1. The tax benefit that the LIFOmethod provides might get nullified when:
a. unit costs tend to decrease as productionincreases.
b. unit costs tend to increase as productionincreases.
c. revenues are increasing faster than costs.
d. a fairly constant âbase stockâ is present.
2. Which of thefollowing statements is not true as it relates tothe dollar-value LIFO invenÂtory method?
a. It is easier to erode LIFO layers usingdollar-value LIFO techniques than it is with specific goods pooledLIFO.
b. Under the dollar-value LIFO method, it ispossible to have the entire inventory in only one pool.
c. Several pools are commonly employed in using thedollar-value LIFO inventory method.
d. Under dollar-value LIFO, increases and decreasesin a pool are determined and measured in terms of total dollarvalue, not physical quantity.
3. LawsonManufacturing Company has the following account balances at yearend:
Officesupplies $ 4,000
Rawmaterials 27,000
Work-in-process 59,000
Finishedgoods 109,000
Prepaidinsurance 6,000
What amount should Lawson report as inventories in its balancesheet?
a. $109,000.
b. $113,000.
c. $195,000.
d. $199,000.
4. MaloneCorporation uses the perpetual inventory and the gross method. OnMarch 1, it purchased $80,000 of inventory, terms 2/10, n/30. OnMarch 3, Malone returned goods that cost $8,000. On March 9, Malonepaid the supplier. On March 9, Malone should credit
a. purchase discounts for $1,600.
b. inventory for $1,600.
c. purchase discounts for $1,440.
d. inventory for $1,440.
5. Bell Inc. took a physical inventory atthe end of the year and determined that $780,000 of goods were onhand. In addition, Bell, Inc. determined that $60,000 of goods thatwere in transit that were shipped f.o.b. shipping point wereactually received two days after the inventory count and that thecompany had $90,000 of goods out on consignment. What amount shouldBell report as inventory at the end of the year?
a. $780,000.
b. $860,000.
c. $870,000.
d. $930,000.
6. Risers Inc.reported total assets of $2,400,000 and net income of $320,000 forthe current year. Risers determined that inventory was overstatedby $24,000 at the beginning of the year (this was not corrected).What is the corrected amount for total assets and net income forthe year?
a. $2,400,000 and $320,000.
b. $2,400,000 and $344,000.
c. $2,376,000 and $296,000.
d. $2,424,000 and $344,000.
7. Hudson, Inc. is acalendar-year corporation. Its financial statements for the years2018 and 2017
contained errors as follows:
2018 2017
Endinginventory $9,000overstated $24,000 overstated
Depreciationexpense $6,000understated $18,000 overstated
Assume that the proper correctingentries were made at December 31, 2017. By how much will 2018income before taxes be overstated or understated?
a. $ 3,000 understated
b. $ 3,000 overstated
c. $ 6,000 overstated
d. $15,000 overstated
8. The followinginformation is available for Naab Company for 2017:
Freight-in $ 60,000
Purchasereturns 150,000
Sellingexpenses 460,000
Endinginventory 520,000
The cost of goods sold is equal to400% of selling expenses. What is the cost of goods available forsale?
a. $1,840,000.
b. $2,300,000.
c. $2,370,000.
d. $2,360,000.
9. Winsor Co. recordspurchases at net amounts. On May 5 Winsor purchased merchandise onaccount, $80,000, terms 2/10, n/30. Winsor returned $6,000 of theMay 5 purchase and received credit on account. At May 31 thebalance had not been paid.
The amount to be recorded as a purchase return is
a. $5,400.
b. $6,120
c. $6,000.
d. $5,880.
10. Niles Co. has the following data related to an item ofinventory:
Inventory, March1 400 units @ $2.10
Purchase, March7 1,400units @ $2.20
Purchase, March16 280 units @ $2.25
Inventory, March31 520units
The value assigned to ending inventory if Niles uses LIFO is
a. $1,160.
b. $1,104.
c. $1,092.
d. $1,168.
11. Niles Co. has the following data related to an item ofinventory:
Inventory, March1 400 units @ $2.10
Purchase, March7 1,400units @ $2.20
Purchase, March16 280 units @ $2.25
Inventory, March31 520 units
The value assigned to cost of goodssold if Niles uses FIFO is
a. $1,160.
b. $1,104.
c. $3,448.
d. $3,392.
12. Transactions for the month of June were:
Purchases Sales
June1 (balance) 3,200@$3.20 June 2 2,400 @ $5.50
3 8,800 @ 3.10 6 6,400 @ 5.50
7 4,800 @ 3.30 9 4,000 @ 5.50
15 7,200 @ 3.40 10 1,600 @ 6.00
22 2,000 @ 3.50 18 5,600 @ 6.00
25 800@ 6.00
Assuming that perpetualinventory records are kept in dollars, the ending inventory on aFIFO basis is
a. $16,440.
b. $16,640.
c. $17,160.
d. $17,880.
13. Farr Co. adopted thedollar-value LIFO inventory method on December 31, 2017. Farr'sentire inventory constitutes a single pool. On December 31, 2017,the inventory was $960,000 under the dollar-value LIFO method.Inventory data for 2018 are as follows:
12/31/18 inventory at year-endprices $1,320,000
Relevant price index at year end (base year2017) 110
Using dollar value LIFO, Farr's inventory at December 31, 2018is
a. $1,056,000.
b. $1,224,000.
c. $1,200,000.
d. $1,320,000.
14. Milford Company had 500units of âTankâ in its inventory at a cost of $4 each. Itpurchased, for $2,800, 300 more units of âTankâ. Milford then sold400 units at a selling price of $10 each, resulting in a grossprofit of $1,600. The cost flow assumption used by Milford
a. is FIFO.
b. is LIFO.
c. is weighted average.
d. cannot be determined from the informationgiven.
15. Checkers uses the periodic inventory system. For the current month,the beginning inventory consisted of 7,200 units that cost $12each. During the month, the company made two purchases: 3,000 unitsat $13 each and 12,000 units at $13.50 each. Checkers also sold12,900 units during the month. Using the average cost method, whatis the amount of cost of goods sold for the month?
a. $167,055.
b. $173,700.
c. $161,850.
d. $167,700.
16. The followinginformation was available from the inventory records of RichCompany for January:
Units UnitCost Total Cost
Balance at January1 9,000 $9.77 $87,930
Purchases:
January6 6,000 10.30 61,800
January26 8,100 10.71 86,751
Sales:
January7 (7,500)
January31 (11,100)
Balance at January31 4,500
Assuming that Rich does not maintain perpetualinventory records, what should be the inventory at January 31,using the weighted-average inventory method, rounded to the nearestdollar?
a. $47,270.
b. $46,067.
c. $46,170.
d. $46,620.
17. Black Corporation uses theFIFO method for internal reporting purposes and LIFO for externalreporting purposes. The balance in the LIFO Reserve account at theend of 2017 was $280,000. The balance in the same account at theend of 2018 is $420,000. Blackâs Cost of Goods Sold account has abalance of $2,100,000 from sales transactions recorded during theyear. What amount should Black report as Cost of Goods Sold in the2018 income statement?
a. $1,960,000.
b. $2,100,000.
c. $2,240,000.
d. $2,520,000.
18. RF Company had January 1inventory of $300,000 when it adopted dollar-value LIFO. Duringthe
year, purchases were $1,800,000 and sales were $3,000,000. December31 inventory at year-end
prices was $430,080, and the price index was 112.
What is RF Companyâs gross profit?
a. $1,248,000.
b. $1,294,080.
c. $1,330,380.
d. $2,605,920.
19. Hay Company had January 1inventory of $300,000 when it adopted dollar-value LIFO. Duringthe
year, purchases were $1,800,000 and sales were $3,000,000. December31 inventory at year-end
prices was $379,500, and the price index was 110.
What is Hay Companyâs ending inventory?
a. $330,000.
b. $345,000.
c. $349,500.
d. $379,500.
20. Opera Corp. usesdollar-value LIFO method of computing its inventory cost. Data forthe past three years is as follows:
Yearended Inventoryat Price
December31. End-of-yearPrices Index
2016 $650,000 1.00
2017 1,260,000 1.05
2018 1,350,250 1.10
What is the 2018 inventory balance using dollar-value LIFO?
a. $1,350,250.
b. $1,285,000.
c. $1,227,500.
d. $1,257,750.
1. The tax benefit that the LIFOmethod provides might get nullified when:
a. unit costs tend to decrease as productionincreases.
b. unit costs tend to increase as productionincreases.
c. revenues are increasing faster than costs.
d. a fairly constant âbase stockâ is present.
2. Which of thefollowing statements is not true as it relates tothe dollar-value LIFO invenÂtory method?
a. It is easier to erode LIFO layers usingdollar-value LIFO techniques than it is with specific goods pooledLIFO.
b. Under the dollar-value LIFO method, it ispossible to have the entire inventory in only one pool.
c. Several pools are commonly employed in using thedollar-value LIFO inventory method.
d. Under dollar-value LIFO, increases and decreasesin a pool are determined and measured in terms of total dollarvalue, not physical quantity.
3. LawsonManufacturing Company has the following account balances at yearend:
Officesupplies $ 4,000
Rawmaterials 27,000
Work-in-process 59,000
Finishedgoods 109,000
Prepaidinsurance 6,000
What amount should Lawson report as inventories in its balancesheet?
a. $109,000.
b. $113,000.
c. $195,000.
d. $199,000.
4. MaloneCorporation uses the perpetual inventory and the gross method. OnMarch 1, it purchased $80,000 of inventory, terms 2/10, n/30. OnMarch 3, Malone returned goods that cost $8,000. On March 9, Malonepaid the supplier. On March 9, Malone should credit
a. purchase discounts for $1,600.
b. inventory for $1,600.
c. purchase discounts for $1,440.
d. inventory for $1,440.
5. Bell Inc. took a physical inventory atthe end of the year and determined that $780,000 of goods were onhand. In addition, Bell, Inc. determined that $60,000 of goods thatwere in transit that were shipped f.o.b. shipping point wereactually received two days after the inventory count and that thecompany had $90,000 of goods out on consignment. What amount shouldBell report as inventory at the end of the year?
a. $780,000.
b. $860,000.
c. $870,000.
d. $930,000.
6. Risers Inc.reported total assets of $2,400,000 and net income of $320,000 forthe current year. Risers determined that inventory was overstatedby $24,000 at the beginning of the year (this was not corrected).What is the corrected amount for total assets and net income forthe year?
a. $2,400,000 and $320,000.
b. $2,400,000 and $344,000.
c. $2,376,000 and $296,000.
d. $2,424,000 and $344,000.
7. Hudson, Inc. is acalendar-year corporation. Its financial statements for the years2018 and 2017
contained errors as follows:
2018 2017
Endinginventory $9,000overstated $24,000 overstated
Depreciationexpense $6,000understated $18,000 overstated
Assume that the proper correctingentries were made at December 31, 2017. By how much will 2018income before taxes be overstated or understated?
a. $ 3,000 understated
b. $ 3,000 overstated
c. $ 6,000 overstated
d. $15,000 overstated
8. The followinginformation is available for Naab Company for 2017:
Freight-in $ 60,000
Purchasereturns 150,000
Sellingexpenses 460,000
Endinginventory 520,000
The cost of goods sold is equal to400% of selling expenses. What is the cost of goods available forsale?
a. $1,840,000.
b. $2,300,000.
c. $2,370,000.
d. $2,360,000.
9. Winsor Co. recordspurchases at net amounts. On May 5 Winsor purchased merchandise onaccount, $80,000, terms 2/10, n/30. Winsor returned $6,000 of theMay 5 purchase and received credit on account. At May 31 thebalance had not been paid.
The amount to be recorded as a purchase return is
a. $5,400.
b. $6,120
c. $6,000.
d. $5,880.
10. Niles Co. has the following data related to an item ofinventory:
Inventory, March1 400 units @ $2.10
Purchase, March7 1,400units @ $2.20
Purchase, March16 280 units @ $2.25
Inventory, March31 520units
The value assigned to ending inventory if Niles uses LIFO is
a. $1,160.
b. $1,104.
c. $1,092.
d. $1,168.
11. Niles Co. has the following data related to an item ofinventory:
Inventory, March1 400 units @ $2.10
Purchase, March7 1,400units @ $2.20
Purchase, March16 280 units @ $2.25
Inventory, March31 520 units
The value assigned to cost of goodssold if Niles uses FIFO is
a. $1,160.
b. $1,104.
c. $3,448.
d. $3,392.
12. Transactions for the month of June were:
Purchases Sales
June1 (balance) 3,200@$3.20 June 2 2,400 @ $5.50
3 8,800 @ 3.10 6 6,400 @ 5.50
7 4,800 @ 3.30 9 4,000 @ 5.50
15 7,200 @ 3.40 10 1,600 @ 6.00
22 2,000 @ 3.50 18 5,600 @ 6.00
25 800@ 6.00
Assuming that perpetualinventory records are kept in dollars, the ending inventory on aFIFO basis is
a. $16,440.
b. $16,640.
c. $17,160.
d. $17,880.
13. Farr Co. adopted thedollar-value LIFO inventory method on December 31, 2017. Farr'sentire inventory constitutes a single pool. On December 31, 2017,the inventory was $960,000 under the dollar-value LIFO method.Inventory data for 2018 are as follows:
12/31/18 inventory at year-endprices $1,320,000
Relevant price index at year end (base year2017) 110
Using dollar value LIFO, Farr's inventory at December 31, 2018is
a. $1,056,000.
b. $1,224,000.
c. $1,200,000.
d. $1,320,000.
14. Milford Company had 500units of âTankâ in its inventory at a cost of $4 each. Itpurchased, for $2,800, 300 more units of âTankâ. Milford then sold400 units at a selling price of $10 each, resulting in a grossprofit of $1,600. The cost flow assumption used by Milford
a. is FIFO.
b. is LIFO.
c. is weighted average.
d. cannot be determined from the informationgiven.
15. Checkers uses the periodic inventory system. For the current month,the beginning inventory consisted of 7,200 units that cost $12each. During the month, the company made two purchases: 3,000 unitsat $13 each and 12,000 units at $13.50 each. Checkers also sold12,900 units during the month. Using the average cost method, whatis the amount of cost of goods sold for the month?
a. $167,055.
b. $173,700.
c. $161,850.
d. $167,700.
16. The followinginformation was available from the inventory records of RichCompany for January:
Units UnitCost Total Cost
Balance at January1 9,000 $9.77 $87,930
Purchases:
January6 6,000 10.30 61,800
January26 8,100 10.71 86,751
Sales:
January7 (7,500)
January31 (11,100)
Balance at January31 4,500
Assuming that Rich does not maintain perpetualinventory records, what should be the inventory at January 31,using the weighted-average inventory method, rounded to the nearestdollar?
a. $47,270.
b. $46,067.
c. $46,170.
d. $46,620.
17. Black Corporation uses theFIFO method for internal reporting purposes and LIFO for externalreporting purposes. The balance in the LIFO Reserve account at theend of 2017 was $280,000. The balance in the same account at theend of 2018 is $420,000. Blackâs Cost of Goods Sold account has abalance of $2,100,000 from sales transactions recorded during theyear. What amount should Black report as Cost of Goods Sold in the2018 income statement?
a. $1,960,000.
b. $2,100,000.
c. $2,240,000.
d. $2,520,000.
18. RF Company had January 1inventory of $300,000 when it adopted dollar-value LIFO. Duringthe
year, purchases were $1,800,000 and sales were $3,000,000. December31 inventory at year-end
prices was $430,080, and the price index was 112.
What is RF Companyâs gross profit?
a. $1,248,000.
b. $1,294,080.
c. $1,330,380.
d. $2,605,920.
19. Hay Company had January 1inventory of $300,000 when it adopted dollar-value LIFO. Duringthe
year, purchases were $1,800,000 and sales were $3,000,000. December31 inventory at year-end
prices was $379,500, and the price index was 110.
What is Hay Companyâs ending inventory?
a. $330,000.
b. $345,000.
c. $349,500.
d. $379,500.
20. Opera Corp. usesdollar-value LIFO method of computing its inventory cost. Data forthe past three years is as follows:
Yearended Inventoryat Price
December31. End-of-yearPrices Index
2016 $650,000 1.00
2017 1,260,000 1.05
2018 1,350,250 1.10
What is the 2018 inventory balance using dollar-value LIFO?
a. $1,350,250.
b. $1,285,000.
c. $1,227,500.
d. $1,257,750.
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