29 Jan current replacement

ACCT212 Financial Accounting

WEEK 4 CHECKPOINT

Question 1

(TCO 4) The cost of the inventory that the business has sold to customers is called

inventory.

cost of goods sold.

purchases.

gross profit.

Question 2

(TCO 4) The cost of inventory that is still on hand and has not been sold to customers is called

cost of goods sold, an expense that appears on the balance sheet.

inventory, a current asset that appears on the income statement.

inventory, a current asset that appears on the balance sheet.

purchases, an expense that appears on the income statement.

Question 3

(TCO 4) A small _____ would most likely use a perpetual inventory system.

automobile dealership

fabric store

restaurant

flower shop

Question 4

(TCO 4) The cost of inventory is the

purchase price.

sum of all the costs incurred to bring the inventory to its intended use.

sum of all the costs incurred to bring the inventory to its intended use, plus any discounts and allowances.

sum of all the costs incurred to bring the inventory to its intended use, less any discounts and allowances.

Question 5

(TCO 4) ABC Auto Sales sells new Lexus vehicles. ABC will most likely use the _____ method to cost its ending inventory.

first-in, first-out

last-in, first-out

specific-unit-cost

weighted-average

Question 6

(TCO 4) When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is

higher than cost of goods sold under the LIFO method.

lower than cost of goods sold under the LIFO method.

equal to the gross profit under the LIFO method.

equal to cost of goods sold under the LIFO method.

Question 7

(TCO 4) When inventory prices are falling, the LIFO costing method will generally result in

a lower gross profit than under FIFO.

a higher gross profit than under FIFO.

a lower inventory value than under FIFO.

the same inventory value as FIFO.

Question 8

(TCO 4) The _____ principle states that the financial statements of a business must report enough information for outsiders to make knowledgeable decisions about the business.

consistency

historical cost

disclosure

conservatism

Question 9

(TCO 4) When applying the lower-of-cost-or-market rule, market value generally refers to

FIFO cost using the periodic method.

LIFO cost using the periodic method.

current sales price of the inventory.

current replacement cost of the inventory.

Question 10

(TCO 4) The inventory turnover ratio

is determined by dividing cost of goods sold by net sales.

shows how many times the company sold its average level of inventory.

should be high for a company that sells high-priced inventory items.

will be lower for companies that have many low-priced items in their inventory .