71. Given the following items and costs as of the balance sheet date, determine the value of Light Company's merchandise inventory.
- $2,000 goods sold by Light to another company. The goods are in transit and shipping terms are FOB shipping point.
- $3,000 goods sold by another company to Light. The goods are in transit and shipping terms are FOB shipping point.
- $4,000 owned by Light but in the possession of another company, the consignee.
- Damaged goods owned by Light thatoriginally cost $5,000 but now have an $800 net realizable value.
A. $7,000
B. $7,800
C. $9,800
D. $9,000
E. $6,800
72. Physical inventory counts:
A. Are not necessary under the perpetual system.
B. Are necessary to measure and adjust for inventory shrinkage.
C. Must be taken at least once a month.
D. Require the use of hand-held portable computers.
E. Are not necessary under the cost-to benefit constraint.
73. During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
A. Specific identification method
B. Average cost method
C. Weighted-average method
D. FIFO method
E. LIFO method
74. The inventory valuation method that tends to smooth out erratic changes in costs is:
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
E. WIFO
75. Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
E. First in still here
76. The inventory valuation method that results in the lowest taxable income in a period of inflation is:
A. LIFO method
B. FIFO method
C. Weighted-average cost method
D. Specific identification method
E. Gross profit method
77. The consistency concept:
A. Requires a company to consistently use the same accounting method of inventory valuation unless a change will improve financial reporting.
B. Requires a company to use one method of inventory valuation exclusively.
C. Requires that all companies in the same industry use the same accounting methods of inventory valuation.
D. Is also called the full disclosure concept.
E. Is also called the matching concept
78. The full disclosure principle:
A. Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made, and its effect on net income.
B. Requires that companies use the same accounting method for inventory valuation period after period.
C. Is not subject to the materiality principle.
D. Is only applied to retailers.
E. Is also called the consistency principle.
79. An error in the period-end inventory causes an offsetting error in the next period and therefore:
A. Managers can ignore the error.
B. It is sometimes said to be self-correcting.
C. It affects only income statement accounts.
D. If affects only balance sheet accounts.
E. Is immaterial for managerial decision making.
80. The understatement of the ending inventory balance causes:
A. Cost of goods sold to be overstated and net income to be understated.
B. Cost of goods sold to be overstated and net income to be overstated.
C. Cost of goods sold to be understated and net income to be understated.
D. Cost of goods sold to be understated and net income to be overstated.
E. Cost of goods sold to be overstated and net income to be correct.