Question : 56. Which of the following inventory valuation methods only an estimate : 1229807

 

 

56. Which of the following inventory valuation methods is only an estimate of actual costs? 
A. The retail method.
B. The gross profit method.
C. Both retail and gross profit methods are only estimations.
D. Neither the retail nor the gross profit methods are estimations.

 

 

57. In a period of rising prices, a company is most likely to use the specific identification method of pricing inventory if: 
A. Each item in the inventory is unique.
B. Management wants the same unit cost assigned to items sold and items remaining in inventory.
C. Management’s primary objective is to minimize income taxes.
D. Management wants the company’s income statement to indicate the highest possible amounts of gross profit and net income.

 

 

58. During periods of inflation which method will yield the smallest ending inventory and the largest cost of goods sold? 
A. LIFO.
B. FIFO.
C. Average.
D. Specific identification.

 

 

59. In a period of rising prices, a company is most likely to use the FIFO method of pricing inventory if: 
A. Each item in the inventory is unique.
B. Management wants the same unit cost assigned to items sold and items remaining in inventory.
C. Management’s primary objective is to minimize income taxes.
D. Management wants the company’s income statement to indicate the highest possible amounts of gross profit and net income.

 

 

60. Which of the following inventory cost flow assumptions is not in accord with the physical flow of merchandise in most businesses? 
A. LIFO.
B. FIFO.
C. Specific identification.
D. Average.

 

 

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.

 

 

 

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