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Question 1 The following information applied to Frack Inc. for year 2: Merchandise purchased for resale $400,000 Freight-in 10,000 Freight-out 5,000 Purchase returns 2,000 Frack’s year 2 inventoriable cost was a. $408,000 b. $404,000 c

Question 1 The following information applied to Frack Inc. for year 2: Merchandise purchased for resale $400,000 Freight-in 10,000 Freight-out 5,000 Purchase returns 2,000 Frack’s year 2 inventoriable cost was a. $408,000 b. $404,000 c

Question 1
 
The following information applied to Frack Inc. for year 2:
 
 
Merchandise purchased for resale $400,000
 
Freight-in 10,000
 
Freight-out 5,000
 
Purchase returns 2,000
 
Frack's year 2 inventoriable cost was
 
a. $408,000
 
b. $404,000
 
c. $413,000
 
d. $400,000
 
 
Question 2
On December 28, year 2, Frack ManufacturingCo. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale
 
and delivery of the goods were as follows:
 
Packaging for shipment $1,000
 
Shipping 1,500
 
Special handling charges 2,000
 
These goods were received on December 31, year 2. In Frack's December 31, year 2 balance sheet, what amount of cost for these goods should be included in
 
inventory?
 
a. $53,500
 
b. $54,500
 
c. $52,000
 
d. $50,000
 
 
Question 3
The following information was taken fromFrack Co.'s accounting records for the year ended December 31, year 2:
 
 
 
Decrease in raw materials
 
inventory
 
$
 
15,000
 
Increase in finished goods
 
inventory
 
35,000
 
Raw material purchased 430,000
 
Direct labor payroll 200,000
 
Factory overhead 300,000
 
Freight-out 45,000
 
There was no work in process inventory at the beginning or end of the year. Frack's year 2 cost of goods sold is
 
 
a. $950,000
 
b. $895,000
 
c. $955,000
 
d. $910,000
 
 
Question 4
 
 
 
 
 
 
How should the following costs affect a retailer's inventory?
 
 
 
a. Freight-in Interest on inventory loan
 
 
 
 
No effect Increase
 
 
 
b. Freight-in Interest on inventory loan
 
 
 
 
No effect No effect
 
 
 
c. Freight-in Interest on inventory loan
 
 
 
 
Increase No effect
 
 
 
d. Freight-in Interest on inventory loan
 
 
 
 
Increase Increase
 
 
 
Question 5
 
 
 
When allocating costs to inventory produced for the period, fixed overhead should be based upon
 
a. The actual amounts of goods produced during the period.
 
 
 
 
b. The highest production levels in the last three periods.
c. The lowest production level in the last three periods.
 
d. The normal capacity of production facilities.
 
 
Question 6
Flip Co. recorded the following inventory information during the month of January:
 
Units Unit cost Total cost Units on hand
 
Balance on 1/1 2,000 $1 $2,000 2,000
 
Purchased on 1/8 1,200 3 3,600 3,200
 
Sold on 1/23 1,800 1,400
 
Purchased on 1/28 800 5 4,000 2,200
 
Flip uses the LIFOmethod to cost inventory.What amount should Flip report as inventory on January 31 under each of the following methods of recording inventory?
 
A. Perpetual Periodic
 
$2,600              $2,600
 
b. Perpetual Periodic
 
$2,600              $5,400
 
c. Perpetual Periodic
 
$5,400             $2,600
 
d. Perpetual Periodic
 
$5,400             $5,400
 
Question 7
 
The weighted-average for the year inventory cost flow method is applicable to which of the following inventory systems?
 
a. Periodic Perpetual
 
No                       No
 
b. Periodic Perpetual
 
Yes                   Yes
 
c. Periodic Perpetual
 
No                 Yes
 
d. Periodic Perpetual
 
Yes                No
Question 8
During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1/Y2 1,000 $1 $1,000 1,000
Purchased on1/7/Y2 600 3 1,800 1,600
Sold on 1/20/Y2 900
700
Purchased on1/25/Y2 400 5 2,000 1,100
Under the moving-average method, what amount should Flip report as inventory at January 31, year 2?
a. $3,900
b. $2,640
c. $3,300
d. $3,225
Question 9
Based on a physical inventory taken on December 31, year 2, Flip Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Flip
estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Flip's normal profit margin is 10%of sales. Under the lower
of cost or market rule, what amount should Flip report as chocolate inventory in its December 31, year 2 balance sheet?
a. $24,000
b. $26,000
c. $20,000
d. $28,000
Question 10
 
 
Reporting inventory at the lower of cost or market is a departure fromthe accounting principle of
a. Full disclosure
b. Conservatism
c. Consistency
d. Historical cost
Question 11
 
Flip Company had 150 units of product A on hand at January 1, year 2, costing $21 each. Purchases of productA during the month of January were as follows:
Units    Unit    cost
Jan.10     200     $22
18            250      23
28            100       24
 
A physical count on January 31, year 2, shows 250 units of product A on hand. The cost of the inventory at January 31, year 2, under the LIFO method is?
A. $5,850
B. $5,350
C. $5,250
D. $5,550
Question 12
During January year 2, Flip Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1/Y2 1,000 $1 $1,000 1,000
Purchased on 1/7/Y2 600 3 1,800 1,600
Sold on 1/20/Y2 900 700
Purchased on1/25/Y2 400 5 2,000 1,100
Under the LIFO method, what amount should Flip report as inventory at January 31, year 2?
a. $1,300
b. $4,100
c. $3,900
d. $2,700
 
Question 13
 
 
A company decided to change its inventory valuation method fromFIFOto LIFO in a period of rising prices. What was the result of the change on ending inventory and net income in
 
 
 
the year of the change?
 
 
 
 
 
a. Ending Inventory    Net Income
 
 
 
 
Increase                       Decrease
 
 
 
b. Ending Inventory   Net Income
 
 
 
 
Increase                         Increase
 
 
 
c. Ending Inventory     Net Income
 
 
 
 
Decrease                       Increase
 
 
 
d. Ending Inventory         Net Income
 
 
 
 
Decrease                            Decrease
 
Question 14
 
 
 
 
Generally, which inventory costing method approximates most closely the current cost for each of the following?
 
 
 
 
a. Cost of Goods Sold           Ending Inventory
 
           LIFO                                                     LIFO
 
b.Cost of Goods Sold               Ending Inventory
 
        LIFO                                                       FIFO
 
c. Cost of Goods Sold                Ending Inventory
 
                FIFO                                                           FIFO
 
d. Cost of Goods Sold                   Ending Inventory
 
                          FIFO                                   LIFO
 
 
 
Question 15
 
 
Flip Wholesalers stocks a changing variety of products.Which inventory costing method will be most likely to give Flip the lowest ending inventory when its product lines are subject
 
to specific price increases
 
a. Weighted-average.
 
b. Fifo periodic
c. Dollar-value LIFO.
 
d. Specific identification.
 
Question 16
Flip Company's accounting records indicated the following information:
 
 
Inventory, 1/1/Y2 $ 500,000
 
Purchases during year 2 2,500,000
 
Sales during year 2 3,200,000
 
a. $225,000
 
b. $175,000
 
c. $25,000
 
d. $100,000
 
 
Question 17
On July 1, year 2, Flip Development Co. purchased a tract of land for $1,200,000. Flip incurredadditional cost of $300,000 during the remainder of year 2 in preparing the land
 
for sale. The tract was subdivided into residential lots as follows:
 
Lot class             Number of lots                       Sales price per lot
 
    A                                100                                                    $24,000
 
    B                                100                                                          16,000
 
    C                              200                                                           10,000
Using the relative sales value method, what amount of costs should be allocated to the Class A lots?
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a. $300,000
 
b. $720,000
 
c. $375,000
 
d. $600,000
 
Question 18
 
On October 20, year 2, Flip Co. consigned forty freezers to Floozy Co. for sale at $1,000 each and paid $800 in transportation costs. On December 30, year 2, Floozy reported the
 
of ten freezers and remitted $8,500. The remittance was net of the agreed 15%commission. What amount should Flip recognize as consignment sales revenue for year 2?
 
 
 
a. $ 8,500
 
b. $ 7,700
 
c. $ 10,000
 
d. $ 9,800
 
 
 
 
 
 

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