Question

If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole.

Item	Inventory Quantity	Unit Cost Price	Unit Market Price
Product C	420	$ 6	$ 5
Product D	370	12	14

a.$6,540

b.$7,700

c.$6,960

d.$7,280

During times of rising prices, which of the following is not an accurate statement?

a.LIFO will result in higher income taxes than FIFO.

b.LIFO will result in a higher cost of merchandise sold than FIFO.

c.Average costing will yield results that are between those of FIFO and LIFO.

d.FIFO will result in a higher net income than LIFO.

Use the information below to answer the following question.

The following lots of a particular commodity were available for sale during the year:

Beginning inventory	5 units at $61
First purchase	15 units at $63
Second purchase	10 units at $74
Third purchase	10 units at $77

The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year.

What is the amount of cost of merchandise sold for the year according to the FIFO method?

a.$1,380

b.$1,510

c.$1,375

d.$1,250

During the taking of its physical inventory on December 31, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be

a.assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement

b.assets and retained earnings overstated by $70,000 and net income understated by $70,000

c.assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000

d.assets, retained earnings, and net income all overstated by $70,000

Use the information below to answer the following question.

Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

Date	Blankets	Units	Cost
May 3	Purchase	5	$20
10	Sale	3
17	Purchase	10	24
20	Sale	6
23	Sale	3
30	Purchase	10	30

Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method.

a.$364

b.$320

c.$324

d.$372

Which of the following will be the same amount regardless of the cost flow assumption adopted?

a.ending merchandise inventory

b.cost of goods sold

c.number of items ordered

d.gross profit

The inventory data for an item for November are:

Nov. 1	Inventory	20 units at $19
4	Sale	10 units
10	Purchase	30 units at $20
17	Sale	20 units
30	Purchase	10 units at $21

Using a perpetual system, what is the cost of merchandise sold for November if the company uses LIFO?

a.$580

b.$610

c.$590

d.$600

Answer 1

1. Option A ($6,540)

2. Option A

3. Option D ($1,250)

4. Option D