ACC 255 Chp 6 – Flashcards

When is a physical inventory usually taken? Entry field with correct answer When a company has its greatest amount of inventory and when goods are not being sold or received. When goods are not being sold or received When the company has its greatest amount of inventory At the end of the company's fiscal year

Which of the following should not be included in the physical inventory of a company? Entry field with correct answer Goods held on consignment from another company Goods in transit from another company shipped FOB shipping point All of the answer choices are correct. Goods shipped on consignment to another company

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2014. This count did not take into consideration the following transactions: ? Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by CityplaceRogers. The selling price of these goods is $50,000. ? Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report. Entry field with correct answer $193,000 $228,000 $215,000 $230,000

Which of the following is not a legitimate business reason for taking a physical inventory? Entry field with correct answer To determine cost of goods sold To check the accuracy of the perpetual inventory records To determine if any inventory has been lost from waste, shoplifting, or employee theft To verify the profitability of individual inventory items

Ownership passes to the buyer when the public carrier accepts the goods if the goods are shipped Entry field with correct answer FOB shipping point. FOB buyer. FOB destination. FOB shipper.

Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 25% commission. At the end of the accounting period, which of the following parties includes in its inventory the consigned goods? Entry field with incorrect answer Jerry Both Cecil and Jerry Cecil Neither Cecil nor Jerry

Inventory costing methods place primary reliance on assumptions about the flow of Entry field with correct answer costs. resale prices. values. goods.

Cost of goods purchased is $540,000, ending inventory is $20,000, and cost of goods sold is $560,000. How much is beginning inventory? Entry field with incorrect answer $0 $40,000 $20,000 $20,000

Which of the following is true of the FIFO inventory method? Entry field with correct answer It assumes that the cost of the earliest units purchased are the last to be allocated to cost of goods sold. It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold. It assumes that the cost of the earliest units purchased are the last to be allocated to the beginning inventory. It assumes that the cost of the earliest units purchased are the first to be allocated to the ending inventory.

Which of the following would most likely employ the specific identification method of inventory costing? Entry field with correct answer Gasoline station Jewelry store Grocery store Hardware store

Which of the following statements is true? Entry field with correct answer FIFO inventory valuation requires physical flow of goods to be representative of the cost flow. Specific identification method inventory valuation requires physical flow of goods to be representative of the cost flow. All of these answer choices are correct. LIFO inventory valuation requires physical flow of goods to be representative of the cost flow.

Which of the following statements is true? Entry field with correct answer The IRS dictates the method of inventory costing method a company must use. The SEC dictates the method of inventory costing method a company must use. Company management selects the method of inventory costing method a company will use. GAAP dictates the method of inventory costing method a company must use.

Kam Company has the following units and costs: Units Unit Cost Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 12 Purchase, Nov. 8 5,000 13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO using a periodic inventory system? Entry field with correct answer $113,000 $117,000 $99,000 $108,000

Kam Company has the following units and costs: Units Unit Cost Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 12 Purchase, Nov. 8 5,000 13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under LIFO using a periodic inventory system? Entry field with correct answer $108,000 $99,000 $100,000 $113,000

Davidson Electronics has the following: Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, how much is the cost of ending inventory under the average-cost method in a periodic inventory system? Entry field with correct answer $84,000 $70,000 $56,000 $75,250

In periods of rising prices, what will LIFO produce? Entry field with correct answer The same net income as FIFO Higher net income than FIFO Higher net income than average costing Lower net income than FIFO

Which one of the following is not a consideration that affects the selection of an inventory costing method? Entry field with correct answer Perpetual versus periodic inventory system Tax effects Balance sheet effects Income statement effects

In a period of rising prices which inventory method will result in the greatest amount of income tax expense? Entry field with correct answer Average cost Specific identification FIFO LIFO

With the assumption of costs and prices generally rising, which of the following is correct? Entry field with correct answer Specific identification method provides the closest cost of goods sold to replacement cost on the income statement. LIFO provides the closest valuation of inventory on the balance sheet to replacement cost. FIFO provides the closest cost of goods sold to replacement cost. LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.

Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, which statement is true? The company using Entry field with correct answer The company using LIFO will have the lowest cost of goods sold. The company using FIFO will have the highest cost of good sold. The company using LIFO will have the highest ending inventory. The company using FIFO will have the highest ending inventory.

Which situation requires a departure from the cost basis of accounting to the lower-of-cost-or-market basis in valuing inventory? Entry field with incorrect answer A decline in the value of the inventory An increase in selling price An increase in the value of the inventory A desire for more profit

Hagger Sounds has accumulated the following cost and market data on March 31: Cost Data Market Data iPods $24,000 $20,400 Cell phones 18,000 19,000 DVDs 28,000 25,600 Using the lower-of-cost-or-market, how much is the value of the ending inventory? (Apply LCM to each category) Entry field with correct answer $70,000 $65,000 $71,000 $64,000

What is the underlying rationale for the lower-of-cost-or-market rule? Entry field with correct answer The historical cost principle The materiality constraint The economic entity assumption The conservatism constraint

Carlos Comany had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. What is Carlos' days in inventory? Entry field with correct answer 73 days 121.7 days 102.5 days 84.5 days

The following information came from the income statement of the Wilkens Company at December 31, 2014: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. What is Wilkens' inventory turnover ratio for 2014? Entry field with incorrect answer 6.0 times 2.5 times 3.0 times 3.75 times