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| 1.
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Goods in transit that were purchased under freight terms of FOB factory should be included in the ending inventory of the buyer. |
| | A) | True |
| | B) | False |
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| 2.
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When merchandise is left on consignment with a consignee, it should be included in the ending inventory of the consignee. |
| | A) | True |
| | B) | False |
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| 3.
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Merchandise received by a retailer to sell on consignment should be excluded from the ending merchandise inventory of the retailer. |
| | A) | True |
| | B) | False |
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| 4.
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The incidental costs of maintaining inventory (stocking, insuring, rotating, etc.) are generally treated as costs of the reporting period in which these costs are incurred. |
| | A) | True |
| | B) | False |
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| 5.
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Under the FIFO method of inventory valuation, the assignment of cost to merchandise sold is in the same order in which the merchandise was purchased. |
| | A) | True |
| | B) | False |
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| 6.
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Under the LIFO method of inventory valuation, the ending merchandise inventory would be valued at the purchase price of the most recent purchases. |
| | A) | True |
| | B) | False |
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| 7.
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In a periodic system, if a retailer purchased 500 units of merchandise inventory at $8 per unit, and 800 units of inventory at $10 per unit, the weighted average cost of the merchandise is $9 per unit. |
| | A) | True |
| | B) | False |
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| 8.
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During extended periods of rising prices, the FIFO method of inventory pricing will yield a higher cost of merchandise sold and a lower ending merchandise inventory, when compared to the LIFO method of inventory pricing. |
| | A) | True |
| | B) | False |
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| 9.
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During extended periods of rising prices, the use of LIFO will result in a greater amount of gross profit than would result if FIFO were used. |
| | A) | True |
| | B) | False |
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| 10.
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When the value of ending merchandise inventory is overstated, the net income of the subsequent year will be understated by the amount of the overstatement of the ending merchandise inventory. |
| | A) | True |
| | B) | False |
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| 11.
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Should an error that understates the ending merchandise inventory not be discovered, at the end of the subsequent year the capital account will be overstated. |
| | A) | True |
| | B) | False |
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| 12.
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FIFO, LIFO, weighted average, and specific invoice inventory pricing are terms used to describe inventory systems. |
| | A) | True |
| | B) | False |
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| 13.
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If one hundred units of merchandise were purchased at $15 per unit and the current market price of the merchandise is $8 per unit, the merchandise will be reported at $8 per unit. |
| | A) | True |
| | B) | False |
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| 14.
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Financial statements prepared between the first day and the last day of the fiscal period are called interim statements. |
| | A) | True |
| | B) | False |
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| 15.
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The ratio of goods available for sale at cost to the same goods available for sale at retail prices is called the retail method cost ratio. |
| | A) | True |
| | B) | False |
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| 16.
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Goods available for sale at cost total $65,000 and at retail total $100,000. Total net sales at retail total $85,000. The cost ratio is 65%. |
| | A) | True |
| | B) | False |
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| 17.
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Goods available for sale at cost total $55,000 and at retail total $100,000. The cost ratio is 55% and the net sales for the period total $80,000. The ending inventory at retail totals $20,000 and the ending inventory at cost totals $11,000. |
| | A) | True |
| | B) | False |
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| 18.
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Net Sales total $100,000. Beginning inventory totals $12,000 and the total cost of merchandise purchases is $48,000. Gross profit is 60% of net sales. The ending inventory using the gross profit method will be $30,000. |
| | A) | True |
| | B) | False |
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| 19.
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The formula for Merchandise Turnover is Average Merchandise Inventory / by Cost of Goods Sold. |
| | A) | True |
| | B) | False |
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| 20.
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The lowest ratio possible is the goal of the user of the merchandise turnover ratio. |
| | A) | True |
| | B) | False |
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| 21.
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If the ending inventory is overstated, the cost of goods sold is overstated and net income is understated. |
| | A) | True |
| | B) | False |
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| 22.
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If the ending inventory is overstated, the cost of goods sold is understated and net income is overstated. |
| | A) | True |
| | B) | False |
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| 23.
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If the beginning inventory is overstated, the cost of goods sold is overstated and net income is understated. |
| | A) | True |
| | B) | False |
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| 24.
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If the beginning inventory is understated, the cost of goods sold is overstated and net income is overstated. |
| | A) | True |
| | B) | False |
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| 25.
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If the business uses LIFO for tax purposes they may use any other method of inventory costing for their financial statements. |
| | A) | True |
| | B) | False |
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| 26.
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Using one inventory costing system over another has really very little effect on the amount of taxes that might be due in any given period. |
| | A) | True |
| | B) | False |
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| 27.
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When costs and prices are rising, the moving weighted average method gives a lower inventory figure on the balance sheet as compared to FIFO. |
| | A) | True |
| | B) | False |
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| 28.
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One advantage of using moving weighted average is that it exactly matches costs and revenues. |
| | A) | True |
| | B) | False |
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| 29.
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One advantage of using FIFO is that it assigns the most recent costs incurred to cost of goods sold, and likely better matches current costs with revenues. |
| | A) | True |
| | B) | False |
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| 30.
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The conservatism principle most governs allocations of cost of goods available for sale between ending inventory and cost of goods sold. |
| | A) | True |
| | B) | False |
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| 31.
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Net sales is $86,000, Cost of Goods Sold is $51,600. The gross profit ratio is 60% |
| | A) | True |
| | B) | False |
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