Multiple Choice Questions
1. The moving average inventory cost flow method is applicable to which of the following inventory systems?
Periodic Perpetual
a. Yes..... Yes
b. Yes..... No
c. No..... No
d. No..... Yes
Questions M8-2 and M8-3 are based on the following data: City Stationers, Inc., had 200 calculators on hand on January 1, 2007, costing $18 each. Purchases and sales of calculators during the month of January were as follows:

City does not maintain perpetual inventory records. According to a physical count, 150 calculators were on hand at January 31, 2007.
2. The cost of the inventory on January 31, 2007 under the FIFO method is
a. $400
b. $2,700
c. $3,100
d. $3,200
3. The cost of the inventory on January 31, 2007 under the LIFO method is
a. $400
b. $2,700
c. $3,100
d. $3,200
4. Goods on consignment should be included in the inventory of
a. The consignor but not the consignee
b. Both the consignor and the consignee
c. The consignee but not the consignor
d. Neither the consignor nor the consignee
5. On December 31, 2006 Kern Company adopted the dollar-value LIFO inventory method. All of Kern€™s inventories constitute a single pool. The inventory on December 31, 2006 using the dollar-value LIFO inventory method, was $600,000. Inventory data for 2007 are as follows:
Dec. 31, 2007 inventory at year-end prices ........ $780,000
Relevant price index at year-end (base year 2006) ... 120
Under the dollar-value LIFO inventory method, Kern€™s inventory method, Kern€™s inventory on December 31, 2007 would be
a. $650,000
b. $655,000
c. $660,000
d. $720,000
6. Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method?
a. Prices decreased.
b. Prices remained unchanged.
c. Prices increased.
d. Price trend cannot be determined from information given.
7. Dixon Menswear Shop regularly buys shirts from Colt Company and is allowed trade discounts of 20% and 10% from the list price. Dixon purchased shirts from Colt on May 28, 2007, and received an invoice with a list price amount of $5,000, and payment terms of 2/10, n/30. Dixon uses the net method to record purchases. Dixon should record the purchase at
a. $3,600
b. $3,528
c. $3,500
d. $3,430
8. The following items were included in Venicio Corporation€™s inventory account on December 31, 2007:
Merchandise out on consignment, at sales price,
including 40% markup on selling price .......... $14,000
Goods purchased, in transit, shipped F.O.B.
shipping point ................... 12,000
Goods held on consignment by Venicio ......... 9,000
Venicio€™s inventory account at December 31, 2007 should be reduced by
a. $14,600
b. $17,400
c. $23,000
d. $35,000
9. When the double-extension approach to the dollarvalue LIFO inventory cost flow method is used, the inventory layer added in the current year is multiplied by an index number. How would the following be used in the calculation of this index number? Ending inventory Ending inventory at current-year cost at base-year cost
a. Numerator Denominator
b. Numerator Not Used
c. Denominator Numerator
d. Not Used Denominator
10. The LIFO inventory cost flow method may be applied to which of the following inventory systems?
Periodic Perpetual
a. No ..... No
b. No ...... Yes
c. Yes ..... Yes
d. Yes..... No

Transcribed Image Text:

Purchases Sales 150 $28 Date Jan. 12 15 27 30 100 a $20 100 @ $22 100 @ $32