Quiz
chapter 6
Questions in this quiz (48)
1Manufactured inventory that has begun the production process but is not yet completed is
- Awork in process.
- B
raw materials.
- Cmerchandise inventory.
- Dfinished goods.
- Awork in process.
2The factor which determines whether or not goods should be included in a physical count of inventory is
- Aphysical possession.
- Bwhether or not the purchase price has been paid.
- Cmanagement's judgment.
- Dlegal title
3If goods in transit are shipped FOB destination
- Athe seller has legal title to the goods until they are delivered.
- Bthe buyer has legal title to the goods until they are delivered.
- Cthe transportation company has legal title to the goods while the goods are in transit.
- Dno one has legal title to the goods until they are delivered.
- Athe seller has legal title to the goods until they are delivered.
4Independent internal verification of the physical inventory process occurs when
- Aa second employee counts the inventory and compares the result to the count made by the first employee.
- Ball prenumbered inventory tags are accounted for.
- Cthe items counted are compared to the inventory account balance.
- Dthe employee is required to count all items twice for sake of verification.
- Aa second employee counts the inventory and compares the result to the count made by the first employee.
5An employee assigned to counting computer monitors in boxes should
- Adetermine that the box contains a monitor.
- Brely on the warehouse records of the number of computer monitors.
- Cread each box and rely on the box description for the contents.
- Destimate the number if there is a large quantity to be counted.
- Adetermine that the box contains a monitor.
6After the physical inventory is completed
- Aquantities are entered into various general ledger inventory accounts.
- Bunit costs are determined by dividing the quantities on the summary sheets by the total inventory costs.
- Cthe accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets.
- Dquantities are listed on inventory summary sheets.
- Aquantities are entered into various general ledger inventory accounts.
7When is a physical inventory usually taken?
- AWhen the company has its greatest amount of inventory.
- BAt the end of the company’s fiscal year.
- CWhen the company has its greatest amount of inventory and at the end of the company's fiscal year.
- DWhen goods are not being sold or received.
- AWhen the company has its greatest amount of inventory.
8Which of the following should not be included in the physical inventory of a company
- AGoods shipped on consignment to another company.
- BAll of these answer choices should be included.
- CGoods held on consignment from another company.
- DGoods in transit from another company shipped FOB shipping point.
- AGoods shipped on consignment to another company.
9Tidwell Company's goods in transit at December 31 include sales made
(1) FOB destination
(2) FOB shipping point
and purchases made
(3) FOB destination
(4) FOB shipping point.
Which items should be included in Tidwell's inventory at December 31?- A(2) and (4)
- BSales made FOB shipping point and purchase made FOB destination
- C(1) and (4)
- D(1) and (3)
- A(2) and (4)
10The term "FOB" denotes
- Afreight charge on buyer.
- Bfree only (to) buyer.
- Cfree on board.
- Dfreight on board.
- Afreight charge on buyer.
11Goods held on consignment are
- Akept for sale on the premises of the consignor.
- Bincluded as part of no one’s ending inventory.
- Cnever owned by the consignee.
- Dincluded in the consignee’s ending inventory.
- Akept for sale on the premises of the consignor.
12Many companies use just-in-time inventory methods. Which of the following is not an advantage of this method?
- AIt lowers inventory levels and costs.
- BCompanies can respond to individual customer requests.
- Cit limits the risk of having obsolete items in inventory.
- DCompanies may not have quantities to meet customer demand.
13When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory
- AAll are a purpose of taking a physical inventory when a perpetual inventory system is used.
- BTo check the accuracy of the perpetual inventory records
- CTo determine cost of goods sold for the accounting period
- DTo compute inventory ratios
- AAll are a purpose of taking a physical inventory when a perpetual inventory system is used.
14Which statement is false?
- ACompanies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.
- BAn inventory count is generally more accurate when goods are not being sold or received during the counting.
- CTaking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand.
Noing period. - DNo matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period.
15Reeves Company is taking a physical inventory on March 31, the last day of its fiscal year. Which of the following must be included in this inventory count?
- AGoods that Reeves is holding on consignment for Parker Company
- BGoods in transit that Reeves has sold to Smith Company, FOB shipping point
- CGoods that Reeves is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due
- DGoods in transit to Reeves, FOB destination
16Manufacturers usually classify inventory into all the following general categories except
- Awork in process.
- Bmerchandise inventory.
- Craw materials.
- Dfinished goods.
17Johnson Company has a high inventory turnover that has increased over the last year. All of the following statements are true regarding this situation except Johnson County:
- Ais increasing the amount of inventory on hand relative to sales.
- Bmay be losing sales due to inventory shortages.
- Chas a cost of goods sold that is increasing relative to its average inventory.
- Dis minimizing funds tied up in inventory.
- Ais increasing the amount of inventory on hand relative to sales.
18Days in inventory is calculated by dividing 365 days by
- Athe inventory turnover.
- Bbeginning inventory.
- Cending inventory.
- Daverage inventory.
- Athe inventory turnover.
19Which of these would cause the inventory turnover ratio to increase the most?
- Akeeping the amount of inventory on hand constant but decreasing sales.
- Bdecreasing the amount of inventory on hand and increasing sales.
- Cincreasing the amount of inventory on hand.
- Dkeeping the amount of inventory on hand constant but increasing sales.
20A low number of days in inventory may indicate all of the following except
- AThere is less chance of having obsolete inventory items.
- BThe company has fewer funds tied up in inventory.
- CManagement has achieved the best balance between too much and too little inventory levels.
- DSales opportunities may be lost because of inventory shortages.
21Inventory costing methods place primary reliance on assumptions about the flow of
- Agoods.
- Bresale prices.
- Cvalues.
- Dcosts.
22The LIFO inventory method assumes that the cost of the latest units purchased are
- Athe first to be allocated to ending inventory.
- Bthe last to be allocated to cost of goods sold.
- Cthe first to be allocated to cost of goods sold.
- Dnot allocated to cost of goods sold or ending inventory.
- Athe first to be allocated to ending inventory.
23Which of the following is an inventory costing method?
- APerpetual
- BSpecific identification
- CLower of cost or market
- DPeriodic
- APerpetual
24Which of the following terms best describes the assumption made in applying the four inventory methods?
- AAsset flow
- BPhysical flow
- CGoods flow
- DCost flow
25An assumption about cost flow is necessary
- Aeven when there is no change in the purchase price on inventory.
- Bbecause prices usually change, and tracking which units have been sold is difficult.
- Conly when the flow of goods cannot be determined.
- Dbecause it is required by the income tax regulation.
26Which of the following items will increase inventoriable costs for the buyer of goods?
- Apurchase discounts taken by the purchaser
- Bfreight charges paid by the purchaser
- Cpurchase returns and allowances granted by the seller
- Dfreight charges paid by the seller
- Apurchase discounts taken by the purchaser
27Of the following companies, which one would not likely employ the specific identification method for inventory costing?
- Amusic store specializing in organ sales
- Bfarm implement dealership
- Cantique shop
- Dhardware store
28A problem with the specific identification method is that
- Athe lower of cost or market basis cannot be applied.
- Binventories can be reported at actual costs.
- Cmanagement can manipulate income.
- Dmatching is not achieved.
29The selection of an appropriate inventory cost flow assumption for an individual company is made by
- Athe internal auditors.
- Bmanagement.
- Cthe external auditors.
- Dthe SEC.
- Athe internal auditors.
30The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is
- Acalled the consistency principle.
- Bcalled the physical flow assumption.
- Ccalled the matching principle.
- Dnonexistent; that is, there is no such accounting requirement.
31Which of the following statements is true regarding inventory cost flow assumptions?
- AA company must use the same method for domestic and foreign operations.
- BA company may never change its inventory costing method once it has chosen a method.
- CA company must comply with the method specified by industry standards.
- DA company may use more than one costing method concurrently.
32Which of the following statements is correct with respect to inventories?
- AThe FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
- BUnder FIFO, the ending inventory is based on the latest units purchased.
- CFIFO seldom coincides with the actual physical flow of inventory.
- DIt is generally good business management to sell the most recently acquired goods first
- AThe FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
33Given equal circumstances, which inventory method would probably be the most time consuming?
- ALIFO
- BSpecific identification
- CFIFO
- DAverage cost
- ALIFO
34Which inventory costing method should a gasoline retailer use?
- ALIFO
- BFIFO
- Ceither LIFO or FIFO
- Daverage cost
35In periods of rising prices, which is an advantage of using the LIFO inventory costing method?
- AEnding inventory will include latest (most recent) costs and thus be more realistic.
Net income will be the highest and thus reflect the prosperity of the c - BNet income will be the highest and thus reflect the prosperity of the company.
- CPhantom profits are reported.
- DCost of goods sold will include latest (most recent) costs and thus will be more realistic.
- AEnding inventory will include latest (most recent) costs and thus be more realistic.
36In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the
- AFIFO method.
- BLIFO method.
- Caverage-cost method.
- Dtax method.
- AFIFO method.
37In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory
- AFIFO method
- BNeed more information to answer
- CAverage cost method
- DLIFO method
- AFIFO method
38In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?
- AAverage cost method
- BFIFO method
- CNeed more information to answer
- DLIFO method
39Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?
- ALIFO
- BWhichever method that produces the highest ending inventory figure
- CFIFO
- DAverage cost method
40Two 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, then the company using
- AFIFO will have the highest cost of goods sold.
- BFIFO will have the highest ending inventory.
- CLIFO will have the highest ending inventory.
- DLIFO will have the lowest cost of goods sold.
41If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the
- Anet income of the companies will be identical.
- Bending inventory of the companies will be identical.
- Ccost of goods purchased during the year will be identical.
- Dcost of goods sold of the companies will be identical.
42In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?
- AAverage cost method
- BLIFO
- CIncome tax expense for the period will be the same under all assumptions
- DFIFO
- AAverage cost method
43Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most?
- AAverage cost method
- BLIFO
- CIncome tax expense for the period will be the same under all assumptions
- DFIFO
- AAverage cost method
44The specific identification method of costing inventories is used when the
- Acompany sells large quantities of relatively low cost homogeneous items.
- Bcompany sells a limited quantity of high-unit cost items.
- Cphysical flow of units cannot be determined.
- Dcompany sells large quantities of relatively low cost heterogeneous items.
45The specific identification method of inventory costing
- Amay enable management to manipulate net income.
- Balways maximizes a company's net income.
- Calways minimizes a company's net income.
- Dhas no effect on a company's net income.
- Amay enable management to manipulate net income.
46The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?
- ALIFO
- BAverage cost
- CPhysical inventory method
- DFIFO
- ALIFO
47In periods of inflation, phantom or paper profits may be reported as a result of using the
- Aperiodic inventory method.
- Bperpetual inventory method.
- CFIFO costing assumption.
- DLIFO costing assumption.
48Selection of an inventory costing method by management does not usually depend on
- Atax effects.
- Bthe fiscal year end.
- Cincome statement effects.
- Dbalance sheet effects.
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- Quiz on chapter 6, created by robertse10 on 27/10/2014.
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