1. Determine the gross profit using the periodic inventory system and the FIFO inventory method, assuming that 18 units were sold at a sales price of $14.

Date	Item	Units	Cost	Total
January 1	Beginning inventory	5	$3	$15
January 12	Purchase	10	4	40
January 18	Purchase	8	5	40
	Totals	23		$95

a. $252

b. $95

c. $80

d. $182

2. When identical units of an item are purchased at different costs:

a. an inventory cost flow method must be used under a perpetual inventory system only.

b. an inventory cost flow method must be used under a periodic inventory system only.

c. an inventory cost flow method must be used under both a perpetual and a periodic inventory system.

d. an inventory cost flow method is not used under either a perpetual or a periodic inventory system.

3. Estimating inventory may be needed for all of the following reasons except

a. when it is impractical to take a physical inventory.

b. when a fire has destroyed the inventory and inventory records.

c. when the periodic method is used instead of taking a physical inventory.

d. when monthly or quarterly financial statements are needed, but a physical inventory is taken only once a year.

4. When using the periodic FIFO inventory cost method, which of the following statements is false?

a. The cost of goods sold is made up of the earliest purchases.

b. The cost of inventory on hand is made up of the most recent costs.

c. The cost of inventory on hand is made up of the earliest costs.

d. The physical count determines the inventory on hand.

5. Which of the following is true regarding consigned inventory?

a. The manufacturer is the consignor.

b. The retailer is the consignor.

c. The unsold merchandise is part of the consignee's records at year-end.

d. The consignee retains the title to the inventory.

6. What is not considered an advantage of using the retail method of inventory costing?

a. The retail method provides inventory figures for preparing monthly and quarterly financial statements when the periodic system is used.

b. The retail method may be used as an aid in taking a physical inventory.

c. The retail method uses specific costs to compute inventory.

d. The retail method allows management to monitor operations more closely.

7. Financial statement data at December 31 for Alpine Company are as follows:

Cost of goods sold	$1,050,000
Inventories:
Beginning of year	380,000
End of year	320,000

Determine inventory turnover for the year.

a. 3.3

b. 1.5

c. 3.0

d. 2.8

8. Determine the gross profit using the FIFO cost flow method, assuming that only one item was sold on May 24 for $14.

Date	Item	Units	Cost	Total
May 3	Purchase	1	$6	$6
May 8	Purchase	1	7	7
May 22	Purchase	1	8	8
	Total	3		$21

a. $7

b. $14

c. $8

d. $6

9. A physical inventory is not used to

a. compare actual inventory to book inventory.

b. help prevent employee theft or misuse of inventory.

c. journalize the daily transactions in the inventory account.

d. investigate major errors.

10. The inventory cost method that will yield a higher ending inventory during times of inflation will be the:

a. FIFO inventory cost method.

b. weighted average inventory cost method.

c. LIFO inventory cost method.

d. specific identification inventory cost method.

11. The inventory is added to the inventory records after three documents are reconciled. One of those documents is the:

a. sales receipt.

b. company check.

c. general journal.

d. receiving report.

12. When taking a physical inventory, the company inadvertently counted its inventory as $34,000 instead of the correct amount of $43,000. Indicate the effect of the misstatement on the balance sheet of the current year.

a. Assets are understated by $9,000.

b. Assets are overstated by $9,000.

c. Stockholders' equity is overstated by $9,000.

d. Liabilities are overstated by $9,000.