2. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of: (Points : 1)
3. The use of LIFO during a long inflationary period can result in: (Points : 1)
A net increase in income tax expense.
An inflated balance sheet.
Significant cash flow advantages over FIFO.
A reduction in inventory turnover over FIFO.
4. In a periodic inventory system, the cost of inventories sold is: (Points : 1)
Debited to accounts receivable.
Credited to cost of goods sold.
Debited to cost of goods sold.
Not recorded at the time of sale.
5. Cost of goods sold is given by: (Points : 1)
Beginning inventory - net purchases + ending inventory.
Beginning inventory + accounts payable - net purchases.
Net purchases + ending inventory - beginning inventory.
Net Purchases + beginning inventory - ending inventory.
6. When using the gross profit method to estimate ending inventory, it is not necessary to know: (Points : 1)
Cost of goods sold.
7. Using the dollar-value LIFO retail method for inventory,: (Points : 1)
Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost.
Combines retail LIFO accounting with dollar-value LIFO accounting
Allows companies to report inventory on the balance sheet at retail prices.
All of the above are correct.
8. To determine the value of a LIFO layer, using dollar-value LIFO retail: (Points : 1)
Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage.
Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.
Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index.
9. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be: (Points : 1)
None of the above.
10. During periods when prices are rising and inventory quantities are stable, cost of goods sold will be: (Points : 1)
Higher under FIFO than LIFO.
Higher under FIFO than average cost.
Lower under average cost than LIFO.
Lower under LIFO than FIFO.
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