Reference no: EM13882768

Multiple Choice Questions
The following questions are adapted from a variety of sources including questions developed by the AICPA Board of Examiners and those used in the Kaplan CPA Review Course to study inventory while preparing for the CPA examination. Determine the response that best completes the statements or questions. 

1. Herc Co.'s inventory at December 31, 2013, was $1,500,000 based on a physical count priced at cost, and before any necessary adjustment for the following:Merchandise costing $90,000, shipped f.o.b shipping point from a vendor on December 30, 2013, was received and recorded on January 5, 2014.Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2014. The goods, billed to the customer f.o.b. shipping point on December 30, 2013, had a cost of $120,000.What amount should Herc report as inventory in its December 31, 2013, balance sheet?
a. $1,500,000
b. $1,590,000
c. $1,700,000
d. $1,710,000

2. Dixon Menswear Shop regularly buys shirts from Colt Company. Dixon purchased shirts from Colt on May 27, and received an invoice with a list price amount of $3,600 and payment terms of 2/10, n/30. Dixon uses the net method to record purchases. Dixon should record the purchase at
a. $3,430
b. $3,500
c. $3,528
d. $3,600

Questions 3 through 5 are based on the following information. Esquire Corp. uses the periodic inventory system. During its first year of operations, Esquire made the following purchases (list in chronological order of acquisition):
 20 units at $50
 35 units at $40
 85 units at $30
Sales for the year totaled 135 units, leaving 5 units on hand at the end of the year.
3. Ending inventory using the average cost method is
a. $ 150
b. $ 177
c. $ 250
d. $1,540

4. Ending inventory using the FIFO method is
a. $ 150
b. $ 177
c. $ 250
d. $1,540

5. Ending inventory using the LIFO method is
a. $ 150
b. $ 177
c. $ 250
d. $1,540

6. Jamison Corporation's inventory cost in its balance sheet is lower using the first in, first out method than it would have been had it used the last in, first out method. Assuming no beginning inventory, what direction did the cost of purchases move during the period?
a. Up.
b. Down.
c. Unchanged.
d. Can't be determined.

7. Dalton Company adopted the dollar value LIFO inventory method on January 1, 2013. In applying the LIFO method, Dalton uses internal price indexes and the multiple pools approach. The following data were available for Inventory Pool No. 1 for the two years following the adoption of LIFO:
Under the dollar value LIFO method the inventory at December 31, 2014, should be
a. $128,000
b. $129,800
c. $130,800
d. $140,800
Beginning in 2011, International Financial Reporting Standards are tested on the CPA exam along with U.S. GAAP. The following question deals with the application of IFRS.

8. Under IFRS, which of the following methods is not acceptable for the valuation of inventory?
a. LIFO.
b. FIFO.
c. Average cost.
d. Specificidentification.