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1. ACC 290 Week 4 Chapter 6 Orion WileyPlus
Proficiency and Practice Quiz
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2. Q 6.1: Where is inventory reported?
Q 6.2: ________ are items that will eventually be used in production
Q 6.3: How is inventory ready for sale classified in a manufacturing
company?
Q 6.4: In the perpetual inventory system, which of the following is
NOT a reason to take physical inventory?
Q 6.5: Which of the following is NOT considered an inventory cost?
Q 6.6: What is the beginning inventory plus the cost of goods
purchased?
Q 6.7: A new company purchased three inventory items at the
following costs: first purchase $60; second purchase $40; third
purchase $50. If the company sells two units for $200, what would the
gross profit for the period be, using FIFO costing?
Q 6.8: What does the LIFO inventory method assume about the cost
of the latest units purchased?
Q 6.9: Which inventory flow assumption should a company choose if
it is interested in the lowest amount of income tax expense in a period
of increasing prices?
Q 6.10: Phantom or paper profits can result in periods of inflation
when a company is using the
Q 6.11: Based on the net income of the shop, the sales staff at
Francesca’s Fashions receive performance bonuses. In periods of
declining prices, which inventory costing method would bring the
sales staff the most benefit?
Q 6.12: When determining the cost of inventory items before lower-
of-cost-or-market is applied, which of the following costing methods
can be used?
Q 6.13: How is market defined under the lower-of-cost-or-market
basis in valuing inventory?
Q 6.14: An error was made with the physical count of goods on hand
at the end of a period that resulted in a $25,000 overstatement of the
ending inventory. What is the effect of this error on cost of goods sold
and net income, respectively?
Q 6.15: American Supply sold merchandise on account to Decker
Plumbing on March 31. The sales price was $2,300, and the cost of
goods sold was $1,500. Sales revenue was reported immediately, but

3. the cost of goods sold was not reported until April 3. What happened
to the net income for March as a result?
Q 6.16: To compute the inventory turnover ratio, cost of goods sold
should be divided by which of the following?
Q 6.17: On December 31, 2012, Jameson reported the following
numbers: beginning inventory $80,000; ending inventory $120,000;
cost of goods sold $700,000; and sales $1,200,000. What was
Jameson’s inventory turnover in 2012?
Q 6.18: Where should a company report inventory?
Q 6.19: If beginning inventory is understated, which of the following
will also be understated?
Q 6.20: Managers at Birdie’s Branch Removal, Inc. are confused
because they maintain lower inventory amounts than the industry
average, but they are a highly successful company, outselling even
the big box companies in the chain saw market. Which of the
following is the best answer to the managers’ confusion?
Q 6.21: Simpson’s Sandals, Inc. has five cases of flip-flops that have
not been sold and are part of inventory for more than two years. Each
case costs $300 and originally retailed for $500. Each case has a
current replacement cost of $200. What is the amount of loss that
Simpson’s should report for the year?
ACC 290 Chapter 6 Orion
• Question 1 When the terms of a sale are FOB destination, legal title
to the goods passes to the buyer when the goods reach the buyer's
place of business.
• Question 2 As a result of a thorough physical inventory, Railway
Company determined that it had inventory worth $180,000 at
December 31, 2014. This count did not take into consideration the
following transactions:
• Question 3 Ownership passes to the buyer when the public carrier
accepts the goods if the goods are shipped
• Question 4 Inventory costing methods place primary reliance on
assumptions about the flow of

4. • Question 5 Which of the following statements is true?
• Question 6 In a period of inflation, LIFO produces a higher net
income than FIFO.
• Question 7 In a period of falling prices, which of the following
methods will give the largest net income?
• Question 8 What is the underlying rationale for the lower-of-cost-
or-market rule?
• Question 9 The following information came from the income
statement of the Wilkens Company at December 31, 2014: sales
revenue $1,800,000; beginning inventory $160,000; ending inventory
$240,000; and gross profit $600,000. What is Wilkens' inventory
turnover ratio for 2014?
lllustration 6-17
• Question 1 If the ending inventory is overstated, what occurs?