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Multiple Choice Quiz
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1
In a perpetual inventory system, if merchandise is returned to a supplier:
A)Purchase returns is credited.
B)Inventory is credited.
C)Purchase discounts is credited.
D)Inventory is debited.
2
The Hamlet Company uses the periodic inventory system. Information for 2006 is as follows:

Sales $2,650,000
Beginning inventory 680,000
Purchases 1,200,000
Purchase returns12,000
Ending inventory 740,000

Hamlet's cost of goods sold for 2006 is:

A)$1,522,000
B)$1,188,000
C)$1,140,000
D)$1,128,000
3
Symington Corporation uses the periodic inventory system. At December 31, 2006, the end of the company's fiscal year, a physical count of inventory revealed an ending inventory balance of $320,000. The following items were not included in the physical count:

Goods held on consignment at Murphy Corporation $23,000
Merchandise shipped to a customer on 12/30 f.o.b. destination
     (merchandise arrived at customer's location on 1/3/07) 		12,000
Merchandise shipped to a customer on 12/29 f.o.b. shipping point
     (merchandise arrived at customer's location on 1/2/07) 		6,000
Merchandise purchased from a supplier, shipped f.o.b. destination
     on 12/29, in transit at year-end 		24,000

Symington's 2006 ending inventory should be:

A)$320,000
B)$379,000
C)$355,000
D)$332,000
4
By the gross method of accounting for purchase discounts, a discount not taken is recorded as:
A)Purchases.
B)Interest expense.
C)A reduction in sales revenue.
D)None of the above.
5
By the net method of accounting for purchase discounts, a discount not taken is recorded as:
A)Purchases.
B)Interest expense.
C)A reduction in sales revenue.
D)None of the above.
6
Identify the statement below concerning the LIFO inventory method that is untrue.
A)In the absence of changes in costs, the results of using LIFO would be identical to those obtained by FIFO.
B)LIFO will provide a close matching of current revenues with current costs since themost recent costs are expensed first.
C)The ending inventory under LIFO will tend to approximate replacement cost.
D)In periods of declining costs, cost of goods sold using LIFO will produce a lowercost of goods sold than FIFO.
7
Questions 7, 8, 9, and 10 are based on the following data:

Sanfillipo, Inc., had 800 units of inventory on hand at March 1, 2006, costing $20 each. Purchases and sales of inventory during the month of March were as follows:

Date   PurchasesSales
March 8 600 units
15 400 units @ $22 each 
22  400 units @ $24 each 
27   400 units

Sanfillipo uses the periodic inventory system. According to a physical count, 600 units were on hand at the end of March.

The cost of inventory at the end of March applying the FIFO method is:

A)$12,900
B)$14,400
C)$12,000
D)$14,000
8
The cost of inventory at the end of March applying the LIFO method is:
A)$12,900
B)$14,400
C)$12,000
D)$14,000
9
The cost of inventory at the end of March applying the average cost method is:
A)$12,900
B)$14,400
C)$12,000
D)$14,000
10
If Sanfillipo instead used the perpetual inventory system, cost of goods sold for the month of March applying the LIFO inventory method would be:
A)$22,400
B)$21,500
C)$21,600
D)$24,000
11
In a period of declining costs, the use of which of the following inventory cost methods would result in the highest ending inventory?
A)FIFO
B)LIFO
C)Average cost.
D)Weighted-average cost.
12
LIFO liquidation profits occur when:
A)Costs are rising and inventory quantity increases.
B)Costs decline.
C)Costs increase.
D)Costs are rising and inventory quantity declines.
13
For its 2006 fiscal year, the King Pharmaceutical Company reported sales of $10,500,000, cost of goods sold of $6,300,000, and net income of $525,000. The company's gross profit ratio for the year is:
A)40%
B)60%
C)5%
D)67%
14
On December 31, 2006, the Charlie Company adopted the dollar-value LIFO inventory method. Inventory at the end of 2006 for its only inventory pool was $500,000 under the dollar-value LIFO method. At the end of 2007 inventory at year-end cost is $672,000 and the cost index is 1.05. Inventory at the end of 2007 at dollar-value LIFO cost is:
A)$625,000
B)$640,000
C)$647,000
D)$672,000
15
J.T. Rider and Sons uses the dollar-value LIFO inventory method. At the end of 2007 the cost index is 1.25 and the ending inventory at base year cost is $360,000. If 2007 beginning inventory at base year cost was $300,000, 2007 ending inventory at dollar-value LIFO cost is:
A)$300,000
B)$450,000
C)$360,000
D)$375,000





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