1. A drawback to using _______ when inventory costs are rising is that the company reports lower netincome.A. specific-identification costingB. FIFOC. LIFOD. average costing2. Which of the following is an incorrect statement if ending inventory is overstated?A. Gross profit is overstated.B. Income tax is overstated.C. Cost of goods sold is overstated.D. Net income is overstated.3. A company has $8,200 in net sales, $1,100 in gross profit, $2,500 in ending inventory, and $2,000 inbeginning inventory. The company’s cost of goods sold isA. $5,600.B. $6,200.C. $5,700.D. $7,100.4. Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012,were as follows: (Note: The company uses a perpetual system of inventory.)Units Unit Price Total CostJanuary 1âBeginning Inventory 20 $12 $240March 8âSold 14April 2âPurchase 30 $13 $390June 5âSold 25Aug 6âPurchase 25 $14 $350Sept 11âSold 22Total Cost of Inventory $980Ending inventory is 14 units.What is the cost of goods sold for Casey Company for 2012 using LIFO?A. $308B. $264C. $784D. $8017. New technology, like the latest cell phones and HDTV, would probably be costed using theA. FIFO method of inventory costing.B. moving-average method of inventory costing.C. LIFO method of inventory costing.D. specific-identification method of inventory costing.8. To pay the least income tax possible in periods of rising inventory costs, the company should use whichinventory costing method?A. Specific identificationB. FIFOC. LIFOD. Average cost9. ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to recordthe payment of this invoice isA. debit Accounts Payable $340; credit Cash $340.B. debit Accounts Payable $340; debit Inventory $10; credit Cash $350.C. debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.D. debit Accounts Payable $350; credit Cash $350.10. Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below isthe inventory record for Product C124:Date Received Sold Cost/Unit BalanceWhat is the average cost per unit after the receipt of the May 17 inventory (rounded to the nearest cent)?April 22 534 $6.58 $3,513.72May 17 433 $6.70 $2,901.10June 21 389 $6.76 $2,629.64August 2 436 $6.44 $2,807.84A. $6.55B. $6.00C. $6.63D. $7.4011. Meranda Company reports the following inventory information:What is the total value of the merchandise under LCM (lower-of-cost or market)?InventoryNumberInventoryQuantity Unit CostUnit MarketValueAPD 3838 325 $56.78 $55.32CPZ 1212 506 $92.31 $92.78IXL 4039 817 $77.89 $79.31EOD 3902 382 $19.38 $19.02DKS 4823 626 $33.46 $30.74A. $154,832.90B. $157,147.60C. $158,545.60D. $156,230.8012. Nick Company reports the following inventory information:What is the total value of the merchandise under LCM (lower-of-cost or market)?Inventory Number Inventory Quantity Unit Cost Unit Market ValueAPD 4837 440 $51.29 $51.48CPZ 2837 290 $76.59 $77.02IXL 9291 310 $42.34 $42.47EOD 1717 200 $22.19 $21.75DKS 3088 180 $31.22 $31.17A. $68,210.30B. $67,961.70C. $68,113.30D. $67,864.7013. One of the biggest factors in implementing SOX wasA. establishing internal control procedures.B. the cost of implementing the system.C. reviewing the financial reports.D. disclosing deficiencies in internal controls.16. Which of the following is an incorrect statement if ending inventory is understated?A. Net income is understated.B. Income tax is understated.C. Gross profit is overstated.D. Cost of goods sold is overstated.17. Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company’sinternal control within the previousA. six months.B. nine months.C. 90 days.D. year.18. The major difference in the statement of retained earnings between a service business and amerchandising business isA. that the retained earnings statement of a service business includes dividends.B. nothing. There are no differences between the two.C. that the retained earnings statement of a merchandising business includes dividends.D. that the retained earnings statement of a merchandising business shows the cost of goods sold.19. Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000; and cost of goods sold is $77,000. The inventory turnover isA. 1.53.B. 2.99.C. 1.95.D. 1.83.20. When a company repays the seller for shipping costs on an FOB shipping transaction, which of the following is true?A. A purchase discount can still be taken net of the prepaid shipping charges.B. A purchase discount cannot be taken when shipping charges are prepaid.C. A purchase discount can still be taken on the gross amount of the invoice.D. The shipping costs don’t affect the invoice cost.
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