Accounting Ch.6 Questions

Which of the following should not be included in the physical inventory of a company? A. Goods held on consignment from another company. B. Goods shipped on consignment to another company. C. Goods in transit from another company shipped FOB shipping point. D. All of the above should be included.

A. Goods held on consignment from another company.

The lower-of-cost-or-net realizable value rule for inventory is an example of the application of: A. the conservatism convention. B. the historical cost principle. C. the materiality concept. D. the economic entity assumption.

A. the conservatism convention.

The LIFO reserve is: A. the difference between the value of the inventory under LIFO and the value under FIFO. B. an amount used to adjust inventory to the lower-of-cost-or-net realizable value. C. the difference between the value of the inventory under LIFO and the value under average-cost. D. an amount used to adjust inventory to historical cost.

A. the difference between the value of the inventory under LIFO and the value under FIFO.

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2022. This count did not take into consideration the following facts. Rogers Consignment Store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report. A. $230,000. B. $215,000. C. $228,000. D. $193,000.

B. $215,000.

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Carlos's days in inventory is: A. 73 days. B. 121.7 days. C. 102.5 days. D. 84.5 days.

B. 121.7 days.

Cost of goods available for sale consists of two elements: beginning inventory and: A. ending inventory. B. cost of goods purchased. C. cost of goods sold. D. All of the answer choices are correct.

B. cost of goods purchased.

Fran Company's ending inventory is understated by $4,000. The effects of this error on the current year's cost of goods sold and net income, respectively, are: A. understated and overstated. B. overstated and understated. C. overstated and overstated. D. understated and understated.

B. overstated and understated.

Harold Company overstated its inventory by $15,000 at December 31, 2021. It did not correct the error in 2021 or 2022. As a result, Harold's stockholders' equity was: A. overstated at December 31, 2021, and understated at December 31, 2022. B. overstated at December 31, 2021, and properly stated at December 31, 2022. C. understated at December 31, 2021, and understated at December 31, 2022. D. overstated at December 31, 2021, and overstated at December 31, 2022.

B. overstated at December 31, 2021, and properly stated at December 31, 2022.

Kam Company has the following units and costs. Units Unit Cost Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 12 Purchase, Nov. 8 5,000 13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO? A. $99,000. B. $108,000. C. $113,000. D. $117,000.

C. $113,000.

In periods of rising prices, LIFO will produce: A. higher net income than FIFO. B. the same net income as FIFO. C. lower net income than FIFO. D. higher net income than average-cost.

C. lower net income than FIFO.

From the data in Question 4, what is the cost of the ending inventory under LIFO? A. $113,000. B. $108,000. C. $99,000. D. $100,000.

D. $100,000.

Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a net realizable value of $80 each. The ending inventory under lower-of-cost-or-net realizable value is: A. $91,000. B. $80,000. C. $18,200. D. $16,000.

D. $16,000

Davidson Electronics has the following: Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is: A. $84,000. B. $70,000. C. $56,000. D. $75,250.

D. $75,250.

When is a physical inventory usually taken? A. When the company has its greatest amount of inventory. B. When a limited number of goods are being sold or received. C. At the end of the company's fiscal year. D. Both (b) and (c).

D. Both (b) and (c).

Which of these would cause inventory turnover to increase the most? A. Increasing the amount of inventory on hand. B. Keeping the amount of inventory on hand constant but increasing sales. C. Keeping the amount of inventory on hand constant but decreasing sales. D. Decreasing the amount of inventory on hand and increasing sales.

D. Decreasing the amount of inventory on hand and increasing sales.

In a perpetual inventory system: A. LIFO cost of goods sold will be the same as in a periodic inventory system. B. average costs are based entirely on unit-cost simple averages. C. a new average is computed under the average-cost method after each sale. D. FIFO cost of goods sold will be the same as in a periodic inventory system.

D. FIFO cost of goods sold will be the same as in a periodic inventory system.

Considerations that affect the selection of an inventory costing method do not include: A. tax effects. B. balance sheet effects. C. income statement effects. D. perpetual versus periodic inventory system.

D. perpetual versus periodic inventory system.