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If goods in transit are shipped FOB destination

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1. If goods in transit are shipped FOB destination
a. the seller has legal title to the goods until they are delivered.
b. the buyer has legal title to the goods until they are delivered.
c. the transportation company has legal title to the goods while the goods are in transit.
d. no one has legal title to the goods until they are delivered.

2. An auto manufacturer would classify vehicles in various stages of production as
a. finished goods.
b. merchandise inventory.
c. raw materials.
d. work in process.

3. Cost of goods sold is computed from the following equation:
a. beginning inventory – cost of goods purchased + ending inventory.
b. sales – cost of goods purchased + beginning inventory – ending inventory.
c. sales + gross profit – ending inventory + beginning inventory.
d. beginning inventory + cost of goods purchased – ending inventory

4. The cost of goods available for sale is allocated between
a. beginning inventory and ending inventory.
b. beginning inventory and cost of goods on hand.
c. ending inventory and cost of goods sold.
d. beginning inventory and cost of goods purchased

5. Which one of the following inventory methods is often impractical to use?
a. Specific identification
b. LIFO
c. FIFO
d. Average cost

6. Companies adopt different cost flow methods for each of the following reasons except
a. balance sheet effects.
b. cash flow effects.
c. income statements effects.
d. tax effects.

7. 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
a. FIFO method.
b. LIFO method.
c. average-cost method.
d. tax method.

8. The managers of Teng Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?
a. LIFO
b. Average Cost
c. FIFO
d. Physical inventory method

9. The consistent application of an inventory costing method is essential for
a. conservatism.
b. accuracy.
c. comparability.
d. efficiency

10. Inventory is reported in the financial statements at
a. cost.
b. market.
c. the higher-of-cost-or-market.
d. the lower-of-cost-or-market.

11. Isaac Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories:

Product Cost Market
A $110,000 $120,000
B 80,000 76,000
C 160,000 162,000

If Isaac applies the LCM basis, the value of the inventory reported on the balance sheet would be
a. $350,000.
b. $342,000.
c. $346,000.
d. $362,000.

12. Understating beginning inventory will understate
a. assets.
b. cost of goods sold.
c. net income.
d. owner's equity.

13. Disclosures about inventory should include each of the following except the
a. basis of accounting.
b. costing method.
c. quantity of inventory.
d. major inventory classifications.

14. In a period of rising prices, FIFO will have
a. lower net income than LIFO.
b. lower cost of goods sold than LIFO.
c. lower income tax expense than LIFO.
d. lower net purchases than LIFO.

15. Euler Company made an inventory count on December 31, 2008. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, 2008, the effects of this error are

Assets Liabilities Owner’s Equity
a. overstated understated overstated
b. understated no effect understated
c. overstated no effect overstated
d. overstated overstated understated

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