Reference no: EM132586360

Question 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?

A. Conservatism

B. Materiality concept

C. Disclosure principle

D. Consistency principle

Question 2. Which inventory costing method assigns to Cost of Goods Sold the most recent purchases incurred during the period?

A. Weighted-average

B. Last-in, first-out (LIFO)

C. First-in, first-out (FIFO)

D. Specific identification

Question 3. Assume Red Rover began June with 52 units of merchandise inventory, with a cost of $17 per unit. During June, Red Rover purchased and sold goods as follows:

June 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 Red Rover's cost of goods sold for the sale on June 14?

A. $510

B. $2,400

C. $1,004

D. $936

Question 4. After the sale on June 14, what is Red Rover's cost of the merchandise inventory on hand, assuming that Red Rover uses FIFO? (Reference Question 3 information.)

A. $510

B. $2,400

C. $1,004

D. $936

Question 5. After the sale on June 14, what is Red Rover's cost of the merchandise inventory on hand, assuming that Red Rover uses LIFO? (Reference Question 3 information.)

A. $510

B. $578

C. $900

D. $2,400

Question 6. Suppose Red Rover uses the weighted-average method and the perpetual inventory system. Use the Red Rover data from Question 3 to compute the weighted-average unit cost of the company's inventory on hand on June 8. Round unit cost to the nearest cent.

A. $16.11

B. $16.50

C. $18.15

D. $19.00

Question 7. Which inventory costing method results in the lowest ending inventory during a period of rising merchandise inventory cost?

A. Weighted-average

B. Specific identification

C. First-in, first-out (FIFO)

D. Last-in, first-out (LIFO)

Question 8. 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?

A. Conservatism

B. Lower-of-cost-or-market

C. Materiality concept

D. Consistency principle

Question 9. On December 31, 20X8, Jones Company understated ending inventory by $52,000. How does this error affect Cost of Goods Sold and Net Income for 20X8?

A. Overstates Cost of Goods Sold and understates Net Income

B. Overstates both Cost of Goods Sold and Net Income

C. Understates Cost of Goods Sold and overstates Net Income

D. Leaves both Cost of Goods Sold and Net Income correct because the errors cancel each other

Question 10. Comfort Clothing 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 Comfort Clothing (rounded to one decimal place)?

A. 0.7 times per year

B. 1.6 times per year

C. 2.4 times per year

D. 3.1 times per year