Ch.8 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. The cost of goods available for sale during the period exceeds the cost of goods sold by the amount of the beginning inventory.   (4 points)

      
      

  2. In a periodic inventory system, understating the amount of ending inventory will cause an understatement of gross profit in the current year.   (4 points)

      
      

  3. If the terms of a sale are F.O.B. shipping point, the sale should not be recorded until the goods are received by the buyer.   (4 points)

      
      

  4. A jewelry store would logically have a higher inventory turnover rate than would a fish market.   (4 points)

      
      

  5. If a company liquidates part or all of its LIFO reserve, its gross profit rate is likely to rise temporarily.   (4 points)

      
      

  6. In a perpetual inventory system, an inventory flow assumption is used primarily for determining which costs to use in:   (4 points)

    a.  
    b.  
    c.  
    d.  

  7. Electra Corporation's inventory of a particular product includes 50 units purchased at a per-unit cost of $100, and another 50 units purchased at a unit cost of $120. If Electra sells 10 units of this product, the cost of goods sold will be:   (4 points)

    a.  
    b.  
    c.  
    d.  

  8. The specific identification method is more appropriate than a flow assumption:   (4 points)

    a.  
    b.  
    c.  
    d.  

  9. Which of the following will cause net income to be overstated for the following year?   (4 points)

    a.  
    b.  
    c.  
    d.  

  10. Which of the following methods of measuring the cost of goods sold most closely parallels the actual physical flow of the merchandise?   (4 points)

    a.  
    b.  
    c.  
    d.  

  11. During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely to result in the lowest taxable income?   (4 points)

    a.  
    b.  
    c.  
    d.  

  12. In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:   (4 points)

    a.  
    b.  
    c.  
    d.  

  13. Goods in transit between the buyer and the seller belong to:   (4 points)

    a.  
    b.  
    c.  
    d.  

  14. In a periodic inventory system, the cost of goods sold is determined as follows:   (4 points)

    a.  
    b.  
    c.  
    d.  

  15. The CPA firm auditing Gable Corporation found that net income had been overstated. Which of the following could be the cause?   (4 points)

    a.  
    b.  
    c.  
    d.  

  16. If an error in valuing inventory occurs in one year:   (4 points)

    a.  
    b.  
    c.  
    d.  

  17. A LIFO reserve refers to:   (4 points)

    a.  
    b.  
    c.  
    d.  

  18. Quatro Co. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows:




    On January 12, Quatro Co. sold 20 units of this product. The other 15 units remained in inventory at January 31. Refer to the above data. Assuming that Quatro uses the LIFO flow assumption, the cost of goods sold to be recorded at January 12 is:   (4 points)

    a.  
    b.  
    c.  
    d.  

  19. Quatro Co. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows:




    On January 12, Quatro Co. sold 20 units of this product. The other 15 units remained in inventory at January 31. Refer to the above data. Assuming that Quatro uses the average cost flow assumption, the cost of goods sold to be recorded at January 12 is:   (4 points)

    a.  
    b.  
    c.  
    d.  

  20. Quatro Co. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows:




    On January 12, Quatro Co. sold 20 units of this product. The other 15 units remained in inventory at January 31. Refer to the above data. Assuming that Quatro uses the LIFO flow assumption, the 15 units of this product in inventory at January 31 have a total cost of:   (4 points)

    a.  
    b.  
    c.  
    d.  

  21. Software City purchased 1,500 units of a particular software package on January 12 at a per-unit cost of $200, and another 1,500 units on January 31 at a per-unit cost of $300. In the period from February 1 through year-end, the company sold 2,700 units of this product. At year-end, 300 units remained in inventory. Refer to the above data. Assume that Software City uses the LIFO flow assumption. The cost of the 300 units in the year-end inventory is:   (4 points)

    a.  
    b.  
    c.  
    d.  

  22. Software City purchased 1,500 units of a particular software package on January 12 at a per-unit cost of $200, and another 1,500 units on January 31 at a per-unit cost of $300. In the period from February 1 through year-end, the company sold 2,700 units of this product. At year-end, 300 units remained in inventory. Refer to the above data. Assume that the replacement cost of this software at year-end is $210 per unit. Using the FIFO flow assumption and the lower-of-cost-or-market rule, Software City should write-down the carrying value of this inventory by:   (4 points)

    a.  
    b.  
    c.  
    d.  

  23. Software City purchased 1,500 units of a particular software package on January 12 at a per-unit cost of $200, and another 1,500 units on January 31 at a per-unit cost of $300. In the period from February 1 through year-end, the company sold 2,700 units of this product. At year-end, 300 units remained in inventory. Refer to the above data. Assume that the replacement cost of this software at year-end is $210 per unit. Using LIFO flow assumption and the lower-of-cost-or-market rule, the ending inventory amounts to:   (4 points)

    a.  
    b.  
    c.  
    d.  

  24. Dullsea, Inc. uses a periodic inventory system. The purchases of a particular product during the year are shown below:




    At December 31 the ending inventory consisted of 2,000 units. Refer to the above data. Compute the cost of the ending inventory based on the LIFO method of inventory valuation.   (4 points)

    a.  
    b.  
    c.  
    d.  

  25. The recent annual report of Quest Corporation disclosed a LIFO reserve of $25 million. Assuming that Quest pays income taxes at a rate of 40%, using LIFO has:   (4 points)

    a.  
    b.  
    c.  
    d.  



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