1) Which of the following accounts has a normal credit balance?
Sales Returns and Allowances
Cost of Goods Sold
2) Classic Floors has the following inventory data:
July 1 Beginning inventory 15 units at $8.00
5 Purchases 60 units at $8.80
14 Sale 40 units
21 Purchases 30 units at $9.60
30 Sale 28 units
Assuming that a perpetual inventory system is used, what is the value of ending inventory on a LIFO basis for July?
3) Which statement concerning lower of cost or market (LCM) is incorrect?
LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.
Under the LCM basis, market does not apply because assets are always recorded and maintained at cost.
The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item.
LCM is applied after one of the cost flow assumptions has been applied.
4) Which of the following is not a common cost flow assumption used in costing inventory?
5) Freight costs incurred by a seller on merchandise sold to customers will cause an increase
in the selling expenses of the buyer.
in operating expenses for the seller.
to the cost of goods sold of the seller.
to a contra-revenue account of the seller.
6) Which of these would cause the inventory turnover ratio to increase the most?
Increasing the amount of inventory on hand.
Keeping the amount of inventory on hand constant but increasing sales.
Keeping the amount of inventory on hand constant but decreasing sales.
Decreasing the amount of inventory on hand and increasing sales.
7) At May 1, 2012, Heineken Company had beginning inventory consisting of 100 units with a unit cost of $7. During May, the company purchased inventory as follows:
200 units at $7
300 units at $8
The company sold 500 units during the month for $12 per unit. Heineken uses the average cost method. The value of Heineken’s inventory at May 31, 2012 is
8) For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except to:
check the accuracy of the records.
determine the amount of wasted raw materials.
determine losses due to employee theft.
determine ownership of the goods.
9) Echo Sound Company just began business and made the following four inventory purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is
the FIFO method.
the LIFO method.
the weighted average unit cost method.
10) The accountant at Landry Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $8,740. The LIFO method will result in income before taxes of $7,900. What is the difference in tax that would be paid between the two methods?
Cannot be determined from the information provided.