61. A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:
A. Specific identification.
B. Average cost.
C. First-in, first-out.
D. Last-in, last-out.
62. A company with a liquid inventory will have:
A. A high inventory turnover and a high average number of days to sell inventory.
B. A high inventory turnover and a low average number of days to sell inventory.
C. A low inventory turnover and a high average number of days to sell inventory.
D. A low inventory turnover and a low average number of days to sell inventory.
63. The choice of inventory valuation method can help achieve each of the following independent goals, except:
A. Reduce cost of merchandise acquired from suppliers.
B. Increase reported net income.
C. Increase the inventory turnover rate.
D. Reduce the amount of income taxes owed.
64. With respect to the valuation of inventory and measurement of the cost of goods sold, the principle of consistency means that the same method should be applied:
A. In successive accounting periods.
B. By all companies in a given industry.
C. To all products in the inventory.
D. In financial statements and income tax returns.
65. In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:
A. Receiving deliveries of materials from suppliers just before the materials are used in the production process.
B. Completing the manufacturing process just before the deadline established by the customer.
C. An automated factory that reduces production time below that of other companies in the industry.
D. Selling finished products before they go out of style.
66. The "just-in-time" concept of inventory management is best illustrated by:
A. A clothing manufacturer that sells all of its finished goods before they go out of style.
B. A defense contractor that completes its projects within the deadlines set by its customer (the federal government).
C. A pharmaceutical firm that consistently brings new products to market ahead of its competitors.
D. A homebuilder who has its suppliers deliver lumber and other building materials to the building site the night before these materials will be used by the company's construction crews.
67. The primary advantage of a just-in-time inventory system is:
A. The amount of money tied up in inventory is minimized.
B. Customers are afforded a wider selection of merchandise available for immediate delivery.
C. The company is able to use the specific identification method of inventory pricing.
D. The risks of losing sales opportunities or of having to shut down manufacturing operations because of inventory shortages are minimized.
68. The principle of consistency states that:
A. Companies are prohibited from ever changing their accounting methods.
B. Every company in the same industry must use the same accounting principle.
C. There must be a consistent blend to the accounting principles.
D. If changes in accounting principles are made the reasons for the change and the effects on the company's net income must be disclosed.
69. From an accounting point of view, one implication of an effective just-in-time inventory system is that:
A. Sales transactions must be recorded using on-line point-of-sale terminals.
B. Inventories are less material in dollar amount and alternative inventory flow assumptions will produce more similar results.
C. The cost of goods sold is significantly reduced.
D. Purchases of merchandise are recorded as cash payments are made, and sales transactions are recorded as cash is received.
70. As a result of taking an annual physical inventory, it usually is necessary in a perpetual inventory system to make an entry:
A. Reducing assets and increasing the cost of goods sold.
B. Reducing assets and increasing liabilities.
C. Reducing the cost of goods sold.
D. None of the above; a physical inventory usually does not indicate the need for any entries in the accounting records.