1. The journal entry to record the purchase of $7,400 of inventory on account under the perpetual inventory method is:
a. debit Cost of Goods Sold, $7,400; credit Inventory, $7,400.
b. debit Purchases, $7,400; credit Accounts Payable, $7,400.
c. debit Inventory, $7,400; credit Cash, $7,400.
d. debit Inventory, $7,400; credit Accounts Payable, $7,400.
2. Olympic Enterprises had the following inventory data:
Date Quantity Unit Cost
June 1 Beginning Inventory 5 $52
June 4 Purchase 10 $55
June 7 Sale 12
June 11 Purchase 9 $58
June 14 Sale 8
Assuming LIFO, what is the cost of goods sold for the June 7 sale?
a. $660
b. $654
c. $648
d. $645
3. In order to pay the least income tax possible in periods of rising inventory costs, the company should use which of the following inventory costing methods?
a. LIFO
b. Average cost
c. FIFO
d. Specific Identification
4. Inventory is probably the retailer's smallest (by value) current asset.
True or False
5. Net sales minus estimated gross profit yields the estimated:
a. ending inventory
b. beginning inventory
c. gross profit
d. cost of goods sold
6. The LCM rule compares original cost to current replacement cost to determine the amount at which inventory should be valued
True or False
7. Which is NOT an assurance of footnote disclosures?
a. Comparable information
b. Conservative information
c. Reliable information
d. Relevant information
8. Under the LIFO method, the flow of costs through the accounting records will:
a. exactly match the physical flow of goods through the business.
b. be nearly the opposite of the physical flow of goods through the business
c. have no relationship to the physical flow of goods through the business.
c. closely match the physical flow of goods through the business.
9. A company has $8,200 in net sales. $1,100 in gross profit, $2,500 in ending inventory and $2,000 in beginning inventory. The company's cost of goods sold is:
a. $7,100
b. $5,600
c. $5,700
d. $6,200
10. The ________ estimates inventory by using the format for cost of goods sold.
a. gross profit method
b. LIFO method
c. average cost method
d. FIFO method