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Question 1

The following information applied to Frack Inc. for year 2:

Merchandise purchased for resale $400,000

Freight-in 10,000

Freight-out 5,000

Purchase returns 2,000

Frack's year 2 inventoriable cost was

a. $408,000

b. $404,000

c. $413,000

d. $400,000

Question 2

On December 28, year 2, Frack ManufacturingCo. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale

and delivery of the goods were as follows:

Packaging for shipment $1,000

Shipping 1,500

Special handling charges 2,000

These goods were received on December 31, year 2. In Frack's December 31, year 2 balance sheet, what amount of cost for these goods should be included in

inventory?

a. $53,500

b. $54,500

c. $52,000

d. $50,000

Question 3

The following information was taken fromFrack Co.'s accounting records for the year ended December 31, year 2:

Decrease in raw materials

inventory

15,000

Increase in finished goods

inventory

35,000

Raw material purchased 430,000

Direct labor payroll 200,000

Factory overhead 300,000

Freight-out 45,000

There was no work in process inventory at the beginning or end of the year. Frack's year 2 cost of goods sold is

a. $950,000

b. $895,000

c. $955,000

d. $910,000

Question 4

How should the following costs affect a retailer's inventory?

a. Freight-in Interest on inventory loan

No effect Increase

b. Freight-in Interest on inventory loan

No effect No effect

c. Freight-in Interest on inventory loan

Increase No effect

d. Freight-in Interest on inventory loan

Increase Increase

Question 5

When allocating costs to inventory produced for the period, fixed overhead should be based upon

a. The actual amounts of goods produced during the period.

b. The highest production levels in the last three periods.

c. The lowest production level in the last three periods.

d. The normal capacity of production facilities.

Question 6

Flip Co. recorded the following inventory information during the month of January:

Units Unit cost Total cost Units on hand

Balance on 1/1 2,000 $1 $2,000 2,000

Purchased on 1/8 1,200 3 3,600 3,200

Sold on 1/23 1,800 1,400

Purchased on 1/28 800 5 4,000 2,200

Flip uses the LIFOmethod to cost inventory.What amount should Flip report as inventory on January 31 under each of the following methods of recording inventory?

A. Perpetual Periodic

$2,600 $2,600

b. Perpetual Periodic

$2,600 $5,400

c. Perpetual Periodic

$5,400 $2,600

d. Perpetual Periodic

$5,400 $5,400

Question 7

The weighted-average for the year inventory cost flow method is applicable to which of the following inventory systems?

a. Periodic Perpetual

No No

b. Periodic Perpetual

Yes Yes

c. Periodic Perpetual

No Yes

d. Periodic Perpetual

Yes No

Question 8

During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:

Units Unit cost Total cost Units on hand

Balance on 1/1/Y2 1,000 $1 $1,000 1,000

Purchased on1/7/Y2 600 3 1,800 1,600

Sold on 1/20/Y2 900

700

Purchased on1/25/Y2 400 5 2,000 1,100

Under the moving-average method, what amount should Flip report as inventory at January 31, year 2?

a. $3,900

b. $2,640

c. $3,300

d. $3,225

Question 9

Based on a physical inventory taken on December 31, year 2, Flip Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Flip

estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Flip's normal profit margin is 10%of sales. Under the lower

of cost or market rule, what amount should Flip report as chocolate inventory in its December 31, year 2 balance sheet?

a. $24,000

b. $26,000

c. $20,000

d. $28,000

Question 10

Reporting inventory at the lower of cost or market is a departure fromthe accounting principle of

a. Full disclosure

b. Conservatism

c. Consistency

d. Historical cost

Question 11

Flip Company had 150 units of product A on hand at January 1, year 2, costing $21 each. Purchases of productA during the month of January were as follows:

Units Unit cost

Jan.10 200 $22

18 250 23

28 100 24

A physical count on January 31, year 2, shows 250 units of product A on hand. The cost of the inventory at January 31, year 2, under the LIFO method is?

A. $5,850

B. $5,350

C. $5,250

D. $5,550

Question 12

During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:

Units Unit cost Total cost Units on hand

Balance on 1/1/Y2 1,000 $1 $1,000 1,000

Purchased on 1/7/Y2 600 3 1,800 1,600

Sold on 1/20/Y2 900 700

Purchased on1/25/Y2 400 5 2,000 1,100

Under the LIFO method, what amount should Flip report as inventory at January 31, year 2?

a. $1,300

b. $4,100

c. $3,900

d. $2,700

Question 13

A company decided to change its inventory valuation method fromFIFOto LIFO in a period of rising prices. What was the result of the change on ending inventory and net income in

the year of the change?

a. Ending Inventory Net Income

Increase Decrease

b. Ending Inventory Net Income

Increase Increase

c. Ending Inventory Net Income

Decrease Increase

d. Ending Inventory Net Income

Decrease Decrease

Question 14

Generally, which inventory costing method approximates most closely the current cost for each of the following?

a. Cost of Goods Sold Ending Inventory

LIFO LIFO

b.Cost of Goods Sold Ending Inventory

LIFO FIFO

c. Cost of Goods Sold Ending Inventory

FIFO FIFO

d. Cost of Goods Sold Ending Inventory

FIFO LIFO

Question 15

Flip Wholesalers stocks a changing variety of products.Which inventory costing method will be most likely to give Flip the lowest ending inventory when its product lines are subject

to specific price increases

a. Weighted-average.

b. Fifo periodic

c. Dollar-value LIFO.

d. Specific identification.

Question 16

Flip Company's accounting records indicated the following information:

Inventory, 1/1/Y2 $ 500,000

Purchases during year 2 2,500,000

Sales during year 2 3,200,000

a. $225,000

b. $175,000

c. $25,000

d. $100,000

Question 17

On July 1, year 2, Flip Development Co. purchased a tract of land for $1,200,000. Flip incurredadditional cost of $300,000 during the remainder of year 2 in preparing the land

for sale. The tract was subdivided into residential lots as follows:

Lot class Number of lots Sales price per lot

A 100 $24,000

B 100 16,000

C 200 10,000

Using the relative sales value method, what amount of costs should be allocated to the Class A lots?

a. $300,000

b. $720,000

c. $375,000

d. $600,000

Question 18

On October 20, year 2, Flip Co. consigned forty freezers to Floozy Co. for sale at $1,000 each and paid $800 in transportation costs. On December 30, year 2, Floozy reported the

of ten freezers and remitted $8,500. The remittance was net of the agreed 15%commission. What amount should Flip recognize as consignment sales revenue for year 2?