A2_Mid_Chapter1 Quiz

What are the three types of inventory in a manufacturing company?

• Raw materials, prepaid expenses, finished goods

• Raw materials, work-in-progress, finished goods

• Work-in-progress, prepaid expenses, cash

• Finished goods, cash, accounts receivable

What does FOB stand for?

• Freight on Balance

• Free on Board

• Freight on Business

• Free on Business

Which inventory costing method is not allowed under IFRS?

• FIFO

• LIFO

• Weighted Average

• Specific Identification

What is the formula for Gross Profit?

• Sales Revenue – Operating Expenses

• Net Income – Taxes

• Sales Revenue – Cost of Goods Sold

• Inventory – Cost of Goods Sold

Under FOB Destination, who pays for shipping?

• Buyer

• Seller

• Freight Company

• Government

Why is LIFO considered less faithful in representing inventory flows?

• It uses the oldest costs first

• It distorts income when inventory is low

• It matches current costs with current revenues

• It is too complex to apply

What does Net Realizable Value (NRV) represent?

• Original cost of inventory

• Estimated selling price minus disposal costs

• Market value of inventory

• Cost of goods sold

In a perpetual inventory system, when is inventory updated?

• Monthly

• Quarterly

• Constantly

• Annually

If a company sells 2 shirts at $50 each and each shirt costs $30, what is the gross profit?

• $100

• $60

• $40

• $30

A retailer receives a 2/10, n/30 discount on a $1,000 purchase. If paid within 10 days, how much is paid?

• $1,000

• $980

• $990

• $970