cha8 Ex - 8. Valuation of Inventories: A Cost-Basis...

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Unformatted text preview: 8. Valuation of Inventories: A Cost-Basis Approach 21. Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer? a. Raw materials. b. Work-in-process. c. Finished goods. d. Supplies. 22. Where should raw materials be classified on the balance sheet? a. Prepaid expenses. b. Inventory. c. Equipment. d. Not on the balance sheet. 23. Which of the following accounts is not reported in inventory? a. Raw materials. b. Equipment. c. Finished goods. d. Supplies. 24. Why are inventories included in the computation of net income? a. To determine cost of goods sold. b. To determine sales revenue. c. To determine merchandise returns. d. Inventories are not included in the computation of net income. 25. Which of the following is a characteristic of a perpetual inventory system? a. Inventory purchases are debited to a Purchases account. b. Inventory records are not kept for every item. c. Cost of goods sold is recorded with each sale. d. Cost of goods sold is determined as the amount of purchases less the change in inventory. 26. How is a significant amount of consignment inventory reported in the balance sheet? a. The inventory is reported separately on the consignor's balance sheet. b. The inventory is combined with other inventory on the consignor's balance sheet. c. The inventory is reported separately on the consignee's balance sheet. d. The inventory is combined with other inventory on the consignee's balance sheet. 27. Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? a. Accounts payable. b. Inventory. c. Equipment. d. Not on the balance sheet. 28. If a company uses the periodic inventory system, what is the impact on net income of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate net income. b. Understate net income. c. No effect on net income. d. Not sufficient information to determine effect on net income. 29. If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a. Overstate the current ratio. b. Understate the current ratio. c. No effect on the current ratio. d. Not sufficient information to determine effect on the current ratio....
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This note was uploaded on 02/21/2012 for the course BUS-A 311 taught by Professor Mr.birr during the Spring '12 term at IUPUI.

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cha8 Ex - 8. Valuation of Inventories: A Cost-Basis...

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