Accounting 330 Chapter 8 Wiley
If ending inventory is overstated, net income, retained earnings and working capital are overstated in that period as well. T/F
True
The use of the LIFO perpetual method of inventory results in different ending inventory and cost of goods sold amounts than the amounts calculated under the LIFO periodic method of inventory. T/F
True
LIFO would be appropriate when prices charged to customers tend to lag behind costs paid to suppliers. T/F
False
Storage costs are usually included in the value of the inventory. T/F
False
The method employed by most companies that use a LIFO system is: A.) dollar-value LIFO. B.) specific goods LIFO. C.) specific goods pooled LIFO. D.) weighted-average LIFO.
A.) dollar-value LIFO.
An erosion of LIFO inventory layers is referred to as a LIFO A.) Allowance B.) Liquidation C.) Effect D.) Reserve
B.) Liquidation
Which of the following is not considered an advantage of LIFO when prices are rising? A.) The more recent costs are matched against current revenues. B.) The inventory will be overstated. C.) There will be a deferral of income tax. D.) A company's future reported earnings will not be affected substantially by future price declines.
B.) The inventory will be overstated.
The change in the Allowance to Reduce Inventory to LIFO balance from one period to the next is called the LIFO A.) reduction. B.) allowance. C.) effect. D.) reserve.
C.) effect
In a period of rising prices, LIFO will result in a higher income tax expense than FIFO. T/F
False (LIFO will result in a lower net income and income tax expense because Cost of Goods Sold will be higher by including more recent costs.)
Manufacturing companies have only two inventory accounts: Work in Process and Finished Goods. T/F
False (Raw Materials too)
A physical inventory is only required at year-end if the company has a periodic inventory system. T/F
False (Regardless of the type of inventory system used, the company should take a physical count of inventory at the end of the fiscal year.)
