1. In periods of rising prices, LIFO will produce: a. lower net income than FIFO. b. higher net income than FIFO. c. higher net income than FIFO. d. higher net income than average costing.

2. Which statement is false regarding the lower of cost or market (LCM) method of inventory? a. LCM is an example of the revenue recognition principle b. Market is defined as current replacement cost, not selling price. c. LCM is an example of an accounting concept of conservatism. d. Inventory is written down to its market value in the period in which the price decline occurs.

3. The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $61 First purchase 25 units at $63 Second purchase 30 units at $64 Third purchase 15 units at $73 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method? a. $1,300 b. $1,305 c. $1,415 d. $1,236

4. A company just starting business purchased three merchandise inventory items at the following prices: first purchase $520; second purchase $550; third purchase $580. If two items were sold during the period and the company used the LIFO costing method, the gross profit for the period would be how much greater or less than if the FIFO costing method had been used? a. Gross profit would be $60 greater. b. Gross profit would be $60 less. c. Gross profit would be the same. d. Gross profit would be $30 greater.

5. In a period of rising prices, the inventory method that will show the highest net income is: a. Average Cost. b. FIFO. c. LIFO. d. Specific Identification.

6. A company just starting business made the following purchases in August: August 1 300 units $1,560 August 12 400 units $2,340 August 24 400 units $2,520 August 30 300 units $1,980 1,400 units $8,400 A physical count of the inventory on August 31 reveals that there are 500 units on hand. Using the LIFO inventory method, the value of the ending inventory on August 31 is: a. $5,670. b. $3,240. c. $5,160. d. $2,730. Accounting G101 Financial Accounting Chapter 6 Quiz Inventory 2