1. A method of valuing inventory based on the average of units is called the:

A. average cost method.

B.LIFO method.

C.specificunitcost method.

D.FIFO method.

2. The various inventory costing methods will still produce the same cost of goods sold value.

True or False

3. ________ produces the lowest cost of goods sold and the highest gross profit when prices are increasing.

A. LIFO

B. FIFO

C. Average Cost

D. Specific Identification

4. Under the FIFO method, the flow of costs through the accounting records will:

A. have no relationship to the physical flow of goods through the business.

B. be nearly the opposite of the physical flow of goods through the business.

C. closely match the physical flow of goods through the business.

D. exactly match the physical flow of goods through the business.

5. Shrinkage refers to the loss of inventory due to theft, damage or other similar occurrences.

True Or False

6. Inventory is probably the retailer's smallest (by value) current asset.

True Or False

7. The journal entry to record the purchase of $7,600 of inventory on account under the perpetual inventory system is:

A. debit Inventory, $7,600; credit Cash, $7,600.

B. debit Cost of Goods Sold, $7,600; credit Inventory, $7,600.

C. debit Purchases,$7,600;credit Accounts Payable,$7,600.

D. debit Inventory,$7,600;credit Accounts Payable,$7,600.

8. The average cost method generates gross profit, net income, and income tax amounts that fall between the extremes of FIFO and LIFO.

True or False

9. The Cypress Company's inventory account balance was $1,750 at the end of the year. A physical inventory count revealed that inventory on hand was $1,350. What amount should Cypress report on the balance sheet for inventory?

A. $1,350

B. $1,750

C. $400

D. $3,100

10. The LEAST widely used of the four inventory valuation methods is:

A. LIFO

B. FIFO

C. Specific Identification

D. Average Cost