41.Selecting an inventory cost flow assumption will most likely be impacted by which one of the following?
a.The physical flow of the inventory goods.
b.The cost of the company’s plant and equipment.
c.Income taxes.
d.The cost flow assumptions most often used by other companies.
42.All of the following are typically associated with Japanese business inventory accounting except:
a.the use of the average assumption for inventory cost.
b.shared business risks.
c.slow inventory turnover.
d.lower levels of inventory.
43.
Inventory reported on the balance sheet of a manufacturing company consists of:
a.raw materials and the cost of labor to convert the raw materials to finished products.
b.raw materials, the cost of labor to convert the raw materials, and an allocated portion of manufacturing overhead cost.
c.the cost of the raw materials used.
d.raw materials, the cost of labor to convert the raw materials, and all major corporate overhead costs.
44.The LIFO conformity rule requires a company that uses:
a.the LIFO assumption for computing cost of goods sold on its tax return to also use the LIFO assumption in preparing its financial statements.
b.any inventory cost assumption to use the LIFO cost assumption for tax purposes.
c.the LIFO assumption for computing cost of goods sold on its financial statements to also use LIFO on its tax return.
d.the LIFO assumption to avoid paying taxes on inventory profits.
45.During a period of rising prices and inventories, a company whose current ratio is dangerously close to the minimum specified by agreement with a major creditor would prefer which cost flow assumption?
a.FIFO
b.LIFO
c.Averaging
d.The company would be indifferent as to which cost flow assumption is adopted.
46.Selling more inventory than was purchased during the current period may often cause old, smaller costs that were carried as part of the company's beginning inventory, to be moved to the income statement and reported as cost of goods sold. This is called:
a.the LIFO conformity rule.
b.LIFO liquidation.
c.the LIFO reserve rule.
d.lower-of-cost-or-market accounting.
47.During a period of rising prices and inventories, a company whose debt/equity ratio is dangerously close to the minimum specified by agreement with a major creditor would prefer which cost flow assumption?
a.FIFO
b.LIFO
c.Averaging
d.The company would be indifferent as to which cost flow assumption is adopted.
48.During a period of changing inventory prices, which of the following is NOT immediately sensitive to the particular cost flow assumption adopted?
a.Net income
b.Current ratio
c.Gross profit
d.Working capital
e.Quick ratio
49.Under the lower-of-cost-or-market rule, market is:
a.the selling price of inventory items.
b.the original cost paid for inventory.
c.used to value inventory if it is less than its recorded cost.
d.the amount of cash the company expects to collect from the sale of an inventory item.
50.Which of the following policies would increase a firm's current inventory turnover ratio?
a.Reduction of the average inventory that supports a constant amount of sales
b.An decrease in the units of inventory sold while holding average inventory constant
c.Increase of inventory by adopting a Just-in-Time production schedule
d.Saving new purchases of inventory until the following year instead of this year