Strayer ACC556 CHAPTER 6 EXERCISE Latest 2019 April Question # 00600705 Course Code : ACC556 Subject: Business Due on: 04/25/2019 Posted On: 04/25/2019 08:24 AM Tutorials: 1 Rating: 4.7/5

ACC556 Financial Accounting for Managers

CHAPTER 6 EXERCISE

Question 1 The
LIFO reserve is

Answers:

the difference between the value of the
inventory under LIFO and the value under FIFO.

an amount
used to adjust inventory to the lower of cost or market.

the
difference between the value of the inventory under LIFO and the value under
average cost.

the amount
used to adjust inventory to history cost.

Question 2 If
a company has no beginning inventory and the unit cost of inventory items does
not change during the year, the value assigned to the ending inventory will be
the same under LIFO and average cost flow assumptions.

Answers:

True

False

Question 3 Raw
materials inventories are the goods that a manufacturing company has completed
and are ready to be sold to customers.

Answers:

True

False

Question 4 Noise
Makers Inc has the following inventory data:

July 1 Beginning inventory 20 units at $19 $ 380

7 Purchases 70 units at $20 1,400

22 Purchases 10 units at $22 220

$2,000

A physical
count of merchandise inventory on July 30 reveals that there are 32 units on
hand. Using the average cost method, the value of ending inventory is

Answers:

$620.

$640.

$651.

$660.

Question 5 Which
statement concerning lower of cost or market (LCM) is in?

Answers:

LCM is an
example of a company choosing the accounting method that will be least likely
to overstate assets and income.

Under the LCM basis, market does not apply
because assets are always recorded and maintained at cost.

The LCM
basis uses current replacement cost because a decline in this cost usually
leads to a decline in the selling price of the inventory item.

LCM is
applied after one of the cost flow assumptions has been applied.

Question 6 Jenks
Company developed the following information about its inventories in applying
the lower of cost or market (LCM) basis in valuing inventories:

Product Cost Market

A $57,000 $60,000

B 40,000 38,000

C 80,000 81,000

If Jenks applies the LCM basis, the value of
the inventory reported on the balance sheet would be

Answers:

$177,000.

$179,000.

$175,000.

$181,000.

Question 7 Inventory
costing methods place primary reliance on assumptions about the flow of

Answers:

good.

costs.

resale
prices.

values.

Question 8 Selection
of an inventory costing method by management does not usually depend on

Answers:

the fiscal year end.

income
statement effects.

balance
sheet effects.

tax
effects.

Question 9 Many
companies use just-in-time inventory methods. Which of the following is not an
advantage of this method?

Answers:

It limits
the risk of having obsolete items in inventory.

Companies may not have quantities to meet customer
demand.

It lowers
inventory levels and costs.

Companies
can respond to individual customer requests.

Question 10
In periods of rising prices, which is an advantage of using the LIFO inventory
costing method?

Answers:

Ending
inventory will include latest (most recent) costs and thus be more realistic.

Cost of goods sold will include latest (most
recent) costs and thus will be more realistic.

Net income
will be the highest and thus reflect the prosperity of the company.

Phantom
profits are reported.

Question 11
Which of the following should not be included in the physical inventory of a
company?

Answers:

Goods held on consignment from another
company.

Goods in
transit from another company shipped FOB shipping point.

Goods
shipped on consignment to another company.

All of
these answer choices should be included.

Question 12
The LIFO method is rarely used because most companies do not sell the last
goods they purchase first.

Answers:

True

False

Question 13
Goods held on consignment should be included in the consignor’s ending
inventory.

Answers:

True

False

Question 14
A low number of days in inventory may indicate all of the following except

Answers:

Sales
opportunities may be lost because of inventory shortages.

There is
less chance of having obsolete inventory items.

The company
has fewer funds tied up in inventory.

Management
has achieved the best balance between too much and too little inventory levels.

Question 15
At December 31, 2014 Howell Company’s inventory records indicated a balance of
$858,000. Upon further investigation it was determined that this amount
included the following:

• $168,000
in inventory purchases made by Howell shipped from the seller 12/27/14 terms
FOB destination, but not due to be received until January 2nd

• $111,000
in goods sold by Howell with terms FOB destination on December 27th. The goods
are not expected to reach their destination until January 6th.

• $9,000 of
goods received on consignment from Westwood Company

What is
Howell’ sending inventory balance at December 31, 2014?

Answers:

$690,000

$849,000

$570,000

$681,000

Question 16Match
the items below by entering the appropriate code letter in the space provided.

Question		Selected Match
Merchandise Inventory		Goods ready for sale to customers by retailers and wholesalers.
Work in process		Goods that are only partially completed in a manufacturing company.
FOB shipping point		Title to the goods transfers when the public carrier accepts the goods from the seller.
FOB destination		Title to goods transfers when the goods are delivered to the buyer.
Specific identification method		Tracks the actual physical flow for each inventory item available for sale.
First-in, first-out (FIFO) method		Ending inventory valuation consists of the most recent inventory purchases.
Last-in, first-out (LIFO) method		Cost of goods sold consists of the most recent inventory purchases.
Average cost method		The same unit cost is used to value ending inventory and cost of goods sold.
LIFO reserve		The difference between inventory reported using LIFO and inventory using FIFO.
Inventory turnover ratio		Measures the number of times the inventory sold during the period.

Question 17
Which of the following statements iswith respect to inventories?

Answers:

The FIFO
method assumes that the costs of the earliest goods acquired are the last to be
sold.

It is
generally good business management to sell the most recently acquired goods
first.

Under FIFO, the ending inventory is based on
the latest units purchased.

FIFO seldom
coincides with the actual physical flow of inventory.

Question 18
Use the following information regarding Black Company and Red Company to answer
the question “Which of the following is Red Company's “cost of
goods sold” for 2014 (to the closest dollar)?” Hint: The Ending Inventory
of 1 year is the Beginning Inventory of the next year.

Year Inventory Turnover Ratio Ending Inventory

Black
Company 2012 $26,340

2013 10.7 $29,890

2014 10.2 $30,100

Red Company 2012
$25,860

2013 9.0 $24,750

2014 9.5 $22,530

Answers:

$222,684

$235,125

$224,580

$214,035