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1. A drawback to using _______ when inventory costs are rising is that the company reports lower net income. A. specific-identification costing B. FIFO C. LIFO D. average costing 2. Which of the following is an incorrect statement if ending inventory is overstated? A. Gross profit is overstated. B. Income tax is overstated. C. Cost of goods sold is overstated. D. Net income is overstated. 3. A company has $8,200 in net sales, $1,100 in gross profit, $2,500 in ending inventory, and $2,000 in beginning inventory. The company’s cost of goods sold is A. $5,600. B. $6,200. C. $5,700. D. $7,100. 4. Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.) Units Unit Price Total Cost January 1—Beginning Inventory 20 $12 $240 March 8—Sold 14 April 2—Purchase 30 $13 $390 June 5—Sold 25 Aug 6—Purchase 25 $14 $350 Sept 11—Sold 22 Total Cost of Inventory $980 Ending inventory is 14 units. What is the cost of goods sold for Casey Company for 2012 using LIFO? A. $308 B. $264 C. $784 D. $801 7. New technology, like the latest cell phones and HDTV, would probably be costed using the A. FIFO method of inventory costing. B. moving-average method of inventory costing. C. LIFO method of inventory costing. D. specific-identification method of inventory costing. 8. To pay the least income tax possible in periods of rising inventory costs, the company should use which inventory costing method? A. Specific identification B. FIFO C. LIFO D. Average cost 9. ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record the payment of this invoice is A. debit Accounts Payable $340; credit Cash $340. B. debit Accounts Payable $340; debit Inventory $10; credit Cash $350. C. debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50. D. debit Accounts Payable $350; credit Cash $350. 10. Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is the inventory record for Product C124: Date Received Sold Cost/Unit Balance What is the average cost per unit after the receipt of the May 17 inventory (rounded to the nearest cent)? April 22 534 $6.58 $3,513.72 May 17 433 $6.70 $2,901.10 June 21 389 $6.76 $2,629.64 August 2 436 $6.44 $2,807.84 A. $6.55 B. $6.00 C. $6.63 D. $7.40 11. Meranda Company reports the following inventory information: What is the total value of the merchandise under LCM (lower-of-cost or market)? Inventory Number Inventory Quantity Unit Cost Unit Market Value APD 3838 325 $56.78 $55.32 CPZ 1212 506 $92.31 $92.78 IXL 4039 817 $77.89 $79.31 EOD 3902 382 $19.38 $19.02 DKS 4823 626 $33.46 $30.74 A. $154,832.90 B. $157,147.60 C. $158,545.60 D. $156,230.80 12. Nick Company reports the following inventory information: What is the total value of the merchandise under LCM (lower-of-cost or market)? Inventory Number Inventory Quantity Unit Cost Unit Market Value APD 4837 440 $51.29 $51.48 CPZ 2837 290 $76.59 $77.02 IXL 9291 310 $42.34 $42.47 EOD 1717 200 $22.19 $21.75 DKS 3088 180 $31.22 $31.17 A. $68,210.30 B. $67,961.70 C. $68,113.30 D. $67,864.70 13. One of the biggest factors in implementing SOX was A. establishing internal control procedures. B. the cost of implementing the system. C. reviewing the financial reports. D. disclosing deficiencies in internal controls. 16. Which of the following is an incorrect statement if ending inventory is understated? A. Net income is understated. B. Income tax is understated. C. Gross profit is overstated. D. Cost of goods sold is overstated. 17. Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company’s internal control within the previous A. six months. B. nine months. C. 90 days. D. year. 18. The major difference in the statement of retained earnings between a service business and a merchandising business is A. that the retained earnings statement of a service business includes dividends. B. nothing. There are no differences between the two. C. that the retained earnings statement of a merchandising business includes dividends. D. that the retained earnings statement of a merchandising business shows the cost of goods sold. 19. Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000; and cost of goods sold is $77,000. The inventory turnover is A. 1.53. B. 2.99. C. 1.95. D. 1.83. End of exam 20. When a company repays the seller for shipping costs on an FOB shipping transaction, which of the following is true? A. A purchase discount can still be taken net of the prepaid shipping charges. B. A purchase discount cannot be taken when shipping charges are prepaid. C. A purchase discount can still be taken on the gross amount of the invoice. D. The shipping costs don’t affect the invoice cost.

1. A drawback to using _______ when inventory costs are rising is that the company reports lower net
income.
A. specific-identification costing
B. FIFO
C. LIFO
D. average costing

2. Which of the following is an incorrect statement if ending inventory is overstated?
A. Gross profit is overstated.
B. Income tax is overstated.
C. Cost of goods sold is overstated.
D. Net income is overstated.
3. A company has $8,200 in net sales, $1,100 in gross profit, $2,500 in ending inventory, and $2,000 in
beginning inventory. The company’s cost of goods sold is
A. $5,600.
B. $6,200.
C. $5,700.
D. $7,100.
4. Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012,
were as follows: (Note: The company uses a perpetual system of inventory.)
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Sept 11—Sold 22
Total Cost of Inventory $980
Ending inventory is 14 units.
What is the cost of goods sold for Casey Company for 2012 using LIFO?
A. $308
B. $264
C. $784
D. $801

7. New technology, like the latest cell phones and HDTV, would probably be costed using the
A. FIFO method of inventory costing.
B. moving-average method of inventory costing.
C. LIFO method of inventory costing.
D. specific-identification method of inventory costing.
8. To pay the least income tax possible in periods of rising inventory costs, the company should use which
inventory costing method?
A. Specific identification
B. FIFO
C. LIFO
D. Average cost
9. ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record
the payment of this invoice is
A. debit Accounts Payable $340; credit Cash $340.
B. debit Accounts Payable $340; debit Inventory $10; credit Cash $350.
C. debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.
D. debit Accounts Payable $350; credit Cash $350.
10. Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is
the inventory record for Product C124:
Date Received Sold Cost/Unit Balance
What is the average cost per unit after the receipt of the May 17 inventory (rounded to the nearest cent)?
April 22 534 $6.58 $3,513.72
May 17 433 $6.70 $2,901.10
June 21 389 $6.76 $2,629.64
August 2 436 $6.44 $2,807.84
A. $6.55
B. $6.00
C. $6.63
D. $7.40
11. Meranda Company reports the following inventory information:
What is the total value of the merchandise under LCM (lower-of-cost or market)?
Inventory
Number
Inventory
Quantity Unit Cost
Unit Market
Value
APD 3838 325 $56.78 $55.32
CPZ 1212 506 $92.31 $92.78
IXL 4039 817 $77.89 $79.31
EOD 3902 382 $19.38 $19.02
DKS 4823 626 $33.46 $30.74
A. $154,832.90
B. $157,147.60
C. $158,545.60
D. $156,230.80
12. Nick Company reports the following inventory information:
What is the total value of the merchandise under LCM (lower-of-cost or market)?
Inventory Number Inventory Quantity Unit Cost Unit Market Value
APD 4837 440 $51.29 $51.48
CPZ 2837 290 $76.59 $77.02
IXL 9291 310 $42.34 $42.47
EOD 1717 200 $22.19 $21.75
DKS 3088 180 $31.22 $31.17
A. $68,210.30
B. $67,961.70
C. $68,113.30
D. $67,864.70
13. One of the biggest factors in implementing SOX was
A. establishing internal control procedures.
B. the cost of implementing the system.
C. reviewing the financial reports.
D. disclosing deficiencies in internal controls.
16. Which of the following is an incorrect statement if ending inventory is understated?
A. Net income is understated.
B. Income tax is understated.
C. Gross profit is overstated.
D. Cost of goods sold is overstated.
17. Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company’s
internal control within the previous
A. six months.
B. nine months.
C. 90 days.
D. year.
18. The major difference in the statement of retained earnings between a service business and a
merchandising business is
A. that the retained earnings statement of a service business includes dividends.
B. nothing. There are no differences between the two.
C. that the retained earnings statement of a merchandising business includes dividends.
D. that the retained earnings statement of a merchandising business shows the cost of goods sold.
19. Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000;
and cost of goods sold is $77,000. The inventory turnover is
A. 1.53.
B. 2.99.
C. 1.95.
D. 1.83.
End of exam
20. When a company repays the seller for shipping costs on an FOB shipping transaction, which of the
following is true?
A. A purchase discount can still be taken net of the prepaid shipping charges.
B. A purchase discount cannot be taken when shipping charges are prepaid.
C. A purchase discount can still be taken on the gross amount of the invoice.
D. The shipping costs don’t affect the invoice cost.

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