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Exam 7: Inventories

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Question 61

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Why will an understated beginning inventory produce an overstated income before income taxes for the same period? Will the understatement have a favorable or unfavorable effect on current year income taxes?

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An understated beginning inventory will ...

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Question 62

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Days' inventory on hand equals 365 divided by

A) inventory turnover.
B) cost of goods sold.
C) goods available for sale.
D) average inventory.

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Question 63

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The FIFO inventory method does not produce the most up-to-date figure for ending inventory.

Under a periodic inventory system,cost of goods sold is not recorded until the end of the accounting period.

An overstatement of beginning inventory results in

A major criticism of the FIFO method is that it magnifies the effects of the business cycle on business income.

The lower the inventory turnover,the lower the days' inventory on hand.

Which costing method is used based on the reasoning that the fairest determination of income occurs if the current costs are matched against current sales prices?

Which costing method tends to level out the effects of cost increases or decreases?

Which of the following is an inventory processing system?

Market is the amount that a merchandising company would pay at the present time for the same goods as are in the inventory and from the usual suppliers in the usual quantities

If prices were to never change,there would be no need for alternative inventory methods.

When applying the retail method,which of the following would not be a component of the cost-to-retail percentage?

Goods in transit shipped FOB destination should not be included in the buyer's ending inventory.

Inventory costing methods place primary reliance on assumptions about the flow of

Use this information to answer the following question. A periodic inventory system is used. -Cost of goods sold under FIFO is

In a period of declining prices,which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

An understatement of year 1's beginning inventory will

When the average-cost method is applied to a perpetual inventory system,the sale of goods will not change the unit cost of the goods that remain in inventory.

Merchandise inventory is valued on the balance sheet at the expected resale price.