Posted: April 21st, 2016
1. A manufacturing firm would not normally have an account titled Goods in Process Inventory Raw Materials Inventory Merchandise Inventory Finished Goods Inventory 2. A retail firm would normally use an inventory account titled Finished Goods Inventory Merchandise Inventory Goods in Process Inventory Raw Materials Inventory 3. Which of the following is not an advantage of a perpetual inventory system? assists in the prevention of stockouts requires less data processing effort than periodic systems maintains up to date inventory and cost of goods sold balances provides evidence of inventory shrinkage 4. Which one of the following types of costs is most likely to be included in determining the cost of inventory? freight in costs freight out costs interest cost for amounts borrowed to finance the purchase of inventory marketing costs 5. Which one of the following types of costs should be included in the cost of a manufactured inventory? abnormal spoilage production supervisory salaries interest costs selling costs 6. Concerning purchase discounts, which one of the following statements is true? Purchase discounts taken should be deducted from the acquisition cost of the inventory. The net price method results in recording accounts payable at the maximum value of the liability that the company may be required to pay out. Purchase discounts lost should be included in the cost of inventory. An advantage of the gross price method is that it isolates purchase discounts lost and thus highlights inefficiencies. 7. RK, Inc. had the following activity for an inventory item during June: Assuming RK uses a periodic weighted average cost flow assumption, cost of goods sold for June would be $512 $560 $768 $720 8. Which one of the following is not an advantage of LIFO? In periods of rising prices, less income taxes are paid. In periods of rising prices, less holding gains are reported in net income. Record keeping and financial statement preparation are easier. Conservative income statements and balance sheet disclosures result from rising prices. 9. Which of the following is not a disadvantage of using the FIFO cost flow assumption? creates the highest outflow for income taxes during periods of rising prices does not match current costs against current revenues includes all the holding gains in income during periods of rising prices provides a relevant ending inventory value 10. Titan Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices. What was the result of the change on ending inventory in the year of the change? increased ending inventory decreased ending inventory no change in ending inventory cannot determine from the information given
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