MULTIPLE CHOICE: Highlight or Underline the best answer.

1. Which principle or concept states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?
2. Conservatism
3. Materiality concept
4. Disclosure principle
5. Consistency principle

1. Which inventory costing method assigns to Cost of Goods Sold the most recent purchases incurred during the period?
2. Weighted-average
3. Last-in, first-out (LIFO)
4. First-in, first-out (FIFO)
5. Specific identification

1. Assume Harold's Hats began August with 52 units of merchandise inventory, with a cost of $17 per unit. During August, Harold's Hats purchased and sold goods as follows:

August 8	Purchase	42 units @ $15
14	Sale	60 units @ $40
22	Purchase	28 units @ $25
27	Sale	42 units @ $40

Under the FIFO inventory costing method, how much is Harold's Hats's cost of goods sold for the sale on August 14?

1. $510
2. $2,400
3. $1,004
4. $936

1. After the sale on August 14, what is Harold's Hats's cost of the merchandise inventory on hand, assuming that Harold's Hats uses FIFO? (Reference Question 3 information.)
2. $510
3. $2,400
4. $1,004
5. $936

1. After the sale on August 14, what is Harold's Hats's cost of the merchandise inventory on hand, assuming that Harold's Hats uses LIFO? (Reference Question 3 information.)
2. $510
3. $578
4. $900
5. $2,400

1. Suppose Harold's Hats uses the weighted-average method and the perpetual inventory system. Use the Harold's Hats data from Question 3 to compute the weighted-average unit cost of the company's inventory on hand on August 8. Round unit cost to the nearest cent.
2. $16.11
3. $16.50
4. $18.15
5. $19.00

1. Which inventory costing method results in the lowest ending inventory during a period of rising merchandise inventory cost?
2. Weighted-average
3. Specific identification
4. First-in, first-out (FIFO)
5. Last-in, first-out (LIFO)

1. Some companies account for purchases of equipment less than $500 as expenses instead of as assets. This policy is most closely linked to which accounting principle?
2. Conservatism
3. Lower-of-cost-or-market
4. Materiality concept
5. Consistency principle

1. On December 31, 20X8, Simpson Company understated ending inventory by $72,000. How does this error affect Cost of Goods Sold and Net Income for 20X8?
2. Overstates Cost of Goods Sold and understates Net Income
3. Overstates both Cost of Goods Sold and Net Income
4. Understates Cost of Goods Sold and overstates Net Income
5. Leaves both Cost of Goods Sold and Net Income correct because the errors cancel each other

1. Finley Corporation had the following financial data for the year ended December 31, 20X8:

Cost of Goods Sold	$ 256,000
Beginning Merchandise Inventory	$ 58,000
Ending Merchandise Inventory	$107,200

What is the inventory turnover for Finley Corporation (rounded to one decimal place)?

1. 0.7 times per year
2. 1.6 times per year
3. 2.4 times per year
4. 3.1 times per year