1. How should the balances of Progress Billings and Constructionin Progress be shown at reporting dates prior to completion of along-term contract
a. Progress billings as income, construciton in progress asinventory
b. Net , as income from construction if credit balance, and lossfrom construction if debit balance
c. Progress Billings as deferred income, Construction inProgress as a current asset
d. Net, as a current asset if debit balance and currentliability if credit balance
3. the competed-contract method of accounting for long-termconstruction-type contracts is preferable when
a. a contractor is involved in numerous projects
b. the contracts are of a relatively long duration
c. estimates of costs to complete and extent of progress towardcompletion are reasonably dependable
d. there are inherent uncertainties in the contract beyondnormal business risks
4. C & J Construction has consistently used the percentageof completion method of recognizing income. Last year C & Jstarted work on a $4,500,000 constuction contract, which wascompleted this year, the accounting records desclosed the followingdata for the last year
Progress billings - $1,650,000
Costs incurred - 1,350,000
Collections - 1,050,000
Estimated cost to complete - 2,700,000
How much income should C & J have recognized on thiscontract last year?
a. 105,000
b. 150,000
c. 300,000
d. 350,000
6. The use of the gross profit assumes
a. the amount of gross profit is the same as in prior years
b. sales and cost of goods sold have not changed from previousyears
c. inventory values have not increased from previous years
d. the relationship between selling price and cost of goods soldis similar to prior years
7. the gross profit method of inventory valuation is not validwhen
a. there is substantial increase in the quantity of inventoryduring the year
b. there is substantial increase in the cost of inventory duringthe year
c. the gross margin percentage changes significantly during theyear
d. all ending inventory is destroyed by dire before it can becounted
8. When the current year's ending inventory amount isoverstated,
a. the current year's cost of goods sold is overstated
b. the current year's total assets are understated
c. the current year's net income is overstated
d. the next year's income is overstated
9. If the ending inventory balance is understated, net income ofthe same period
a. will be overstated
b. will be understated
c. will be unaffected
d. cannot be determined from the above information
10. An overstatement of ending inventory in Period 1 wouldresult in income of Period 2 being
a. overstated
b. understated
c. correctly stated
d. the answer cannot be determined from the informationgiven
11. what is the maximum amount at which inventory can be valuedwhen the goods have experienced a permanent decline in value
a. historical cost
b. sales price
c. net realizable value
d. net realizable value reduced by a normal profit margin
12. Net realizable value can be defined as
a. selling price
b. selling price less costs to complete and sell
c. selling price plus costs to complete and sell
d. acquisition cost plus costs to complete and sell
13. Miller company needs an estimate of its ending inventorybalance. The following information is available
Cost Retail
sales revenue - 180,000
beginning inventory - 35,000 62,000
net purchases - 100,000 135,000
gross margin percentage - 30%
Given this information, when using the gross margin estimationmethod, ending inventory is approx
a. 1,000
b. 9,000
c. 19,000
d. 11,650
14. Which of the following would not be reported asinventory?
a. land acquired for resale by a real estate firm
b. stocks and bonds held for resale by a brokerage firm
c. partially completed goods held by a manufacturing company
d. machinery acquired by a manufacturing company for use in theproduction process
15. Cost of goods sold is equal to
a. the cost of inventory on hand at the end of a period plus netpurchases minus the cost of inventory on hand at the beginning
b. the cost of inventory on hand at the beginning of a periodminus net purchases plus the cost of inventory on hand at the endof a period
c. the cost of inventory on hand at the beginning of a periodplus net sales minus the cost of inventory on hand at the end of aperiod
d. the cost of inventory on hand at the beginning of a periodplus net purchases minus the cost of inventory on hand at the endof a period
17. In a period of falling prices, the use of which of thefolliwng inventory cost flow methods would typically result inhighest cost of goods sold?
a. FIFO
b. LIFO
c. Weighted average cost
d. Specific identification
18. In a period of rising prices, the inventory cost allocationmethod that tends to result in the lowest reported net incomeis
a. LIFO
b. FIFO
c. Moving average
d. Weighted average
19. The LIFO inventory cost flow method may be applied to whichof the following inventory systems?
Periodic Perpetual
a. no no
b. no yes
c. yes yes
d. yes no
