Question: 1 In a comparison of 2011 to 2012 Neir Co s

1. In a comparison of 2011 to 2012, Neir Co’s inventory turnover ratio increased substantially even though sales and inventory accounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio?
a. Cost of goods sold decreased.
b. Accounts receivable turnover increased.
c. Total asset turnover increased.
d. Gross profit percentage decreased.

2. During 2012, Rand Co. purchased $960,000 of inventory. The cost of goods sold for 2012 was $900,000, and the ending inventory at December 31, 2012, was $180,000. What was the inventory turnover for 2012?
a. 6.4
b. 6.0
c. 5.3
d. 5.0

3. Health Co’s current ratio is 4:1. Which of the following transactions would normally increase its current ratio?
a. Purchasing inventory on account.
b. Selling inventory on account.
c. Collecting an accounts receivable.
d. Purchasing machinery for cash.

4. Jones Wholesalers stocks a changing variety of products. Which inventory costing method will be most likely to give Jones the lowest ending inventory when its product lines are subject to specific price increases?
a. Specific identification.
b. Weighted average.
c. Dollar-value LIFO.
d. FIFO periodic.

5. Dart Company’s accounting records indicated the following information:
Inventory, 1/1/12 $ 500,000
Purchases during 2012 2,500,000
Sales during 2012 3,200,000
A physical inventory taken on December 31, 2012, resulted in an ending inventory of $575,000. Dart’s gross profit on sales has remained constant at 25% in recent years. Dart suspects some inventory could have been taken by a new employee. At December 31, 2012, what is the estimated cost of missing inventory?
a. $25,000.
b. $100,000.
c. $175,000.
d. $225,000.

6. A company decided to change its inventory valuation method from FIFO to LIFO in a period of rising prices. What was the result of the change on ending inventory and net income in the year of the change?
Ending inventory Net income
a. Increase Increase
b. Increase Decrease
c. Decrease Decrease
d. Decrease Increase

7. Generally, which inventory costing method approximates most closely the current cost for each of the following?
Cost of good sold Ending inventory

8. Reporting inventory at the lower of cost or market is a departure from the accounting principle of
a. Historical cost.
b. Consistency.
c. Conservatism.
d. Full disclosure.

9. Which of the following statements are correct when a company applying the lower of cost or market method reports its inventory at replacement cost?
I. The original cost is less than replacement cost.
II. The net realizable value is greater than replacement cost.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

10. How should unallocated fixed overhead costs be treated?
a. Allocated to finished goods and cost of goods based on ending balances in the accounts.
b. Allocated to raw materials, work in process, and finished goods, based on the ending balances in the accounts.
c. Recognized as an expense in the period in which they are incurred.
d. Allocated to work in process, finished goods, and cost of goods sold based on ending balances in the accounts.

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