ACC 371 - Test 3
a
Assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products, the year-end adjusting entry, assuming that inventory write-downs of this nature are common for this company, would include a: a. debit to cost of goods sold for $65. b. debit to inventory for $50. c. credit to cost of goods sold for $50. d. debit to inventory for $65.
a
At the beginning of the year, a company had a credit balance of $12,000 in its LIFO reserve account. At the end of the year, the company calculates ending inventory under LIFO to be $137,000 and under FIFO to be $155,000. Which of the following correctly records the LIFO reserve adjusting entry at the end of the year? a. Debit cost of goods sold and credit LIFO reserve for $6,000. b. Debit retained earnings and credit LIFO reserve for $6,000. c. Debit inventory and credit retained earnings for $18,000. d. Debit cost of goods sold and credit LIFO reserve for $18,000.
d
At the end of a reporting period, a company determines that its ending inventory has a net realizable value below cost. What would be the effect(s) of the adjusting entry to record inventory at net realizable value? a. Decrease total assets. b. Increase total expenses. c. Decrease retained earnings. d. All of the other answers are correct.
c
For companies that use FIFO, average cost, or any method other than LIFO or retail inventory method, inventory is valued at: a. Cost. b. Replacement cost. c. The lower of cost or net realizable value. d. Net realizable value.
d
If ending inventory in 2024 is overstated, which of the following is true? a. Total assets in 2024 are overstated. b. Total expenses in 2024 are understated. c. Retained earnings in 2024 is overstated. d. All of the other answers are correct.
c
In a period of rising costs, the use of which of the following inventory cost methods would result in the highest ending inventory? a. Average cost. b. VRBO. c. FIFO. d. LIFO.
a
On December 31, 2024, a company adopted the dollar-value LIFO inventory method. Inventory at the end of 2024 for its only inventory pool was $500,000 under the dollar-value LIFO method. At the end of 2025, inventory at year-end cost is $672,000 and the cost index is 1.05. Inventory at the end of 2025 at dollar-value LIFO cost is: a. $647,000. b. $625,000. c. $640,000. d. $672,000.
d
The Jaguar Company incorrectly omitted $100,000 of merchandise from its 2024 ending inventory. In addition, a merchandise purchase of $40,000 was incorrectly recorded as a $4,000 debit to the purchases account. As a result of these errors, 2024 before-tax income is: a. overstated by $64,000. b. overstated by $136,000. c. understated by $136,000. d. understated by $64,000.
b
The lower of cost or net realizable value rule causes losses in the value of inventory to be recognized in the period when: a. The inventory is sold. b. The value of inventory declines below cost. c. Cash collection from the customer fails to occur. d. The inventory is purchased.
a
Using a perpetual inventory system, the purchase of inventory on account is recorded with a: a. Debit to inventory. b. Debit to cost of goods sold. c. Debit to accounts payable. d. Credit to sales revenue.
d
Using a perpetual inventory system, the sale of inventory on account is recorded with each of the following except: a. Debit to cost of goods sold. b. Credit to inventory. c. Credit to sales revenue. d. Debit to purchases.
