accounting

chapter 6

Under a perpetual inventory system, which of the following inventory cost flow methods will most often provide the same results as the first-in, first-out (FIFO) inventory cost flow method?

Specific identification inventory cost flow method

Which of the following statements regarding the perpetual LIFO inventory costing method is true?

The cost of the units sold is the cost of the most recent purchases.

Which of the following statements regarding the perpetual FIFO inventory costing method is true?

Costs are included in the cost of goods sold in the order in which units were purchased.

When identical units of an item are purchased at different costs, an inventory cost flow method

must be used under both perpetual and periodic inventory systems.

Which of the following is not a benefit of using a computerized perpetual inventory system?

Computerized perpetual inventory systems remove the requirement of taking a physical inventory.

If purchases are relatively uniform under the periodic inventory method, which inventory cost method would provide similar results to the physical flow of goods during the accounting period?

Weighted average cost methos

When using the periodic FIFO inventory cost method, which of the following statements is not true?

The cost of inventory on hand is made up of the earliest costs

When a periodic inventory system is used,

Only revenue is recorded each time a sale is made

When using the periodic LIFO inventory cost method, which of the following statements is true?

The physical count determines the inventory on hand.

Under the periodic inventory system, cost of goods sold is determined at the end of the accounting period by

taking physical inventory

The cost method that will yield an ending inventory value that is somewhere between possible high and low costs (prices) using traditional costing methods is the

weighted average inventory cost method

Which inventory cost method offers income tax savings during periods of rising prices?

LIFO inventory cost method

The cost method that will yield an ending inventory that is closer to current prices is the

FIFO inventory cost method.

The inventory cost method that will yield a higher ending inventory during times of inflation will be the

FIFO inventory cost method.

Any errors in inventory will

affect both the balance sheet and the income statement.

Which of the following statements regarding consigned inventory is true?

The manufacturer is the consignor

When taking a physical inventory, the company inadvertently counted its inventory as $34,000 instead of the correct amount of $43,000. Indicate the effect of the misstatement on the balance sheet of the current year.

Assets are understated by $9,000.

The lower-of-cost-or-market method cannot be applied to

each item sold

Days' sales in inventory is computed as

Average Inventory ÷ Average Daily Cost of Goods Sold.

Average inventory is computed as

(Inventory at Beginning of Period + Inventory at End of Period) ÷ 2.

Days' sales in inventory measures the

length of time it takes to acquire, sell, and replace inventory.

Inventory turnover is computed as

Cost of Goods Sold ÷ Average Inventory.

Inventory turnover measures the

relationship between cost of goods sold and the amount of inventory carried during the period.

Which of the following inventory estimation methods is useful in estimating the cost of inventory destroyed by fire or other disaster?

Gross profit method

One advantage of the retail method is that it

provides inventory figures for preparing monthly statements.

The first step in the gross profit method of inventory costing is to

determine the merchandise available for sale at cost.

Gordon Company uses the retail method of inventory costing. The retail value of the ending inventory is $330,000. If the ratio of cost to retail price is 66%, what is the amount of the ending inventory to be reported on the financial statements?

$217,800

Which of the following is not considered an advantage of using the retail method of inventory costing?

The retail method uses specific costs to compute inventory.

Which of the following inventory costing methods would require costs and retail prices to be maintained for the merchandise available for sale?

Retail method

Estimating inventory may be needed for all of the following reasons except when

the periodic method is used instead of taking a physical inventory.