Professional Documents
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7. Compared to using the FIFO method to account for inventory, during periods of rising prices a company
that uses the LIFO method is most likely to report higher:
A) Net income
B) Cost of sales
C) Income taxes
D) Intangible assets
8. Like many technology companies, TechnoTools operates in an environment of declining prices. Its
reported profits will tend to be highest if it accounts for inventory using the:
A) FIFO method
B) LIFO method
C) Weighted average cost method
D) EOQ method
9. Cost of goods manufactured during 2006 is $240, WIP inventory on December 31, 2006 is $50. WIP
inventory during 2006 decreased 60%. Total manufacturing costs incurred during 2006 amount to:
a) $190
b) $165
c) $290
d) $315
10. You are given the following for the production of office chairs by the company Chairs and More :
Quantity produced Total Fixed Costs (JMD$)
100 10,000
200 10,000
300 10,000
400 10,000
500 10,000
600 10,000
Variable cost per unit is $150. The production of 15,000 chairs will cost:
a) $2,260,000
b) $1,500,000
c) $10,000
d) $25,000
11. Work in process inventory increased $20,000 during 2005. Cost of goods manufactured was $280,000,
Total manufacturing costs incurred in 2005 are:
a) $298,000
b) $262,000
c) $289,000
d) $300,000
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17. Two separate errors affected Computer Sales in 2005. The beginning inventory was understated by
$28,000 and the ending inventory was understated by $43,000. Net income in 2006 will be:
a) Overstated by $15,000
b) Overstated by $43,000
c) Understated by $43,000
d) Understated by $71,000
19. If a company uses a perpetual inventory system, which of the following entry or entries are required to
record the sale of merchandise on credit?
a) Dr. Accounts Receivable and Cr. Sales revenue
b) Dr. COGS and Cr. Purchases
c) Dr. COGS and Cr. Inventory
d) Both A and C are necessary entries
20. Which International Accounting Standard prescribes the treatment for inventories?
a) IAS 2
b) IAS 7
c) IAS 16
d) IAS 28
21. If the EOQ for laptops at Computer Boutique is 40 units and the annual demand is 2000 models with
an ordering cost per model of $5. What is the carrying cost per unit?
a) $1600
b) $12.50
c) $0.08
d) $20,000
22. LIFO tends to decrease taxes when:
a) Costs are declining
b) Costs are increasing
c) Costs are constant
d) LIFO will always yield the lowest possible taxes
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