Inventory Data

1. Apple-A-Day Company has the following inventory data:

July 1 Beginning inventory 20 units at $20$   400

7Purchases               70 units at $21  1,470

22 Purchases               10 units at $22    220

$2,090

 

A physical count of merchandise inventory on July 30 reveals that there are 30 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

$1,480

$1,470

$1,450.

$1,430.

 

2.  Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

Returns of merchandise inventory by Adams Company to a manufacturer are credited to Inventory.

Freight paid to get merchandise inventory to Adams Company’s store is debited to Freight Expense.

A return of merchandise inventory by one of Adams Company’s customers is credited to Inventory.

Discounts taken by Adams Company’s customers are credited to Inventory.

 

3.  In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?

Average Cost Method

LIFO method

FIFO method

Need more information to answer

 

4.  In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

FIFO method.

LIFO method.

average cost method.

tax method.

 

5.  Net income will result if gross profit exceeds

cost of goods sold.

operating expenses.

purchases.

cost of goods sold plus operating expenses.

 

6.  Which of the following is not a common cost flow assumption used in costing inventory?

First-in, first-out

Middle-in, first-out

Last-in, first-out

Average cost

 

7.  Delightful Discs has the following inventory data:

Nov. 1 Inventory30 units @ $8.00 each

8Purchase120 units @ $8.60 each

17Purchase60 units @ $8.40 each

25Purchase90 units @ $8.80 each

 

A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Ending inventory under LIFO is

$876

$842

$1,692

$1,726

 

8.  When goods are returned that relate to a prior cash sale

the Sales Returns and Allowances account should not be used.

the Cash account will be credited.

Sales Returns and Allowances will be credited.

Accounts Receivable will be credited.

 

9.  Which sales accounts normally have a debit balance?

Sales discounts

Sales returns and allowances.

both (a) and (b).

Neither (a) nor (b).

 

10.  Financial information is presented below:

Operating Expenses$  45,000

Sales Revenue150,000

Cost of Goods Sold90,000

 

Gross profit would be

$105,000.

$  45,000.

$  60,000.

$  15,000.