ACC 210: Ch 6 Pre-Quiz

Which of the following statements is true regarding inventory cost flow assumptions? A company may use more than one costing method concurrently. A company must comply with the method specified by industry standards. A company must use the same method for domestic and foreign operations. A company may never change its inventory costing method once it has chosen a method.

A company may use more than one costing method concurrently

Companies may be motivated to overstate closing inventories in order?

All of these: For managers to earn higher bonuses. To prevent lenders from finding out the company's financial weakness. To maintain or boost its stock price

Cost of goods sold is computed from the following equation:

Beginning inventory + cost of goods purchased - ending inventory

Inventories affect?

Both the balance sheet and the income statement

Beginning inventory plus the cost of goods purchased equals?

Cost of goods available for sale

The cost of goods available for sale is allocated to the cost of goods sold and the?

Ending inventory

Which of the following is not a common cost flow assumption used in costing inventory?

Middle-in, first-out

Inventory is?

Reported as a current asset on the balance sheet

The LIFO inventory method assumes that the cost of the latest units purchased are?

The first to be allocated to cost of goods sold

Which of the following statements is correct with respect to inventories? The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. It is generally good business management to sell the most recently acquired goods first. Under FIFO, the ending inventory is based on the latest units purchased. FIFO seldom coincides with the actual physical flow of inventory.

Under FIFO, the ending inventory is based on the latest units purchased