1) If ending inventory for the current period is understated, then owner’s equity will be
A overstated at the end of the current period, but it will be correct at the end of the next period.
B understated at the end of the current period and overstated at the end of the next period.
C overstated at the end of the current period and understated at the end of the next period.
D understated at the end of the current period, but it will be correct at the end of the next period.
2) Which of the following inventory costing methods requires a company to keep track of the actual movement of individual inventory items?
A FIFO
B average cost
C specific unit cost
D LIFO
3) Refer to the following table:
Assume that all goods are sold throughout the year for $19 per unit. What would the gross profit be if calculated under the periodic LIFO?
A $1,570
B $1,510
C $1,260
D $1,465
4) Two separate errors affected computer sales in 2013. The beginning inventory was understated by $28,000 and the ending inventory was understated by $43,000. Net income in 2013 will be.
A understated by $15,000.
B understated by $43,000.
C overstated by $15,000.
D understated by $71,000.
5) For the current year, Hodges Department Store reported the following data:
The current replacement cost of inventory on balance sheet data is $91,730. Using the lower-of-cost-or-market rule, what is the cost of goods sold for Hodges Department Store?
A $982,720
B $898,060
C $897,290
D $989,020
6) Two separate errors affected computer sales in 2013. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2013 will be
A overstated by $12,000.
B overstated by $30,000.
C overstated by $6,000.
D understated by $6,000.
7) If a company uses LIFO and prices are rising, large purchases of inventory near the end of the year will
A have no effect on the amount of cost of goods sold.
B reduce the gross profit.
C increase income taxes paid.
D reduce cost of goods sold.
8) Refer to the following table:
Under the perpetual LIFO method, what would the cost of goods sold on the income statement be?
A $540
B $1,760
C $1,700
D $1,186
9) Using the lower-of-cost-or-market rule of valuing inventory allows the accountant to attain
A consistency.
B full disclosure.
C conservatism.
D matching.
10) The journal entry to transfer the cost of purchases to cost of goods sold includes a
A debit to cost of goods sold.
B credit to cost of goods sold.
C debit to inventory.
D debit to purchases.
Attachment 3
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