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Accy 111- Chapter 8

20 Questions
Accounting Quizzes & Trivia

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Questions and Answers
  • 1. 
    In a perpetual inventory system, the cost of inventory sold is
    • A. 

      Credit to Cost of Goods Sold

    • B. 

      Debited to Accounts Receivable

    • C. 

      Debited to Cost of Goods Sold

    • D. 

      Not recorded at the time

  • 2. 
    In a periodic inventory system, the cost of inventories sold is
    • A. 

      Not recorded at the time of sale

    • B. 

      Debited to cost of goods sold

    • C. 

      Debited to accounts receivable

    • D. 

      Credited to cost of goods sold

  • 3. 
    • A. 

      FIFO

    • B. 

      LIFO

    • C. 

      Weighted Average

    • D. 

      None of these

  • 4. 
    THe use of LIFO in accounting for a firm's inventory
    • A. 

      Usually matches the physical flow of goods through the business

    • B. 

      Is usually used for internal mgmt purposes

    • C. 

      Usually provides a better match of expenses with revenues

    • D. 

      None of these is correct

  • 5. 
    THe primary reasin for the popularity of LIFO is that it
    • A. 

      Simplifies record keeping

    • B. 

      Saves income taxes currently

    • C. 

      Provides better matching of physical flow and cost flow

    • D. 

      Provides a permanent reduction of income taxes

  • 6. 
    When reported in financial statements, a LIFO allowance accoint usually:
    • A. 

      Indicates the effect on insome if LIFO were not used

    • B. 

      Is shown in the firm's income statement

    • C. 

      Is added to LIFO cost to indicate what the inventory would cost on a FIFO bases

    • D. 

      Shows the current rate of inflation for tha asset

  • 7. 
    If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes
    • A. 

      Whether inventory purchase costs are declining or rising

    • B. 

      LIFO liquidations are not problematic for a company's income taxes

    • C. 

      When inventory purchase costs are rising

    • D. 

      When inventory purchase costs are declining

  • 8. 
    Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17, and received an invoice with a list price amount of $6,200 and payment terms of 3/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:
    • A. 

      $3,007

    • B. 

      $6,386

    • C. 

      $6,014

    • D. 

      $6,200

  • 9. 
    Northwest Fur Co. started 2009 with $97,000 of merchandise inventory on hand. During 2009, $440,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $9,500. Merchandise with an invoice amount of $3,000 was returned for credit. Cost of goods sold for the year was $376,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases?
    • A. 

      $163,070

    • B. 

      $167,500

    • C. 

      $170,500

    • D. 

      $163,130

  • 10. 
    Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): • 45 units at $106 • 75 units at $72 • 175 units at $51 Sales for the year totaled 273 units, leaving 22 units on hand at the end of the year. Ending inventory using the average cost method is
    • A. 

      $1,424.

    • B. 

      $1,172

    • C. 

      $1,122

    • D. 

      $2,332

  • 11. 
    • A. 

      $590

    • B. 

      $810

    • C. 

      $540

    • D. 

      $630

  • 12. 
    Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): • 40 units at $110 • 72 units at $78 • 170 units at $56 Sales for the year totaled 271 units, leaving 11 units on hand at the end of the year. Ending inventory using the LIFO method is
    • A. 

      $666.

    • B. 

      $616

    • C. 

      $1,210

    • D. 

      $762

  • 13. 
    Nu Company reported the following pretax data for its first year of operations.
    Net sales 2,810
      Cost of goods available for sale 2,370
      Operating expenses 800
      Effective tax rate 30%
      Ending inventories:  
         If LIFO is elected 930
         If FIFO is elected 1,160
      What is Nu's net income if it elects FIFO?
    • A. 

      $1,600

    • B. 

      $399

    • C. 

      $560

    • D. 

      $800

  • 14. 
    Nu Company reported the following pretax data for its first year of operations.
    Net sales 2,820
      Cost of goods available for sale 2,490
      Operating expenses 740
      Effective tax rate 30%
      Ending inventories:  
         If LIFO is elected 820
         If FIFO is elected 1,080
     
    • A. 

      $287

    • B. 

      $469

    • C. 

      $410.

    • D. 

      $670

  • 15. 
    Nu Company reported the following pretax data for its first year of operations.
    Net sales 2,990
      Cost of goods available for sale 2,330
      Operating expenses 860
      Effective tax rate 40%
      Ending inventories:  
         If LIFO is elected 950
         If FIFO is elected 1,160
      What is Nu's gross profit ratio if it elects LIFO? (Round your answer to the nearest whole percentage.)
    • A. 

      19%

    • B. 

      61%

    • C. 

      54%

    • D. 

      66%

  • 16. 
    Nueva Company reported the following pretax data for its first year of operations.
    Net sales 7,380
      Cost of goods available for sale 5,690
      Operating expenses 1,708
      Effective tax rate 40%
      Ending inventories:  
         If LIFO is elected 618
         If FIFO is elected 812
    What is Nueva's gross profit ratio if it elects FIFO? (Round your answer to two decimal places e.g., .1234 as 12.34%.)
    • A. 

      62.54%

    • B. 

      31.27%

    • C. 

      57.05%

    • D. 

      33.9%

  • 17. 
    Thompson TV and Appliance reported the following in its 2009 financial statements:
      2009
    Sales $424,000
    Cost of goods sold:  
          Inventory, January 1 62,000
          Net purchases 330,000
          Goods available for sale 392,000
          Inventory, December 31    102,000
          Cost of goods sold 290,000
    Gross profit $134,000
      Thompson's 2009 gross profit ratio is
    • A. 

      None of these is correct

    • B. 

      22%

    • C. 

      31%

    • D. 

      32%

  • 18. 
    Thompson TV and Appliance reported the following in its 2009 financial statements:
      2009
    Sales $436,000
    Cost of goods sold:  
          Inventory, January 1 75,000
          Net purchases 329,000
          Goods available for sale 404,000
          Inventory, December 31    86,000
          Cost of goods sold 318,000
    Gross profit $118,000
      Thompson's 2009 inventory turnover ratio is
    • A. 

      3.7

    • B. 

      5.07

    • C. 

      3.95

    • D. 

      5.42

  • 19. 
    Anthony Thomas Candies (ATC) reported the following financial data for 2009 and 2008: The average days inventory for ATC for 2009 is:
    • A. 

      151 days

    • B. 

      Less than 100 days

    • C. 

      114 days

    • D. 

      132 days

  • 20. 
    • A. 

      $356,660

    • B. 

      $350,000

    • C. 

      $351,760

    • D. 

      None of these