WorksheetsL6: Inventory costing method
Total questions: 6
Worksheet time: 6mins
In a period of rising prices, which methods will yield the higher net income and lower ending inventory cost?
WA, WA
FIFO FIFO
FIFO, WA
WA FIFO
An overstatement of the ending inventory in 2014 will have the following effects on cost of goods sold and net income in 2014:
overstated, understated
overstated, overstated
understated, understated
understated overstated
Which of the following states that businesses should use the same accounting methods and procedures from period to period?
Accounting conservatism
Consistency characteristic
Disclosure principle
Materiality concept
Floormart uses a perpetual inventory system. By year end, inventory that cost $26,000 can only be sold for $24,000. The journal entry required, if any, will include a
debit to Cost of Goods Sold for $2,000.
debit to Inventory for $24,000.
debit to Inventory for $2,000.
No journal entry is required.
When inventory prices are rising, the FIFO method will generally yield a gross margin that is:
less than the weighted average method.
equal to the gross margin of the weighted-average method.
higher than the weighted-average method.
FIFO does not generally cause a gross margin that is different from that of any other costing method.
January 1 inventory balance 100 units at $10 per unit
March 2 purchase 50 units at $11 per unit
July 8 purchase 80 units at $10 per unit
November 15 purchase 30 units at $12 per unit
On December 31, a physical count reveals 80 units in ending inventory.
Assuming all goods are sold throughout the year for $17 per unit, gross margin calculated under the periodic FIFO method would be:
$1,210.
$1,260.
$1,150.
$900.
