Question :
81. During a period of falling prices, which of the following : 1247148
81. During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory.
A. average method
B. LIFO method
C. FIFO method
D. can not tell without more information
82. Damaged merchandise that can be sold only at prices below cost should be valued at
A. net realizable value
B. LIFO
C. FIFO
D. average
83. If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the
A. consignee
B. retailer
C. manufacturer
D. shipper
84. Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and stockholders’ equity?
A. net income is overstated, assets are overstated, stockholders’ equity is understated
B. net income is overstated, assets are overstated, stockholders’ equity is overstated
C. net income is understated, assets are understated, stockholders’ equity is understated
D. net income is understated, assets are understated, stockholders’ equity is overstated
85. Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?
A. net income is understated
B. net income is overstated
C. cost of merchandise sold is understated
D. merchandise inventory reported on the balance sheet is overstated
86. Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?
A. stockholders’ equity is overstated
B. cost of merchandise sold is overstated
C. gross profit is understated
D. net income is understated
87. If the cost of an item of inventory is $50 and the current replacement cost is $57, the amount included in inventory according to the lower of cost or market is
A. $7
B. $50
C. $57
D. $107
88. Kristin’s Boutiques has identified the following items for possible inclusion in its December 31, 2010 inventory. Which of the following would not be included in the year end inventory?
A. Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin’s Boutique as of December 31, 2010.
B. Kristin has in its warehouse merchandise on consignment from Abby Co.
C. Kristin has sent merchandise to various retailers on a consignment basis
D. Kristin has merchandise on hand which has been returned by customers because of wrong size.
89. During the taking of its physical inventory on December 31, 2010, Barry’s Bike Shop incorrectly counted its inventory as $270,000 instead of the correct amount of $190,000. The effect on the balance sheet and income statement would be as follows:
A. assets overstated by $80,000;retained earnings understated by $80,000; net income statement understated by $80,000.
B. assets overstated by $80,000;retained earnings understated by $80,000; no effect on the income statement.
C. assets and retained earnings overstated by $80,000; net income overstated by $80,000;.
D. assets and retained earnings overstated by $80,000; net income understated by $80,000.
90. If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?
A. No change to net income.
B. Net income will be overstated
C. Net income will be understated.
D. Only gross profit will be affected.
