Multiple Choice
Identify the choice that best completes the statement or answers the
question.
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1.
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The factor which determines whether or not goods should be included in a
physical count of inventory is
a. | physical possession. | b. | legal title. | c. | management's
judgement. | d. | whether or not the purchase price has been paid. |
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2.
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If goods in transit are shipped FOB shipping point to a carrier named by the
buyer
a. | the seller has legal title to the goods until they are delivered. | b. | the buyer has legal
title to the goods when a public carrier accepts the goods from the seller. | c. | the transportation
company has legal title to the goods while the goods are in transit. | d. | no one has legal
title to the goods until they are delivered. |
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3.
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All of the following are internal control procedures related to a physical
inventory count except
a. | employees who do not have custodial or record keeping responsibility for the
inventory should do the counting. | b. | pre-numbered inventory tags should be used and
all tags accounted for. | c. | inventory that has been counted should be
removed to a separate warehouse to prevent double counting. | d. | at the end of the
count, a supervisor should ensure that all inventory items are
tagged. |
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4.
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The FIFO inventory method assumes that the cost of the latest units purchased
are
a. | the last to be allocated to cost of goods sold. | b. | the last to be
allocated to ending inventory. | c. | the first to be allocated to cost of goods
sold. | d. | not allocated to cost of goods sold or ending
inventory. |
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5.
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Which of the following items will increase the cost of goods purchased for the
buyer of goods?
a. | Purchase returns and allowances granted by the seller | b. | Volume discounts
taken by the purchaser | c. | Freight charges paid by the
seller | d. | Freight charges paid by the purchaser |
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6.
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At the end of the period, the cost of goods available for sale is allocated
between
a. | beginning inventory and ending inventory. | b. | beginning inventory
and cost of goods on hand. | c. | ending inventory and cost of goods
sold. | d. | beginning inventory and cost of goods purchased. |
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7.
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The selection of an appropriate inventory cost flow assumption for an individual
company is made by
a. | the external auditors. | b. | the CICA. | c. | the internal
auditors. | d. | management. |
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8.
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In periods of rising prices, the inventory method which results in the inventory
value on the balance sheet that is closest to current cost is the
a. | FIFO method. | b. | Specific identification. | c. | Average cost
method. | d. | Tax method. |
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9.
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Two companies report the same cost of goods available for sale but each employs
a different inventory costing method. If the price of goods has increased during the period,
then the company using
a. | Average Cost will have the highest ending inventory value. | b. | FIFO will have the
highest cost of good sold. | c. | FIFO will have the highest ending inventory
value. | d. | Average Cost will have the lowest cost of goods sold. |
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10.
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If companies have identical inventoriable costs but use different inventory flow
assumptions when the price of goods have not been constant, then the
a. | Cost of goods sold of the companies will be identical. | b. | Cost of goods
available for sale of the companies will be identical. | c. | Ending inventory of the companies will be
identical. | d. | Net income of the companies will be identical. |
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11.
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The consistent application of an inventory costing method is essential
for
a. | conservatism. | b. | accuracy. | c. | comparability. | d. | efficiency. |
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12.
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The lower of cost and market basis of valuing inventories is an example
of
a. | comparability. | b. | the cost principle. | c. | conservatism. | d. | consistency. |
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