quiz week 4

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The factor which determines whether or not goods should be included in a physical count of inventory is

whether or not the purchase price has been paid.

physical possession.

legal title.

management's judgment.

If goods in transit are shipped FOB destination

the transportation company has legal title to the goods while the goods are in transit.

the buyer has legal title to the goods until they are delivered.

no one has legal title to the goods until they are delivered.

	the seller has legal title to the goods until they are delivered.

Independent internal verification of the physical inventory process occurs when

all prenumbered inventory tags are accounted for.

a second employee counts the inventory and compares the result to the count made by the first employee.

the employee is required to count all items twice for sake of verification.

the items counted are compared to the inventory account balance.

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

To check the accuracy of the perpetual inventory records.

To determine cost of goods sold for the accounting period.

To compute inventory ratios.

	All are a purpose of taking a physical inventory when a perpetual inventory system is used.

Manufacturers usually classify inventory into all the following general categories except:

finished goods.

raw materials.

work in process.

	merchandise inventory.

The LIFO inventory method assumes that the cost of the latest units purchased are

not allocated to cost of goods sold or ending inventory.

the last to be allocated to cost of goods sold.

the first to be allocated to ending inventory.

the first to be allocated to cost of goods sold.

Internal controls are concerned with

the extent of government regulations.

safeguarding assets.

preparing income tax returns.

only manual systems of accounting

Internal auditors

are hired by CPA firms to audit business firms.

are employees of the IRS who evaluate the internal controls of companies filing tax returns.

evaluate the system of internal controls for the companies that employ them.

cannot evaluate the system of internal controls of the company that employs them because they are not independent.

From an internal control standpoint, the asset most susceptible to improper diversion and use is

cash.

buildings.

prepaid insurance.

land.

A very small company would have the most difficulty in implementing which of the following internal control activities?

Sound personnel procedures.

Separation of duties.

Periodic independent verification.

Limited access to assets.

In a small business, the lack of certain separations of duties can best be overcome by

holding one person responsible for a given set of transactions.

bonding the employees.

hiring only honest employees.

getting the owner actively involved.

A company just starting business made the following inventory transactions in August:

Purchase on August 1	300 units	$1,560
Sale on August 8	200 units	3,400
Purchase on August 12	400 units	1,340
Sale on August 24	350 units	5,950

Using the LIFO inventory method, how much is cost of goods sold for August using a perpetual inventory system?

$9,350

$6,450

$2,212.50

$2,120

A company just starting business made the following purchases in August:

August 1	300 units	$1,560
August 12	400 units	2,340
August 24	400 units	2,520
August 30	300 units	1,980
	1,400 units	$8,400

A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the FIFO inventory method in a perpetual inventory system, how much is the value of the ending inventory on August 31?

$2,730

$5,670

$5,160

$3,240

Which statement is true in a perpetual inventory system?

FIFO cost of goods sold will be the same as in a periodic inventory system.

LIFO cost of goods sold will be the same as in a periodic inventory system.

Average costs are based entirely on unit-cost simple averages.

A new average is computed under the average cost method after each sale.

Inventory turnover is calculated by dividing cost of goods sold by

average inventory.

365 days.

beginning inventory.

ending inventory.

Net sales are $2,000,000, cost of goods sold is $960,000, and average inventory is $30,000. How many days sales are in inventory?

11.4

66.7

12.2

2.6

The following information came from the income statement of the Wilkens Company at December 31, 2017: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. What is Wilkens' inventory turnover ratio for 2017?

2.5 times

3.0 times

6.0 times

3.75 times

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. What is Carlos’ days in inventory?

102.5 days

84.5 days

73 days

121.7 days

In a period of falling prices, which of the following methods will give the largest net income?

Average-cost

LIFO

FIFO

Specific identification

In a period of rising prices which inventory method will result in the greatest amount of income tax expense?

Average cost

FIFO

LIFO

	Specific identification

Which of the following is true of the FIFO inventory method?

It assumes that the cost of the earliest units purchased are the last to be allocated to cost of goods sold.

It assumes that the cost of the earliest units purchased are the last to be allocated to the beginning inventory.

It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold.

	It assumes that the cost of the earliest units purchased are the first to be allocated to the ending inventory.

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