Session:10 Inventory
Multiple Choice
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
2. LO 10.1If a company has three lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (latest) for $12, which of the following statements is true?
- This is an inflationary cost pattern.
- This is a deflationary cost pattern.
- The next purchase will cost less than $12.
- None of these statements can be verified.
4. LO 10.1If goods are shipped FOB destination, which of the following is true?
- Title to the goods will transfer as soon as the goods are shipped.
- FOB indicates that a price reduction has been applied to the order.
- The seller must pay the shipping.
- The seller and the buyer will each pay 50% of the cost.
6. LO 10.1When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would?
- inflationary times
- deflationary times
- always
- never
8. LO 10.1Which type or types of inventory timing system (periodic or perpetual) requires the user to record two journal entries every time a sale is made.
- periodic
- perpetual
- both periodic and perpetual
- neither periodic nor perpetual
9. LO 10.2Which of these statements is false?
- If cost of goods sold is incorrect, ending inventory is usually incorrect too.
- beginning inventory + purchases = cost of goods sold
- ending inventory + cost of goods sold = goods available for sale
- goods available for sale – beginning inventory = purchases
10. LO 10.3Which inventory costing method is almost always done on a perpetual basis?
- specific identification
- first-in, first-out
- last-in, first-out
- weighted average
11. LO 10.3Which of the following describes features of a perpetual inventory system?
- Technology is normally used to record inventory changes.
- Merchandise bought is recorded as purchases.
- An adjusting journal entry is required at year end, to match physical counts to the asset account.
- Inventory is updated at the end of the period.
12. LO 10.4Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system?
- balance sheet
- income statement
- neither statement
- both statements
13. LO 10.4Which of the following would cause periodic ending inventory to be overstated?
- Goods held on consignment are omitted from the physical count.
- Goods purchased and delivered, but not yet paid for, are included in the physical count.
- Purchased goods shipped FOB destination and not yet delivered are included in the physical count.
- None of the above
14. LO 10.5Which of the following indicates a positive trend for inventory management?
- increasing number of days’ sales in inventory ratio
- increasing inventory turnover ratio
- increasing cost of goods sold
- increasing sales revenue