Question 1

The Lower of Cost or Market rule is based on which accounting principle?

Accepted Answer

A)   conservatism
B)   revenue recognition
C)   matching
D)   full disclosureE) A) and D)
F) B) and C)

Question 2

Distinguish between periodic inventory,perpetual inventory,and physical inventory.

Accepted Answer

Periodic inventory is based on the actua...

Question 3

The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.

Accepted Answer

A) True 
 B)False

Question 4

The lower of cost or market rule requires a business to report inventory at original cost or its current replacement cost,whichever is lower.

Accepted Answer

A) True 
 B)False

Question 5

Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.

Accepted Answer

A) True 
 B)False

Question 6

The lower the ending inventory valuation,the ____________________ the reported net income.

Accepted Answer

The answer of The lower the ending inventory valuation,the ____________________...

Question 7

The price a business would pay for its inventory is

Accepted Answer

A)   assessed value.
B)   sales price.
C)   replacement cost.
D)   discount price.E) None of the above
F) A) and D)

Question 8

The inventory valuation method which tends to smooth out periodic fluctuations in cost is:

Accepted Answer

A)   the LIFO method
B)   the weighted average cost method
C)   the FIFO method
D)   the specific identification methodE) C) and D)
F) B) and C)

Question 9

In a period of rising prices,the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

Accepted Answer

A) True 
 B)False

Question 10

In the ____________________ method of inventory valuation,inventory cost is determined by multiplying the number of units in inventory by a unit cost,which is calculated by dividing the cost of goods available for sale by the units of merchandise available for sale.

Accepted Answer

The answer of In the ____________________ method of inventory valuation,inventory...

Question 11

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000.Early in the year,8,000 units were purchased at $6 each.Using LIFO,what is the value of the ending inventory of 2,000 units?

Accepted Answer

A)   $12,000
B)   $10,000
C)   $8,000
D)   $24,000E) All of the above
F) A) and D)

Question 12

In periods of rising prices,the LIFO method of inventory valuation gives a lower taxable income and thus provides a tax advantage.

Accepted Answer

A) True 
 B)False

Question 13

The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.

Accepted Answer

A) True 
 B)False

Question 14

The use of the FIFO method of inventory valuation

Accepted Answer

A)   results in a matching of current inventory costs against sales revenue.
B)   results in the most current costs in ending inventory.
C)   results in a lowest reported net income in a time of rising prices.
D)   results in a highest reported net income in a time of falling prices.E) B) and C)
F) A) and B)

Question 15

In periods of rising prices,use of the ____________________ method of inventory valuation results in the lowest inventory cost on the balance sheet.

Accepted Answer

The answer of In periods of rising prices,use of the...

Question 16

Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?

Accepted Answer

A)   the retail method
B)   the average cost method
C)   the gross profit method
D)   the lower of cost or market methodE) A) and D)
F) B) and C)

Question 17

What is inventory shrink? How may inventory shrink come about?

Accepted Answer

Shrink is the difference between the rec...

Question 18

The use of the FIFO method of inventory valuation results in a matching of current inventory costs against current sales revenue.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is NOT a way to apply the lower of cost or market rule?

Accepted Answer

A)   by item
B)   by size
C)   in total
D)   by groupE) A) and D)
F) A) and C)

Question 20

In order to apply the matching concept,inventory costing methods,once selected,cannot be changed to an alternative method.

Accepted Answer

A) True 
 B)False

Exam 17: Merchandise Inventory

In periods of rising prices,use of the ____________________ method of inventory valuation results in the lowest inventory cost on the balance sheet.

Correct AnswerverifiedShow Answer

In a period of rising prices,the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

Correct AnswerverifiedShow Answer

What is inventory shrink? How may inventory shrink come about?

Correct AnswerverifiedShrink is the difference between the rec...View AnswerShow Answer

In periods of rising prices,the LIFO method of inventory valuation gives a lower taxable income and thus provides a tax advantage.

Correct AnswerverifiedShow Answer

In order to apply the matching concept,inventory costing methods,once selected,cannot be changed to an alternative method.

Correct AnswerverifiedShow Answer

The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.

Correct AnswerverifiedShow Answer

The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.

Correct AnswerverifiedShow Answer

The lower the ending inventory valuation,the ____________________ the reported net income.

Correct AnswerverifiedShow Answer

The use of the FIFO method of inventory valuation results in a matching of current inventory costs against current sales revenue.

Correct AnswerverifiedShow Answer

The inventory valuation method which tends to smooth out periodic fluctuations in cost is:

Correct AnswerverifiedShow Answer

The lower of cost or market rule requires a business to report inventory at original cost or its current replacement cost,whichever is lower.

Correct AnswerverifiedShow Answer

Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.

Correct AnswerverifiedShow Answer

In the ____________________ method of inventory valuation,inventory cost is determined by multiplying the number of units in inventory by a unit cost,which is calculated by dividing the cost of goods available for sale by the units of merchandise available for sale.

Correct AnswerverifiedShow Answer

The price a business would pay for its inventory is

Correct AnswerverifiedShow Answer

The Lower of Cost or Market rule is based on which accounting principle?

Correct AnswerverifiedShow Answer

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000.Early in the year,8,000 units were purchased at $6 each.Using LIFO,what is the value of the ending inventory of 2,000 units?

Correct AnswerverifiedShow Answer

The use of the FIFO method of inventory valuation

Correct AnswerverifiedShow Answer

Which of the following is NOT a way to apply the lower of cost or market rule?

Correct AnswerverifiedShow Answer

Distinguish between periodic inventory,perpetual inventory,and physical inventory.

Correct AnswerverifiedPeriodic inventory is based on the actua...View AnswerShow Answer

Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Shrink is the difference between the rec...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Periodic inventory is based on the actua...
View Answer

Correct Answer
verified