Which of the following methods is appropriate for a business whose inventory consists of a relatively

small number of unique, high-cost items?

Ending inventory is made up of the oldest purchases when a company uses

When merchandise sold is assumed to be in the order in which the purchases were made, the company
is using
A. first-in, last-out
B. last-in, first-out
C. first-in, first-out
D. average cost

The two most widely used methods for determining the cost of inventory are
A. FIFO and LIFO
B. FIFO and average
C. LIFO and average
D. gross profit and average

Cost flow is in the order in which costs were incurred when using
A. average cost
B. last-in, first-out
C. first-in, first-out
D. weighted average
Cost flow is in the reverse order in which costs were incurred when using
A. weighted average
B. last-in, first-out
C. first-in, first-out
D. average cost

The inventory method that assigns the most recent costs to cost of goods sold is
A. FIFO
B. LIFO
C. average
D. specific identification

The inventory costing method that reports the most current prices in ending inventory is
A. FIFO
B. Specific identification
C. LIFO
D. Average cost

The inventory costing method that reports the earliest costs in ending inventory is
A. FIFO
B. LIFO
C. Average cost
D. Specific identification
Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item
for the month of September:

Sep. 1 Inventory 20 units at $20

4 Sold 10 units

10 Purchased 30 units at $25

17 Sold 20 units

30 Purchased 10 units at $30

If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is
A. $800
B. $650
C. $750
D. $700

When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is:
A. debit Cost of Merchandise Sold; credit Sales
B. debit Cost of Merchandise Sold; credit Merchandise Inventory
C. debit Merchandise Inventory; credit Cost of Merchandise Sold
D. No journal entry is made to record the cost of merchandise sold.

Under the _________ inventory method, accounting records maintain a continuously updated inventory
value.
A. retail
B. periodic
C. physical
D. perpetual
The following units of an inventory item were available for sale during the year:

Beginning inventory 10 units at $55

First purchase 25 units at $60

Second purchase 30 units at $65

Third purchase 15 units at $70

The firm uses the periodic inventory system. During the year, 60 units of the item were sold.

The value of ending inventory using LIFO is:

Under a periodic inventory system

If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Goods Sold (COGS), an
equivalent equation can be written as?
A. BI + P = COGS - EI
B. BI - P = COGS + EI
C. BI + P = COGS + EI
D. EI + P = COGS - BI
If the revenues are correctly reported and the Gross Profit of a company is understated, what is the
effect on Owner’s Equity?
A. Understated
B. Overstated
C. Correctly Stated
D. None of the above

Merchandise inventory at the end of the year was inadvertently overstated. Which of the following
statements correctly states the effect of the error on net income, assets, and owner's equity?
A. net income is overstated, assets are overstated, owner's equity is understated
B. net income is overstated, assets are overstated, owner's equity is overstated
C. net income is understated, assets are understated, owner's equity is understated
D. net income is understated, assets are understated, owner's equity is overstated

Merchandise inventory at the end of the year was understated. Which of the following statements
correctly states the effect of the error?
A. net income is understated
B. net income is overstated
C. cost of merchandise sold is understated
D. merchandise inventory reported on the balance sheet is overstated

During the taking of its physical inventory on December 31, 2014, Barry’s Bike Shop incorrectly counted
its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet
and income statement would be as follows:
A. assets overstated by $70,000;retained earnings understated by $70,000; net income statement
understated by $70,000.
B. assets overstated by $70,000;retained earnings understated by $70,000; no effect on the income
statement.
C. assets and retained earnings overstated by $70,000; net income overstated by $70,000.
D. assets and retained earnings overstated by $70,000; net income understated by $70,000.
If a company mistakenly counts more items during a physical inventory than actually exist, how will the
error affect their bottom line?
A. No change to net income.
B. Net income will be overstated
C. Net income will be understated.
D. Only gross profit will be affected.

Which of the following is used to analyze the efficiency and effectiveness of inventory management?
A. inventory turnover only
B. number of days’ sales in inventory only
C. both inventory turnover and number of days’ sales in inventory
D. neither inventory turnover or number of days’ sales in inventory

Which of the following measures the length of time it takes to acquire, sell and replace inventory?
A. inventory turnover
B. number of days’ sales in inventory
C. retail method of inventory costing
D. gross profit method of inventory costing

For the year ended December 31, 2014 Depot Max’s cost of merchandise sold was $56,900. Inventory
at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max’s inventory
turnover for the year.
A. 8.7
B. 7.8
C. 8.3
D. 44