Question 1

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Accepted Answer

True

Question 2

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

Accepted Answer

False

Question 3

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

Accepted Answer

False

Question 4

Generally,inventory inspection costs are reported as operating expenses on the income statement.

Accepted Answer

The answer of Generally,inventory inspection costs are reported as operating...

Question 5

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

Accepted Answer

The answer of The FIFO inventory method allocates the earliest...

Question 6

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a decrease in both ending inventory and cost of goods sold.

Accepted Answer

The answer of The journal entry to write down inventory...

Question 7

During periods of decreasing unit costs,use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Accepted Answer

The answer of During periods of decreasing unit costs,use of...

Question 8

A grocery store would likely use the specific identification inventory costing method for most of the items in its inventory.

Accepted Answer

The answer of A grocery store would likely use the...

Question 9

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a debit to cost of goods sold and a credit to inventory.

Accepted Answer

The answer of The journal entry to write down inventory...

Question 10

The lower of cost or net realizable value rule is used due to the conservatism constraint,and therefore an inventory calculation may result in a departure from the historical cost principle.

Accepted Answer

The answer of The lower of cost or net realizable...

Question 11

Manufactured goods transferred out of work in process become part of finished goods inventory.

Accepted Answer

The answer of Manufactured goods transferred out of work in...

Question 12

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a credit to cost of goods sold and a debit to inventory.

Accepted Answer

The answer of The journal entry to write down inventory...

Question 13

During periods of decreasing unit costs,use of the FIFO inventory method results in lower gross profit than would use of the LIFO method.

Accepted Answer

The answer of During periods of decreasing unit costs,use of...

Question 14

A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

Accepted Answer

The answer of A company can use the LIFO inventory...

Question 15

During periods of increasing unit costs,the LIFO inventory method results in lower income taxes.

Accepted Answer

The answer of During periods of increasing unit costs,the LIFO...

Question 16

Goods available for sale are allocated to both ending inventory and cost of goods sold.

Accepted Answer

The answer of Goods available for sale are allocated to...

Question 17

During periods of increasing unit costs,the LIFO inventory method will result in a higher inventory amount on the balance sheet and a lower net income than will the FIFO inventory method.

Accepted Answer

The answer of During periods of increasing unit costs,the LIFO...

Question 18

Direct material costs are a component of the cost of the work in process inventory.

Accepted Answer

The answer of Direct material costs are a component of...

Question 19

The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

Accepted Answer

The answer of The LIFO inventory method allocates the oldest...

Question 20

A decrease in the merchandise inventory account occurs when units of inventory purchased are greater than units of goods sold.

Accepted Answer

The answer of A decrease in the merchandise inventory account...

Quiz 7: Reporting and Interpreting Cost of Goods Sold and Inventory

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

Generally,inventory inspection costs are reported as operating expenses on the income statement.

The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a decrease in both ending inventory and cost of goods sold.

During periods of decreasing unit costs,use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

A grocery store would likely use the specific identification inventory costing method for most of the items in its inventory.

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a debit to cost of goods sold and a credit to inventory.

The lower of cost or net realizable value rule is used due to the conservatism constraint,and therefore an inventory calculation may result in a departure from the historical cost principle.

Manufactured goods transferred out of work in process become part of finished goods inventory.

The journal entry to write down inventory under the lower of cost or net realizable value rule results in a credit to cost of goods sold and a debit to inventory.

During periods of decreasing unit costs,use of the FIFO inventory method results in lower gross profit than would use of the LIFO method.

A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

During periods of increasing unit costs,the LIFO inventory method results in lower income taxes.

Goods available for sale are allocated to both ending inventory and cost of goods sold.

During periods of increasing unit costs,the LIFO inventory method will result in a higher inventory amount on the balance sheet and a lower net income than will the FIFO inventory method.

Direct material costs are a component of the cost of the work in process inventory.

The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

A decrease in the merchandise inventory account occurs when units of inventory purchased are greater than units of goods sold.