Download Doran`s Section- Accounting 284- Spring 96

Doran Accounting 284 Section E Spring 2001 Quiz 4A Chap. 7 3/6 (10 Points)
Name_SOLUTION___
SS#________________
Part I True/False (Circle the Correct Response) 1/2 Point Each
T F
T F
T F
T F
T F
An overstatement of the ending inventory causes an overstatement of current assets
and net income, as well as an overstatement of cost of goods sold for the same year.
LIFO can be used for tax purposes and FIFO can be used for financial reporting for a
company in a given year.
The lower-of-cost-or-market (LCM) rule is used because of the conservatism
exception, which is permitted to override the cost principle.
The higher the inventory turnover ratio, the higher the average days it takes to sell
inventory.
When the weighted average inventory method is used, ending inventory and cost of
goods sold are valued at a different cost per unit.
Part II Multiple Choice (Circle the Correct Response)
1.5pts 1. Which of the following types of inventory usually is not held by a manufacturing
business?
A)
B)
C)
D)
E)
Finished goods inventory.
Raw material inventory.
Merchandise inventory.
Work in process inventory.
All of the above are correct.
1.5pts 2. The 20B records of Tom Company showed beginning inventory, $6,000; cost of
goods sold, $14,000; and ending inventory, $8,000. The purchases amount for 20B,
was
A)
B)
C)
D)
E)
$12,000
$10,000
$ 9,000
$16,000
None of the above is correct.
1.5pts 3. Wilder Company reported pretax income amounts of: 20B, $11,000; and 20C,
$15,000. Later it was discovered that the ending inventory for 20B was understated
by $2,000 (and not corrected in 20C). The correct pretax income for each year was:
20B
20C
A) $ 9,000
$20,000.
B) $13,000
$17,000.
C) $13,000
$13,000.
D) $ 9,000
$17,000.
E) None of the above is correct.
-Continued on Back Side-
1.5pts 4. Maxell Company uses the periodic FIFO method to value inventory and had the
following transactions in the period. What are the cost of goods sold and ending
inventory balances in dollars for the period?
Date
1/1
1/2
1/5
1/6
A)
B)
C)
D)
E)
Transaction
Beginning
balance
Purchase
Sale
Sale
# of units
100
Cost per unit
$4
75
75
50
$5
COGS
Ending Inventory
625
175
525
225
600
200
525
250
None of the above is correct.
1.5pts. 5. Which of the following statements is correct?
A) FIFO reports lower income amounts than LIFO when prices are rising.
B) LIFO reports a higher income amount than FIFO when prices are rising.
C) LIFO reports a higher income amount than FIFO when prices are
decreasing.
D) LIFO reports the same amount of income as FIFO when prices are rising.
E) None of the above is correct.