions
Please read the questions carefully.

This assessment is worth 100 points.

  1. Cost of goods sold could be computed as net purchases plus any decrease in inventories or minus any increase in inventories.    (2 points)

      
      

  2. Under FIFO, LIFO, and average cost, the cost flow of a product does not depend on the physical flow.    (2 points)

      
      

  3. Perpetual inventory systems eliminate the need for companies to take annual physical counts of inventory.    (2 points)

      
      

  4. The main difference between perpetual and periodic inventory systems is the timing of allocating costs between inventory and cost of goods sold.    (2 points)

      
      

  5. Physical possession does not a guarantee legal ownership.    (2 points)

      
      

  6. Goods on consignment are included in the consignee's inventory until sold.    (2 points)

      
      

  7. Inventory costs include the purchase price of the goods, plus freight, plus insurance costs while in transit, plus the cost of unloading and unpacking, plus the cost of preparing inventory for sale or use.    (2 points)

      
      

  8. Under the gross method, discounts not taken are included in the cost of inventory.    (2 points)

      
      

  9. Under the net method, discounts taken are not recorded.    (2 points)

      
      

  10. Net purchases are reduced for discounts taken whether the net method is used or the gross method is used.    (2 points)

      
      

  11. In a perpetual inventory system, discounts taken are credited to a temporary account under the gross method but are included in a permanent account under the net method.    (2 points)

      
      

  12. The specific identification method of inventory costing is practical for most inventories.    (2 points)

      
      

  13. Inventory costing methods are merely means by which costs are allocated between ending inventory and cost of goods sold.    (2 points)

      
      

  14. Average cost under a periodic system will normally differ from average cost under a perpetual system.    (2 points)

      
      

  15. LIFO periodic and LIFO perpetual usually produce the same amounts for ending inventory.    (2 points)

      
      

  16. FIFO periodic and FIFO perpetual produce the same amounts for cost of goods sold.    (2 points)

      
      

  17. Typically, the average cost method will produce inventory amounts and cost of goods sold amounts that fall between FIFO and LIFO amounts.    (2 points)

      
      

  18. During periods of rising prices, cost of goods sold will be greater under FIFO than LIFO.    (2 points)

      
      

  19. LIFO always provides a better match of revenue and expense than does FIFO.    (2 points)

      
      

  20. Under dollar value LIFO, when products are subject to annual model changes, the new replacement items must be substantially identical to previous models to be included in the same pool.    (2 points)

      
      

  21. Inventory does not include:    (2 points)

    a.  
    b.  
    c.  
    d.  

  22. In a perpetual average cost system:    (2 points)

    a.  
    b.  
    c.  
    d.  

  23. In a perpetual inventory system, the cost of purchases is debited to:    (2 points)

    a.  
    b.  
    c.  
    d.  

  24. In a periodic inventory system, the cost of inventories sold is:    (2 points)

    a.  
    b.  
    c.  
    d.  

  25. Under the net method, purchase discounts lost are:    (2 points)

    a.  
    b.  
    c.  
    d.  

  26. Conceptually, the gross method views discounts not taken as:    (2 points)

    a.  
    b.  
    c.  
    d.  

  27. The net method considers discounts not taken as:    (2 points)

    a.  
    b.  
    c.  
    d.  

  28. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:    (2 points)

    a.  
    b.  
    c.  
    d.  

  29. In a period when prices are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:    (2 points)

    a.  
    b.  
    c.  
    d.  

  30. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:    (2 points)

    a.  
    b.  
    c.  
    d.  

  31. During periods when prices are rising and inventory quantities are stable, ending inventory will be:    (2 points)

    a.  
    b.  
    c.  
    d.  

  32. The LIFO Conformity Rule states that if LIFO is used for:    (2 points)

    a.  
    b.  
    c.  
    d.  

  33. The LIFO conformity rule has been:    (2 points)

    a.  
    b.  
    c.  
    d.  

  34. In periods when prices are rising LIFO liquidations:    (2 points)

    a.  
    b.  
    c.  
    d.  

  35. The use of LIFO during a long inflationary period can result in:    (2 points)

    a.  
    b.  
    c.  
    d.  

  36. A LIFO reserve is:    (2 points)

    a.  
    b.  
    c.  
    d.  

  37. Relaxation of the LIFO conformity rule improves:    (2 points)

    a.  
    b.  
    c.  
    d.  

  38. Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising prices, Company A's gross profit and inventory turnover, compared to Company B's, would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  39. Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising prices, Company C's gross profit and inventory turnover, compared to Company D's, would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  40. What is Nu's net income if it elects FIFO?    (2 points)

    a.  
    b.  
    c.  
    d.  

  41. What is Nu's net income if it elects LIFO?    (2 points)

    a.  
    b.  
    c.  
    d.  

  42. What is Nueva's net income if it elects FIFO?    (2 points)

    a.  
    b.  
    c.  
    d.  

  43. What is Nueva's net income if it elects LIFO?    (2 points)

    a.  
    b.  
    c.  
    d.  

  44. Index Company adopted dollar-value LIFO (DVL) as of January 1, 2000 when it had a cost inventory of $600,000. Its inventory as of December 31, 2000 was $680,000 at year-end prices and the cost index was 1.08. What was DVL inventory on December 31, 2000?    (2 points)

    a.  
    b.  
    c.  
    d.  

  45. Base Company adopted dollar-value LIFO (DVL) as of January 1, 2000 when it had an inventory of $700,000. Its inventory as of December 31, 2000 was $725,000 at year-end prices and the cost index was 1.05. What was DVL inventory on December 31, 2000?    (2 points)

    a.  
    b.  
    c.  
    d.  

  46. Use the following to answer the next two questions: Bakersfield Bakeries started 2000 with $62,000 of merchandise on hand. During 2000, $280,000 in merchandise was purchased on account with credit terms of 2/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. Bakersfield paid freight charges of $9,000. Merchandise with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. Bakersfield uses a perpetual inventory system. Assuming Bakersfield uses the gross method to record purchases, ending inventory would be:    (2 points)

    a.  
    b.  
    c.  
    d.  

  47. The ending inventory assuming FIFO is:    (2 points)

    a.  
    b.  
    c.  
    d.  

  48. Sassie Sue's inventory turnover ratio for 2000 is:    (2 points)

    a.  
    b.  
    c.  
    d.  

  49. The average days inventory for Sassie Sue is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  50. Blaine Corporation adopted dollar-value LIFO on January 1, 2000 when the inventory value was $500,000 and the cost index was 1.0. On December 31, 2000, the inventory value at year-end costs was $535,000 and the cost index was 1.06. Blaine would report a LIFO inventory of:    (2 points)

    a.  
    b.  
    c.  
    d.  



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