Solved by verified expert :36. If the ending inventory is overstated in the
current year:
A. Net income will also be overstated in the current year.
B. Next year’s beginning inventory will also be overstated.
C. Next year’s net income will be understated.
D. All three of the above statements are correct.
37. In a periodic inventory system, recording a sale
on account involves debiting which of the following accounts?
A. Only Accounts Receivable.
B. Accounts Receivable and Inventory.
C. Accounts Receivable and Cost of Goods Sold.
D. Accounts Receivable, Cost of Goods Sold, and Inventory.
38. In a periodic inventory system, recording a sale
on account involves crediting which of the following accounts?
A. Only Sales.
B. Sales and Inventory.
C. Sales and Cost of Goods Sold.
D. Sales, Inventory, and Cost of Goods Sold.
39. In a perpetual inventory system, an inventory flow
assumption is used primarily for determining which costs to use in:
A. Recording purchases of inventory.
B. Recording the cost of goods sold.
C. Recording sales revenue.
D. Forecasts of future operating results.
40. Which of the four inventory cost flow assumptions
transfers the most recent purchase cost to the cost of goods sold and the
remaining items in inventory are valued at the oldest acquisition costs?
A. LIFO
B. FIFO
C. Average
D. Specific identification
41. If the beginning inventory of the current year and
the ending inventory of the past year were overstated by the same amount:
A. Retained earnings at the end of the current year would be correct.
B. Retained earnings at the end of the current year would be overstated.
C. Retained earnings at the end of the current year would be understated.
D. Net income for the current year would be correct.
42. Harris Corporation’s inventory of a particular
product includes 200 units purchased at a per-unit cost of $50, and another 100
units purchased at a unit cost of $60. If Harris sells 10 units of this
product, the cost of goods sold will be:
A. $500.
B. $550.
C. $660.
D. The answer will depend upon the inventory flow assumption in use.
43. During periods of inflation, when comparing LIFO
with FIFO:
A. LIFO inventory and cost of sales would be higher.
B. LIFO inventory and cost of sales would be lower.
C. LIFO inventory would be lower and cost of sales would be higher.
D. LIFO inventory would be higher and cost of sales would be lower.
44. The specific identification method is more
appropriate than a flow assumption method:
A. For a large inventory of identical low-priced items.
B. If each item in the inventory is unique.
C. If purchase costs are rising.
D. If purchase costs are falling.
45. When the LIFO costing method is in use, the
seller:
A. Must sell the most recently acquired units first.
B. Must sell the oldest unit in inventory first.
C. Assumes that the most recently acquired units are sold first.
D. Assumes that the oldest units in inventory are sold first.
