1. Under the gross method, purchase discounts taken are:
Deducted from interest expense.
Added to net purchases.
Added to interest income.
Deducted from purchases.
2. An argument against the use of LCM is its lack of:
Relevance.
Reliability.
Consistency.
Objectivity.
3. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:
Weighted average.
LIFO.
Moving average.
FIFO.
4. In determining the cost-to-retail percentage for the current year,:
Net markups are included.
Net markdowns are excluded.
Net sales are included.
All of the above are correct.
5. Nu Company reported the following pretax data for its first year of operations.
Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 40% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060
What is Nu's gross profit percentage if it elects LIFO?
80%.
49%.
40%.
5%.
6. Inventory does not include:
Materials used in the production of goods to be sold.
Assets intended to be sold in the normal course of business.
Equipment used in the manufacturing of assets for sale.
Assets currently in production for normal sales.
7. When using the gross profit method to estimate ending inventory, it is not necessary to know:
Beginning inventory.
Net purchases.
Cost of goods sold.
Net sales.
8. To determine the value of a LIFO layer, using dollar-value LIFO retail:
Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage.
Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.
Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index.
9. The use of LIFO during a long inflationary period can result in:
A net increase in income tax expense.
An inflated balance sheet.
Significant cash flow advantages over FIFO.
A reduction in inventory turnover over FIFO.
10. To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:
Compare beginning and ending inventory amounts at current year prices.
Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year.
Inflate beginning inventory amount to end of year prices and compare to ending inventory amount.
Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.
password: shiv
Deducted from interest expense.
Added to net purchases.
Added to interest income.
Deducted from purchases.
2. An argument against the use of LCM is its lack of:
Relevance.
Reliability.
Consistency.
Objectivity.
3. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:
Weighted average.
LIFO.
Moving average.
FIFO.
4. In determining the cost-to-retail percentage for the current year,:
Net markups are included.
Net markdowns are excluded.
Net sales are included.
All of the above are correct.
5. Nu Company reported the following pretax data for its first year of operations.
Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 40% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060
What is Nu's gross profit percentage if it elects LIFO?
80%.
49%.
40%.
5%.
6. Inventory does not include:
Materials used in the production of goods to be sold.
Assets intended to be sold in the normal course of business.
Equipment used in the manufacturing of assets for sale.
Assets currently in production for normal sales.
7. When using the gross profit method to estimate ending inventory, it is not necessary to know:
Beginning inventory.
Net purchases.
Cost of goods sold.
Net sales.
8. To determine the value of a LIFO layer, using dollar-value LIFO retail:
Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage.
Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.
Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index.
9. The use of LIFO during a long inflationary period can result in:
A net increase in income tax expense.
An inflated balance sheet.
Significant cash flow advantages over FIFO.
A reduction in inventory turnover over FIFO.
10. To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:
Compare beginning and ending inventory amounts at current year prices.
Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year.
Inflate beginning inventory amount to end of year prices and compare to ending inventory amount.
Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.
password: shiv
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