introduction    chapters

chapter 8
Inventory

goals   discussion   goals achievement  fill in the blanks   multiple choice   problems    check list and key terms 

GOALS ACHIEVEMENT

Select the appropriate response.

Goods in transit should never be included in the buyer's inventory.

true   or   false

Goods on consignment should be included in the accounts of the:

consignee   or   consignor

Under which inventory cost-flow assumption would the most recent cost be assigned to the Inventory account on the balance sheet?

LIFO   or   FIFO

Under the weighted-average inventory method, the average unit cost of inventory is determined by dividing the sum of the individual purchase prices by the number of purchases which occurred during the year.

right   or   wrong

The specific identification method would be used for inventory which involves many similar homogeneous items.

true   or   false

During a period of rising prices, which inventory method would tend to minimize tax liability?

FIFO   or   LIFO

During a time of rising prices, the LIFO technique causes inventory on the balance sheet to bear what relationship to its fair value?

greater than   or   less than

In a perpetual inventory system, which account is not utilized?

Purchases   or   Cost of Goods Sold

Which inventory method produces the same results under both the perpetual and periodic inventory systems?

FIFO   or   LIFO

In determining inventory's lower-of-cost-or-market valuation, market is defined as:

sales price   or   replacement cost

The lower-of-cost-or-market rule can be applied item-by-item or to the aggregate inventory.

true   or   false

Recoveries of value for inventory previously reduced by lower-of-cost-or-market rule adjustments should be recognized.

yes   or   no

Under the gross profit method, ending inventory is determined by multiplying net purchases by the estimated gross profit percentage.

true   or   false

Under the retail inventory method, the estimated ending inventory can be determined by multiplying the cost-to-retail percentage times the:

retail value of goods available for sale   or   estimated ending inventory at retail

The denominator of the inventory turnover ratio calculation includes:

ending inventory   or   average inventory

Overstating ending inventory would have what effect on income for that year?

overstate   or   understate

The impact of inventory errors on income tends to be counter-balanced by offsetting errors in the following accounting period.

right   or   wrong