Use the following information for questions 1-4.
A company just starting business made the following four inventory purchases in June:
June 1 150 units $ 390
June 10 200 units 585
June 15 200 units 630
June 28 150 units 495
$2,100
A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.
1. Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $536.
b. $653.
c. $1,447.
d. $1,564.
2. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
a. $653.
b. $1,272.
c. $1,447.
d. $1,564.
3. Using the average-cost method, the amount allocated to the ending inventory on June 30 is
a. $2,100.
b. $1,500.
c. $575.
d. $600.
4. The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the weighted average unit cost method.
d. not determinable.
5. In periods of inflation, phantom or paper profits may be reported as a result of using the
a. perpetual inventory method.
b. FIFO costing assumption.
c. LIFO costing assumption.
d. periodic inventory method.
6. An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is
Cost of Goods Sold Net Income
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
7. Overstating ending inventory will overstate all of the following except
a. assets.
b. cost of goods sold.
c. net income.
owner's equity.
8. The following information is available for Knot Company at December 31, 2008: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $900,000; and sales $1,200,000. Knot's inventory turnover in 2008 is
a. 12 times.
b. 11.3 times.
c. 9 times.
d. 7.5 times.
9. Nolan Department Store estimates inventory by using the retail inventory method. The following information was developed:
At Cost At Retail
Beginning inventory $318,000 $ 750,000
Goods purchased 900,000 1,350,000
Net sales 1,200,000
The estimated cost of the ending inventory is
a. $696,000.
b. $522,000.
c. $882,000.
d. $900,000.
10. LIFO can be used
a. under neither GAAP nor IFRS.
b. under IFRS but not GAAP.
c. under GAAP but not IFRS.
d. under both GAAP and IFRS.