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Inventory and Cost of Goods Sold (Practice Quiz)

This document contains 20 multiple choice questions about inventory cost flow assumptions, cost of goods sold, and inventory valuation. The key inventory cost flow assumptions covered are FIFO, LIFO, and weighted average. It tests understanding of how each assumption impacts the calculation and matching of inventory costs and cost of goods sold. The correct answers to each question are also provided.

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327 views4 pages

Inventory and Cost of Goods Sold (Practice Quiz)

This document contains 20 multiple choice questions about inventory cost flow assumptions, cost of goods sold, and inventory valuation. The key inventory cost flow assumptions covered are FIFO, LIFO, and weighted average. It tests understanding of how each assumption impacts the calculation and matching of inventory costs and cost of goods sold. The correct answers to each question are also provided.

Uploaded by

Monique
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Inventory and Cost of Goods Sold

(Practice Quiz)

1. Under which inventory cost flow assumption is the cost of the most recent purchase matched first
with sales revenues?
FIFO LIFO Average
2. Under which inventory cost flow assumption is the cost of the most recent purchases likely to
remain in inventory?
FIFO LIFO Average
3. Under which inventory cost flow assumption is the oldest cost of inventory items likely to remain
on the balance sheet?
FIFO LIFO Average
4. The account Inventory will appear on the balance sheet as a current asset at an amount that often
reflects the __________ of the merchandise on hand.
Cost Sales Value
5. The inventory system that does NOT update the Inventory account automatically at the time of
each purchase or sales is the _______________ method/system.
Periodic Perpetual
6. If a company is experiencing continuous cost increases for the merchandise that it purchases,
which cost flow assumption will result in the least amount of profit and the least amount of
income tax expense?
FIFO LIFO Average
7. A company in the computer industry is experiencing continuously lower costs. Which cost flow
assumption will result in less income tax expense for this company?
FIFO LIFO Average
8. A company purchased items for inventory during 2021 at continuously higher costs. Its last two
purchases of 2021 were 20 units on December 20 at a cost of $14 per unit and 30 units on
December 30 at a cost of $15 per unit. On December 28, 2021 the company made its last sale for
the year when it sold 10 units. Which inventory cost flow assumption will cause the $15 cost per
unit to be expensed as part of the year 2021's cost of goods sold?
LIFO Periodic LIFO Perpetual Neither
Use the following information for questions 9 - 14:
A company purchased merchandise to be resold at increasing costs during the year 2021. The purchases
were made at the following costs...

The company sold 10 items at the end of each month.


9. What are the number of units and the cost of the goods available for sale? __________ units
$__________ cost of goods available for sale

10. Assuming the LIFO periodic cost flow assumption, what will be the company's cost of goods sold
for the 120 items sold in 2021?
$1,380 $1,386 $1,410 $1,460
11. Assuming the FIFO periodic cost flow assumption, what will be the company's cost of goods sold
for the 120 items sold in 2021?
$1,380 $1,386 $1,410 $1,460
12. Assuming the periodic weighted-average cost flow assumption, what is the company's cost of
goods sold for the 120 items sold in 2021?
$1,380 $1,386 $1,410 $1,460
13. Assuming the LIFO perpetual cost flow assumption, what will be the company's cost of goods
sold if 10 units were sold on the last day of each month during the year 2021?
$1,380 $1,386 $1,410 $1,460
14. Assuming the perpetual moving-average cost flow assumption, what is the company's cost of
goods sold for the 120 items sold in 2021?
$1,380 $1,386 $1,410 $1,460
15. A company's inventory was destroyed in a fire on January 28, 2022. The company's December
31, 2021 inventory had a cost of $40,000. The company's gross profit has consistently been 30%
of sales. During January the company purchased merchandise costing $36,000 and sales of
$50,000 at regular selling prices. What is the estimated cost of the inventory that was destroyed
on January 28, 2022?
$26,000 $35,000 $41,000
16. A retailer has the following information:

The estimated cost of inventory to be shown on the retailer's January 31, 2022 balance sheet is
$15,000 $16,000 $20,000
17. A company has properly recorded all of its purchases of merchandise inventory, but made an
error when counting its ending inventory. As a result of the error the company's Inventory
account is overstated by $24,000. (This means that the amount in the Inventory account is too
high by $24,000.) What is the impact of this error on the company's income statement?
Specifically, the company's reported profit (ignoring income tax expense) in the period of the
error will be __________.
Too High Too Low Unaffected
18. A retailer's inventory cost should include freight-in on the merchandise purchased with terms
FOB shipping point?
True False
19. Net Purchases is Gross Purchases minus Purchase Returns and Allowances and Purchase
__________.

20. The difference between the Cost of Goods Available and the Cost of Goods Sold is __________.
Answers
1. LIFO
2. FIFO
3. LIFO
4. Cost
5. Periodic
6. LIFO
7. FIFO
8. LIFO Periodic
9. 150, $1,770
10. $1,460
11. $1,380
12. $1,416
13. $1,410
14. $1,386
15. $41,000
16. $15,000
17. Too High
18. True
19. Discounts
20. Ending Inventory

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