Exam 3 – Chapters 6 & 7 Review

Under the periodic inventory system:

• inventory records are updated immediately after each purchase.

• inventory must be counted at the end of each accounting period.

• inventory does not have to be counted. (It can be taken from the accounting records.)

• inventory levels must be counted every day.

Which inventory system updates the inventory account only at the end of the accounting period?

• LIFO

• Perpetual

• FIFO

• Periodic

If merchandise purchased on credit is returned to the seller for a full refund, what would be the effect on the accounts listed below?

• Increase Inventory; No effect on Cost of Goods Sold; Decrease Accounts Payable

• Decrease Inventory; Decrease Cost of Goods Sold; No effect on Accounts Payable

• No effect on Inventory; Decrease Cost of Goods Sold; Decrease Accounts Payable

• Decrease Inventory; No effect on Cost of Goods Sold; Decrease Accounts Payable

• Debit Purchases and credit Accounts Payable for $6,000

• Debit Inventory and credit Accounts Receivable for $6,000

• Debit Inventory and credit Accounts Payable for $6,000

• Debit Cost of Goods Sold and credit Inventory for $4,500

The specific identification method would probably be most appropriate for which of the following goods?

• Boxes of brass 4-inch drywall screws at Home Depot

• Bottles of suntan lotion in Wal-Mart's central warehouse

• Sets of tires at the Goodyear plant

• Diamond necklaces at a Tiffany & Co. jewelry store

Assume a periodic inventory system is used. The LIFO inventory costing method assumes that the cost of the units most recently purchased is the:

• last to be assigned to cost of goods sold.

• first to be assigned to ending inventory.

• first to be assigned to cost of goods sold.

• last to be assigned to units available for sale.

Which of the following statements is correct?

• FIFO results in a lower net income than LIFO when costs are rising.

• LIFO results in a higher net income than FIFO when costs are rising.

• LIFO results in a higher net income than FIFO when costs are falling.

• LIFO results in the same net income as FIFO when costs are rising.

• $42,000

• $37,000

• $23,000

• $33,000

• $33,000.

• $133,000.

• $79,000.

• $21,000.

Tags

CCSS.7.RP.A.3

In order to calculate shrinkage:

• both periodic and perpetual inventory systems are needed.

• a periodic inventory system is more effective.

• a perpetual inventory system requires an occasional count of actual inventory.

• it does not matter which system one uses.