Hrm 531 Week 3 Quiz

Ch6
Student: ___________________________________________________________________________

1.

Inventory is usually reported as a long-term asset in the balance sheet.
True

2.

Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement.
True

3.

False

Using the first-in, first-out method (FIFO), the first units purchased are assumed to be the first ones sold.
True

9.

False

Companies are not allowed to report inventory costs by assuming which units of inventory are sold and which units still remain on hand.
True

8.

False

If a company has ending inventory of $25,000, purchases during the year of $95,000, and beginning inventory of $30,000, cost of goods sold equals $90,000.
One of the primary benefits of using FIFO when inventory costs are rising is that it results in greater tax savings. True

False

18. The LIFO conformity rule requires a company that uses LIFO for tax reporting to use FIFO for financial reporting. True

False

19. The LIFO reserve is the additional amount of inventory a company would report if it used FIFO instead of
LIFO.
True

False

20. Using a perpetual inventory system, the purchase of inventory is recorded with a debit to the Purchases account, which is a temporary account closed to cost of goods sold at the end of the period.
True

False

21. For inventory that is shipped FOB destination, title transfers from the seller to the buyer once the seller ships the inventory.
True

False

22. For inventory that is shipped FOB shipping point, title transfers from the seller to the buyer once the seller ships the inventory.
True

False

23. Freight-in is included in the cost of inventory.
True

False

24. At the time inventory is sold, cost of goods sold is recorded under the perpetual inventory system.
True

False

25. A multiple-step income statement reports multiple levels of profitability, such as gross profit, operating income, income before income taxes, and net
Niva Company has the following information for their inventories A, B, C, and D:
The necessary adjustment associated with the lower-of-cost-or-market method would be:

A.
B.
C.
D.

Option a
Option b
Option c
Option d

87. On April 1, Robert LLC purchased two units of inventory, A and B. The cost of unit A was $650, and the cost of unit B was $625. On April 30, Robert LLC had not sold the inventory. The market value of unit A was now $685 while the market value of unit B was $550. The adjustment associated with the lower-of-

cost-or-market method on April 30 will be:
A.
B.
C.
D.

Option a
Option b
Option c
Option d

88. Consider the following information pertaining to OldWest's inventory:

At what amount should OldWest report its inventory?
A.
B.
C.
D.

$3,213.
$3,386.
$2,996.
$2,906.

89. Company A is identical to Company B in every regard except that Company A uses FIFO and Company
B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover, compared to Company B's, would be:

A.
B.
C.
D.

Option a
Option b
Option c
Option d

90. Nu Company reported the following data for its first year of operations:

What is Nu's gross profit ratio?
A.
B.