Principles of Accounting I Module 6 Quiz

Safeguarding inventory and the proper reporting of inventory in the financial statements are the primary objectives of inventory control.

• True

• False

FIFO is the inventory cost flow method that follows the normal physical flow of the goods.

• True

• False

During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.

• True

• False

During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.

• True

• False

Allowance for Doubtful Accounts is a liability account.

• True

• False

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by 2.

• True

• False

Which of the following measures the length of time it takes to acquire, sell, and replace inventory?

• inventory turnover

• days’ sales in inventory

• retail method of inventory costing

• gross profit method of inventory costing

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

• True

• False

When merchandise is assumed to be sold in the order in which the purchases were made, the company is using the

• first-in, last-out method

• last-in, first-out method

• first-in, first-out method

• weighted average cost method

If beginning inventory (BI) plus purchases (P) minus ending inventory (EI) equals cost of goods sold (COGS), an equivalent equation can be written as

• BI + P = COGS – EI

• BI – P = COGS + EI

• BI + P = COGS + EI

• EI + P = COGS – BI