31. Kent Company has used the same inventory method for many years. This is an example of which principle?
A. Matching
B. Realization
C. Cost
D. Consistency
32. Gross profit rate is equal to.
A. Net sales divided by gross profit.
B. Gross sales divided by gross profit.
C. Gross profit divided by net sales.
D. Gross profit divided by gross sales.
33. In which of these three inventory cost flow assumptions is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?
A. LIFO.
B. FIFO.
C. Specific identification.
D. All three assumptions.
34. In a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows:
A. One entry recognizes the sales revenue and the other recognizes the cost of goods sold.
B. One entry records the purchase of merchandise and the other records the sale.
C. One entry records the cost of goods sold and the other reduces the balance in the Inventory account.
D. One entry updates the subsidiary ledger and the other updates the general ledger.
35. Which of the four inventory cost flow assumptions is best suited to inventories of high-priced, low-volume items?
A. LIFO.
B. FIFO.
C. Average.
D. Specific identification.
36. If the ending inventory is overstated in the current year:
A. Net income will also be overstated in the current year.
B. Next year's beginning inventory will also be overstated.
C. Next year's net income will be understated.
D. All three of the above statements are correct.
37. In a periodic inventory system, recording a sale on account involves debiting which of the following accounts?
A. Only Accounts Receivable.
B. Accounts Receivable and Inventory.
C. Accounts Receivable and Cost of Goods Sold.
D. Accounts Receivable, Cost of Goods Sold, and Inventory.
38. In a periodic inventory system, recording a sale on account involves crediting which of the following accounts?
A. Only Sales.
B. Sales and Inventory.
C. Sales and Cost of Goods Sold.
D. Sales, Inventory, and Cost of Goods Sold.
39. In a perpetual inventory system, an inventory flow assumption is used primarily for determining which costs to use in:
A. Recording purchases of inventory.
B. Recording the cost of goods sold.
C. Recording sales revenue.
D. Forecasts of future operating results.
40. Which of the four inventory cost flow assumptions transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?
A. LIFO
B. FIFO
C. Average
D. Specific identification