Multiple-Choice Questions
1. When inventory is purchased, it is recorded as a(n) _________ and when sold it becomes a(n) ________.
a. Liability; withdrawal
b. Asset; expense
c. Liability; asset
d. Asset; contra-asset
Use the following information to answer questions 2€“5:
Inventory data for Newman & Frith Merchandisers, Inc., is provided here. Sales for the period were 2,800 units. Each sold for $8. The company maintains a periodic inventory system.

2. Determine the ending inventory assuming the company uses the FIFO cost flow method.
a. $3,400
b. $2,400
c. $9,200
d. $10,000
3. Determine the cost of goods sold assuming the company uses the FIFO cost flow method.
a. $3,400
b. $10,000
c. $10,200
d. $2,400
4. Determine the ending inventory assuming the company uses the weighted average cost flow method. (Round average cost to
two decimal places.)
a. $2,300
b. $3,300
c. $9,800
d. $2,976
5. Determine the gross profit assuming the company uses the LIFO cost flow method.
a. $11,400
b. $14,400
c. $22,400
d. $19,700
6. Using LIFO will produce a lower net income than using FIFO under which of the following conditions?
a. Inventory costs are decreasing.
b. Inventory costs are increasing.
c. Inventory costs are not changing.
d. Sales prices are decreasing.
Use the following information to answer questions 7€“10:
Sales revenue .... $480,000
Cost of goods sold ... 300,000
Sales discounts .... 20,000
Sales returns and allowances 15,000
Operating expenses ..... 85,000
Interest revenue ...... 5,000
7. What is the net sales revenue?
a. $400,00
b. $445,000
c. $415,000
d. $455,000
8. What is the gross profit?
a. $145,000
b. $105,000
c. $140,000
d. $90,000
9. What is the net income?
a. $60,000
b. $65,000
c. $55,000
d. $180,000
10. What is the gross profit percentage?
a. 13.54%
b. 14.61%
c. 32.58%
d.21.67%

Number of Units 1,000 600 Total Cost Date January Begning inventory February Purchases March Purchases April Totals Unit Cost 3.00 3,000 S3.502,100 $4.003,200 5,100 $13,400 800 Purchases 1,200 3,600 $4.25