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Multiple Choice Quiz
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1.

Emerson Furniture prepared the following schedule:

 CostRetail
Beginning merchandise inventory$40,000$60,000
Purchases for November80,000140,000
Sales in November 180,000

Using the retail method for estimating the value of ending inventory, the goods available for sale at cost and retail is:

A)$40,000 and $200,000
B)$100,000 and $140,000
C)$120,000 and $200,000
D)$120,000 and $320,000
2.

DateQuantityCost
Per Unit		Total Cost
Jan 1, Beginning Inventory100$18.00$1,800.00
Mar 4, Purchase40019.007,600.00
May 8, Purchase80020.0016,000.00
Nov 3, Purchase50021.0010,500.00
Merchandise Available1,800 $35,900.00

Five-hundred and twenty units are unsold. Using the LIFO (periodic) method, the cost assigned to the ending merchandise inventory is

A)$10,900
B)$11,368
C)$9,800
D)$9,360
3.

DateQuantityCost
Per Unit		Total Cost
Jan 1, Beginning Inventory100$18.00$1,800.00
Mar 4, Purchase40019.007,600.00
May 8, Purchase80018.2514,600.00
Nov 3, Purchase50020.4010,200.00
Merchandise Available1,800 $34,200.00

Five-hundred units are unsold. Using the periodic weighted average method, the cost assigned to the ending merchandise inventory

A)$10,200
B)$9,500
C)$9,800
D)$10,500
4.

DateQuantityCost
Per Unit		Total Cost
Jan 1, Beginning Inventory100$18.00$1,800.00
Mar 4, Purchase40019.007,600.00
May 8, Purchase80020.0016,000.00
Nov 3, Purchase50021.0010,500.00
Merchandise Available1,800 $35,900.00

Five-hundred and seventy units are unsold. Using the FIFO (periodic) method, the cost assigned to the ending merchandise inventory is

A)$10,800
B)$11,900
C)$11,970
D)$11,368
5.

Beginning inventory10 units @ $10 per unit
First purchase35 units @ $11 per unit
Second purchase40 units @ $12 per unit
Third purchase15 units @ $13 per unit

If 83 units are sold, the value of the ending inventory under periodic FIFO would be

A)$177
B)$905
C)$219
D)$204
6.

Beginning inventory10 units @ $10 per unit  
First purchase35 units @ $11 per unit  
First sale   20 units
Second purchase40 units @ $12 per unit  
Second sale   35 units
Third purchase15 units @ $13 per unit  

The value of the ending inventory using a perpetual inventory system with the LIFO valuation method is

A)$485
B)$555
C)$520
D)$540
7.

Beginning inventory10 units @ $10 per unit  
First purchase35 units @ $11 per unit  
First sale   20 units
Second purchase40 units @ $12 per unit  
Second sale   35 units
Third purchase15 units @ $13 per unit  

The value of the ending inventory using a perpetual inventory system with the FIFO valuation method is

A)$555
B)$495
C)$520
D)$485
8.
Inventory at the end of the current period was erroneously understated. Which of the following is ue as a result of the understatement?
A)net income for the current year is overstated
B)the cost of goods sold for the current year is understated
C)capital at the end of the current year is overstated
D)net income at the end of the following year will be overstated
9.
When perpetual inventory is maintained, the cost of goods sold is recorded by a journal entry in which a credit is made to the
A)Cost of Goods Sold account
B)Merchandise Inventory account
C)Accounts Receivable account
D)Purchases account
10.
Which journal entry is an indication that a perpetual inventory system is being used?
A)Accounts Receivable, dr., $500; Sales, cr., $500
B)Merchandise Inventory, dr., $45,000; Income Summary, cr., $45,000
C)Cost of Goods Sold, dr., 30,000; Merchandise Inventory, cr., $30,000
D)Income Summary, dr., $24,000; Merchandise Inventory, cr., $24,000
11.

Lipton Hardware prepared the following schedule of unit costs and market prices for three items of merchandise inventory.

ItemUnitsCost
per unit		Market price
per unit
A1,000$.50$.55
B2,000.45.30
C1,500.60.75

Applying the lower of cost or market price rule, the total value of the units would be reported as

A)$2,300.00
B)$2,000.00
C)$2,080.00
D)$2,580.00
12.

Harrison Hardware prepared the following schedule:

  CostRetail
Beginning merchandise inventory$40,000$60,000
Purchases for November100,000140,000
Sales in November   180,000

Using the retail method for estimating the value of ending inventory, the estimated ending merchandise inventory at cost is

A)$30,000
B)$180,000
C)$14,000
D)$20,000
13.
Work-Days Clothing had beginning merchandise inventory of $45,000. It made purchases of $80,000 and recorded sales of $130,000 during November. Its estimated gross profit on sales was 25%. On November 30, the store was destroyed by fire. The merchandise inventory loss was
A)$27,500
B)$125,000
C)$97,500
D)$25,000
14.
Beginning inventory totals $100,000 and ending inventory totals $140,000. Net sales totals $400,000 and cost of goods sold is $300,000. The merchandise turnover ratio will be
A)2.25
B)2.50
C)3.00
D)4.50
15.
Beginning inventory totals $100,000 and ending inventory totals $140,000. Net sales totals $800,000 and cost of goods sold is $600,000. The days' sales in inventory will be (to the nearest hundredth).
A)22.25 Days
B)32.50 Days
C)55.33 Days
D)85.17 Days
16.
A company takes a physical count of inventory on Dec 31, 2003 and finds ending inventory to be understated. Which of the following statement is true?
A)Cost of Goods Sold is understated and Net Income is overstated.
B)Cost of Goods Sold is overstated and Net Income is understated.
C)Cost of Goods Sold is understated and Net Income is understated.
D)Cost of Goods Sold is overstated and Net Income is overstated.
17.
Which of the following statements is true?
A)The full disclosure principle requires that inventory be reported at market value when market is lower than cost.
B)The matching principle requires that inventory be reported at market value when market is lower than cost.
C)The conservatism principle requires that inventory be reported at market value when market is lower than cost.
D)The full materiality principle requires that inventory be reported at market value when market is lower than cost.
18.
Which of the following statements is true?
A)When costs and prices are rising, FIFO reports higher net income.
B)When costs and prices are rising, LIFO reports higher net income.
C)When costs and prices are rising, moving weighted average reports higher net income.
D)When costs and prices are rising, specific identification reports higher net income.
19.
Which of the following statements is not true?
A)Specific identification exactly matches costs and revenues.
B)Moving weighted average tends to smooth out price changes.
C)FIFO assigns an amount to inventory that is the lower of cost or market, which satisfies the conservatism principle.
D)LIFO assigns the most recent costs incurred to cost of goods sold, and likely better matches current costs with revenues.





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