Nombre:______________________________

Asignación#6

Contabilidad Intermedia 201

Fecha:_____________

Inventories: Cost Measurement and Flow Assumptions

MULTIPLE CHOICE
1. Which of the following is not an advantage of a perpetual inventory system?
a. assists in the prevention of stockouts
b. requires less data processing effort than periodic systems
c. maintains up-to-date inventory and cost of goods sold balances
d. provides evidence of inventory shrinkage

2. The cost of goods sold can be determined only after a physical count of inventory on hand under the
a. perpetual inventory system
b. variable costing system
c. moving average system
d. periodic system

3. Using the following letters to represent items:
P = Purchases (net)
C = Cost of goods sold
B = Beginning inventory
E = Ending inventory
Which equation is correct?
a. B – C + P = E
b. B – E = C + P
c. P – E = B + C
d. B = C – E + P

4.

Which one of the following statements is not true?
a. A company using the periodic system does not maintain a continuous record of the
physical quantities (or costs) of inventory on hand.
b. In the periodic system, the costs of acquisition of inventory are not debited directly to an
inventory account.
c. In the perpetual inventory system, recording in detailed subsidiary records can be in units
only-not in dollar costs.
d. When the perpetual system is used, a physical count does not need to be made
periodically.

Asignación #6 (ACCO 201 – Prof. Carlos Álvarez)
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5.

Jorgensen Jelly Bean Co. purchased raw materials with a catalog price of $70,000. Credit terms of
5/15, n/60 apply. If Jorgensen uses the net price method, the purchase should be recorded at
a. $70,000
b. $66,500
c. $59,500
d. $42,000

6.

Near the end of 2015, Wilson Co. made the following purchases. The months involved in all cases are
December 2015 and January 2016.

Amount
$1,575
2,430
1,890
2,700

FOB
Destination
Shipping Point
Shipping Point
Destination

Date
Goods
Shipped
12/29
1/2
12/28
12/29

Date
Invoice
Mailed
1/2
12/29
1/2
12/27

Date
Goods
Rec’d
1/5
1/4
1/3
1/2

Date
Invoice
Rec’d
1/4
12/30
1/4
12/28

What amount of the above purchases should be included in inventory at December 31, 2015?
a. $1,575
b. $1,890
c. $4,320
d. $4,575

7.

Sylvia’s Designs Co. had the following inventory activity during April:
Units
Beginning inventory
Purchase (April 3)
Sale (April 10)
Purchase (April 18)
Purchase (April 23)
Sale (April 28)

100
50
80
40
60
120

Unit
Cost
$10
12
14
15

Assuming Sylvia’s uses a perpetual LIFO cost flow assumption, ending inventory for April would be
a. $ 500
b. $ 750
c. $2,560
d. $2,310

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8. Which of the following inventory cost flow assumptions produces the same ending inventory values
under both the periodic and perpetual systems?
a. FIFO
b. LIFO
c. Average
d. Dollar-Value LIFO

9.

Sylvia’s Designs Co. had the following inventory activity during April:

Units
Beginning inventory
Purchase (April 3)
Sale (April 10)
Purchase (April 18)
Purchase (April 23)
Sale (April 28)

100
50
80
40
60
120

Unit
Cost
$10
12
14
15

Assuming Sylvia’s uses a periodic LIFO cost flow assumption, ending inventory for April would be
a. $2,560
b. $ 750
c. $2,310
d. $ 500

10. Mama’s Mexican Meals, Inc., had the following activity for an inventory item during June:

Units
Beginning inventory
Purchase (June 5).
Purchase (June 15)
Sale (June 20).
Sale (June 25).
Purchase (June 30)

50
10
30
40
20
10

Unit
Cost
$10
16
14

20

Assuming Mama’s uses a periodic weighted average cost flow assumption, cost of goods sold for
June would be
a. $512
b. $560
c. $768
d. $720

Asignación #6 (ACCO 201 – Prof. Carlos Álvarez)
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11. Which one of the following is not a disadvantage of the specific identification method of inventory
costing?
a. it allows manipulation of profits
b. it does not match expenses against revenues
c. it is too expensive to use in complex manufacturing situations
d. it is only practical where units are costly and easily distinguishable

12. Which one of the following is not a disadvantage of the LIFO inventory cost flow assumption?
a. the impact of LIFO liquidation profits
b. it does not match the most recent costs with revenue
c. the possibility of income manipulation by management
d. it impairs comparability between companies using LIFO

13. Which one of the following sets of inventory cost flow assumptions is not susceptible to profit
manipulation by management?
a. FIFO and specific identification
b. LIFO and average cost
c. FIFO and average cost
d. LIFO and specific identification

14. Which one of the following statements is true?
a. Under conditions of rising prices, the LIFO method results in lower income than the FIFO
method.
b. In most cases, the LIFO method approximates the physical flow of items in inventory.
c. The LIFO method produces a higher ending inventory value than the FIFO method.
d. The FIFO method excludes holding gains from income.

15. Astro company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising
prices. What was the result of the change on ending inventory in the year of the change?
a.
b.
c.
d.

Increased ending inventory
Decreased ending inventory
No change in ending inventory
Can’t determine from the information given

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16. Which one of the following is an advantage of LIFO?
a.
b.
c.
d.

in periods of rising prices, less income taxes are paid
in periods of rising prices, more holding gains are reported in net income
recordkeeping and financial statement preparation are easier
conservative income statements and balance sheet disclosures result from falling prices

BONOs
17. Astro Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising
prices. What was the result of the change on net income in the year of the change?
a.
b.
c.
d.

Increased net income
Decreased net income
No change in net income
Cannot determine from the information provided

18. Which one of the following types of costs is most likely to be included in determining the cost of
inventory?
a.
b.
c.
d.

freight-in costs
freight-out costs
interest cost for amounts borrowed to finance the purchase of inventory
marketing costs

19. Which one of the following statements is false?
a. FOB shipping point means the buyer has legal title to the goods while they are in-transit
b. FOB shipping point means the buyer has legal title to the goods when they are shipped
c. FOB destination means the seller has legal title to the goods until they reach the buyer’s
place of business
d. FOB shipping point means the buyer acquires legal title to the goods when they reach the
buyer’s place of business

Asignación #6 (ACCO 201 – Prof. Carlos Álvarez)
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PROBLEM
1. On January 1, the Abrams Company began business with the purchase of 250 units of inventory for
$21,625. During the month, Abrams had the following inventory transactions:
Date
Jan. 6
11
17
24
28
30

Purchased 100 units @ $75 per unit
Sold 200 units
Sold 85 units
Purchased 100 units @ $125 per unit
Purchased 50 units @ $110 per unit
Sold 100 units

Required:
Compute the cost of the inventory at the end of January under the following alternatives:
a.
b.
c.
d.
e.
f.

FIFO periodic
FIFO perpetual
LIFO periodic
LIFO perpetual
Weighted average (round unit costs to 2 decimal places)
Moving average (round unit costs to 2 decimal places)

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