Teatable MC Ch7 10 Revised 2013

Chapter 7 Inventories

6. Ending inventory is made up of the oldest purchases when a company uses
a.
first-in, first-out
b.
last-in, first-out
c.
average cost
d.
retail method
11. The inventory method that assigns the most recent costs to cost of goods sold is
a.
FIFO
b.
LIFO
c.
Average
d.
specific identification 12. Inventory costing methods place primary emphasis on assumptions about
a.
flow of goods
b.
flow of costs
c.
flow of goods or flow of costs depending on the method
d.
neither flow or goods or flow of costs 13. The inventory costing method that reports the most current prices in ending inventory is
a.
FIFO
b.
Specific identification
c.
LIFO
d.
Average cost

The following lots of a particular commodity were available for sale during the year:

Beginning inventory
10 units at $55
First purchase
25 units at $65
Second purchase
30 units at $68
Third purchase
15 units at $70

The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year.

38. What is the amount of the inventory at the end of the year using the FIFO method?
a.
$1,645
b.
$1,525
c.
$1,730
d.
$3,535

40. What is the amount of the inventory at the end of the year using the average cost method?

a.
$1,645
b.
$1,525
c.
$1,730
d.
$3,620

42. During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is
a.
FIFO
b.
LIFO
c.
average cost
d.
weighted average

43. During times of rising prices, which of the following is not an accurate statement?
a.
Average costing will yield results that are between those of FIFO and LIFO.
b.
LIFO will result in a higher cost of goods sold than FIFO.
c.
FIFO will result in a higher net income than LIFO.
d.
LIFO will result in higher income taxes than FIFO.

50. Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and