1. Hardy Company is a wholesale electronics distributor. On December 31, 2011, it prepared the following partial income statement: Gross sales ............................... $600,400 Sales discounts ........................... 400 Net sales ................................. $600,000 Cost of goods sold: Beginning inventory ..................... $200,000 Net purchases ........................... 300,000 Given this information, if Hardy Company's gross margin is 30 percent of net sales, what is the correct ending inventory balance? a $80,000 b $120,000 c $180,000 d $500,000 2. The term LIFO reserve refers to a a cost flow assumption for valuing inventory. b a special fund set aside to cover LIFO liquidations. c inventory pools used in the dollar-value LIFO method. d the difference between the ending inventory amount under LIFO and the ending inventory amount under another inventory cost flow assumption. 3. A company using a periodic inventory system neglected to record a purchase of merchandise on account at year-end. This merchandise was omitted from the year-end physical count. How will these errors affect inventory at year-end and cost of goods sold for the year? Inventory Cost ofGoods Sold a. No effect Understate b. No effect Overstate c. Understate Understate d. Understate No effect 4. A company sells four products: I, II, III, and IV. The company values all inventories using the lower-of-cost-or-market procedure. The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future. Additional information, shown below, is available for the most recent year as of December 31. Original Cost to Estimated Cost Expected Selling Product Cost Replace to Sell Prices I $60 $70 $10 $100 II 70 90 20 120 III 80 60 10 60 IV 90 80 20 90 See information regarding the four products above. Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31 for one unit of Product I? a $60 b $70 c $80 d $90 5.The specific identification method of inventory costing a eliminates all opportunity for profit manipulation. b matches the flow of recorded costs with the physical flow of goods. c can be used only with a perpetual inventory system. d is a violation of generally accepted accounting principles 6.In a period of rising prices, the inventory cost allocation method that tends to result in the lowest reported net income is a LIFO. b FIFO. c moving average. d weighted average. 7.Which of the following inventory costing methods reports most closely the current cost of inventory on the balance sheet? a FIFO b Specific identification c Weighted average d LIFO 8.During periods of rising prices, when the FIFO inventory cost flow method is used, a perpetual inventory system would a not be permitted. b result in a higher ending inventory than a periodic inventory system. c result in the same ending inventory as a periodic inventory system. d result in a lower ending inventory than a periodic inventory system. 9.Miller Inc. is a wholesaler of office supplies. The activity for Model III calculators during August is shown below: Balance/ Date Transaction Units Cost August 1 Inventory 2,000 $36.00 7 Purchase 3,000 37.20 12 Sales 3,600 21 Purchase 4,800 38.00 22 Sales 3,800 29 Purchase 1,600 38.60 See information for Miller Inc. above. If Miller Inc. uses a FIFO periodic inventory system, the ending inventory of Model III calculators at August 31 is reported as a $150,080. b $150,160. c $152,288. d $152,960. See information for Miller Inc. above. If Miller Inc. uses a LIFO cost perpetual inventory system, the ending inventory of Model III calculators at August 31 is reported as a $146,400. b $150,080. c $150,160. d $152,960. 10.The following information is available for Lyman Company: Cost of goods sold for 2011 ........................... $1,200,000 Inventories at December 31, 2010 ...................... 350,000 Inventories at December 31, 2011 ...................... 310,000 Assuming that a business year consists of 360 days, the number of days' sales in average inventories for 2011 was a 49.5. b 93. c 99. d 105. 11.The following information is available for Carter Corporation for the month of June: Beginning Inventory ............. 8 units @ $20.00 = $160 Purchased, June 3 ............... 5 units @ $22.00 = $110 Purchased, June 5 ............... 7 units @ $24.00 = $168 Sold, June 9 .................... 9 units Purchased, June 15 .............. 8 units @ $26.00 = $208 Sold, June 19 ................... 7 units Given this information, the ending inventory balance using the average cost method is a $276. b $302. c $368. d $386