1. Which one of the following is not a disadvantage of the specific identification method of inventory costing?

a. it allows manipulation of profits

b. it does not match expenses against revenues

c. it is too expensive to use in complex manufacturing situations

d. it is only practical where units are costly and easily distinguishable

2. Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management?

a. FIFO and specific identification

b. LIFO and average cost

c. FIFO and average cost

d. LIFO and specific identification

3. Which one of the following statements is true?

a. Under conditions of rising prices, the LIFO method results in lower income than the FIFO

method.

b. In most cases, the LIFO method approximates the physical flow of items in inventory.

c. The LIFO method produces a higher ending inventory value than the FIFO method.

d. The FIFO method excludes holding gains from income.

4. Astro Company changed its inventory cost flow assumption from FIFO to LIFO in a period of rising prices. What was the result of the change on net income in the year of the change?

a. Increased net income

b. Decreased net income

c. No change in net income

d. Cannot determine from the information provided

5. Which one of the following statements is false?

a. FOB shipping point means the buyer has legal title to the goods while they are in-transit

b. FOB shipping point means the buyer has legal title to the goods when they are shipped

c. FOB destination means the seller has legal title to the goods until they reach the buyer's

place of business

d. FOB shipping point means the buyer acquires legal title to the goods when they reach the

buyer's place of business