Reference no: EM132345460

Question

1) The entry to close Cost of goods sold results in a debit to Income summary

A) TRUE

B) FALSE

2) The following pertains to periodic inventory: On a merchandising income statement, which would NOT be found under the heading of Cost of goods sold?

A) Freight-in

B) Purchases

C) Supplies

D) Purchases returns and allowances

3) The consistency principle states that a business should use the same accounting methods from period to period.

A) TRUE

B) FALSE

4) The lower-of-cost-or-market rule demonstrates accounting conservatism in action. 

A) TRUE

B) FALSE

5) A company reports that it uses the FIFO method of inventory costing. This is an example of the disclosure principle.

A) TRUE

B) FALSE

6) A company should NOT change the inventory costing method each period in order to maximize net income. This is an example of the disclosure principle.

A) TRUE

B) FALSE

7) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?

A) $1,000

B) $1,500

C) $1,250

D) $2,250

8) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average-cost inventory costing method, what is the amount of ending inventory on December 31?

A) $1,000

B) $1,250

C) $1,500

D) $2,250

9) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the Last-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?

A) $1,250

B) $2,250

C) $1,000

D) $1,500

10) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?

A) $4,000

B) $3,750

C) $6,750

D) $3,500

11) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average cost inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?

A) $3,750

B) $6,750

C) $3,500

D) $4,000

12) An overstatement of ending inventory in the current period results in the understatement of Ne income in the current year.

A) TRUE

B) FALSE

13) Ending inventory for the current year is overstated by $20,000. What effect will this error have on the following year's Net income?

A) The inventory overstatement will not affect Net income.

B) Net income will be understated by $40,000.

C) Net income will be understated by $20,000.

D) Net income will be overstated by $20,000.