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Exam 7: Inventories

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Question 21

Multiple Choice

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An assumption about cost flow is necessary

A) because it is required by income tax regulations.
B) only when the flow of goods cannot be determined.
C) because prices usually change,and tracking which units have been sold is difficult.
D) even when there is no change in the purchase price of inventory.

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Question 22

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Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

A) Full disclosure
B) Consistency
C) Cost-benefit
D) Conservatism

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Question 23

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Use this information to answer the following question. A periodic inventory system is used. Using the average-cost method,the cost assigned to ending inventory is

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

What is the chief objective of supply-chain management? How is it accomplished?

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

The average-cost method relies on a calculation of average unit cost.

In periods of rising inventory prices,the LIFO method will result in a higher inventory valuation than will the average-cost method.

A retail store has beginning inventory of $60,000,purchases of $440,000,sales of $400,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

The just-in-time operating environment produces decreased carrying costs for inventory.

Use this inventory information for the month of June to answer the following questions. Assuming that a perpetual inventory system is used,what is ending inventory on a LIFO basis?

Which of the following companies would be most likely to use the retail method?

Use this inventory information for the month of May to answer the following question. Assuming that a periodic inventory system is used,what is cost of goods sold on a FIFO basis?

Explain how the accounting convention of conservatism applies to the lower-of-cost-or market rule.

An understatement of year 1's beginning inventory will

An understatement of year 1's ending inventory will

A fur dealer probably would use which of the following inventory methods?

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

In periods of falling prices,FIFO will result in a higher ending inventory valuation than LIFO.

Costs incurred in storing inventory usually are included in inventory costs.