41. If the beginning inventory of the current year and the ending inventory of the past year were overstated by the same amount:
A. Retained earnings at the end of the current year would be correct.
B. Retained earnings at the end of the current year would be overstated.
C. Retained earnings at the end of the current year would be understated.
D. Net income for the current year would be correct.
42. Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:
A. $500.
B. $550.
C. $660.
D. The answer will depend upon the inventory flow assumption in use.
43. During periods of inflation, when comparing LIFO with FIFO:
A. LIFO inventory and cost of sales would be higher.
B. LIFO inventory and cost of sales would be lower.
C. LIFO inventory would be lower and cost of sales would be higher.
D. LIFO inventory would be higher and cost of sales would be lower.
44. The specific identification method is more appropriate than a flow assumption method:
A. For a large inventory of identical low-priced items.
B. If each item in the inventory is unique.
C. If purchase costs are rising.
D. If purchase costs are falling.
45. When the LIFO costing method is in use, the seller:
A. Must sell the most recently acquired units first.
B. Must sell the oldest unit in inventory first.
C. Assumes that the most recently acquired units are sold first.
D. Assumes that the oldest units in inventory are sold first.
46. Which of the following statements is not a characteristic of the LIFO method of pricing inventory?
A. During a period of rising prices, LIFO tends to minimize the amounts of income taxes owed.
B. The cost of goods sold is measured in relatively current costs.
C. Inventory is valued at relatively current costs.
D. None of the above; these statements all describe characteristics of the LIFO method.
47. Which of the following will cause net income to be overstated for the following year?
A. Current year's ending inventory is understated.
B. Current year's ending inventory is overstated.
C. Next year's beginning inventory is overstated.
D. Next year's ending inventory is understated.
48. Which of the following methods of measuring the cost of goods sold most closely parallels the actual physical flow of the merchandise?
A. LIFO.
B. FIFO.
C. Average cost.
D. Specific identification.
49. In a perpetual inventory system, the flow of inventory cost is:
A. First through the income statement, then through the balance sheet.
B. First through the balance sheet, then through the income statement.
C. Only through the balance sheet and not the income statement.
D. Only through the income statement and not the balance sheet.
50. Which of the following results in the cost of goods sold being stated at the most current acquisition costs?
A. Average cost.
B. Specific identification.
C. FIFO.
D. LIFO.