1)Ending inventory for the current accounting period is overstated by $3,500. What will be effect of this error?

A)Net income for the current period will be overstated by $3,500.

B)Ending inventory for the next period will be overstated by $3,500.

C)Equity at the end of the next accounting period will be overstated by $3,500.

D)Cost of goods sold for the current period will be overstated by $3,500

21)

2)Ending inventory for the current period is understated. What effect will this error have on equity?

A)Equity will be understated at the end of the current period, but it will be correct at the endothe next period.

B)Equity will be overstated at the end of the current period, but it will be correct at the endothe next period.

C)Equity will be overstated at the end of the current period and overstated at the end of thenexperiod.

D)Equity will be overstated at the end of the current period and understated at the end of the next period.

22)

3)Ending inventory for the current accounting period is understated by $2,700. What effect will this error have on Cost of goods sold and Net income?

A)

Cost of goods sold.

Net income

Understated

Understated

B)

Cost of goods sold.

Net income

Overstated

Understated

C)

Cost of goods sold.

Net income

Overstated

Overstated

D)

Cost of goods sold.

Net income

Understated

Overstated

4)Ending inventory for the current accounting period is overstated by $2,700. What effect will this error have on Cost of goods sold and Net income?

A)

Cost of goods sold.

Net income

Understated

Understated

B)

Cost of goods sold.

Net income

Overstated

Understated

C)

Cost of goods sold.

Net income

Understated

Overstated

D)

Cost of goods sold.

Net income

Overstated

Overstated

24)

5)Which of the following are clues that a company may have been "cooking the books" by fraudulently increasing their level of net sales?

A)Several company warehouses reported burglaries.

B)There was a high level of inventory purchases in the following period.

C)Several shipping clerks checked into hospitals from lifting heavy boxes.

D)There was a very high level of returned goods shortly after year-end.

TRUE/FALSE.

6)Using the FIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.

7)Using the LIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.

8)When using periodic inventory, the closing process begins with closing out the Beginning inventory to Cost of goods sold.

9)When using periodic inventory, the closing process begins with closing out the Beginning inventory to Cost of goods sold. The second step is to set up the ending inventory by debiting Cost of goods sold and crediting Inventory.

10)Under periodic inventory, the company first calculates Cost of goods sold for the period, and then determines what the Ending inventory balance is.

MULTIPLE CHOICE.

11)Samson Company had the following balances and transactions during 2012.

Beginning inventory

March 10

June 10

October 30

Net income

10 units at $70

Sold 8 units

Purchased 20 units at $80

Sold 15 units

What would the company's Inventory amount be on the December 31, 2012 balance sheet if the periodic FIFO costing method is used? (Answers are rounded to the nearest dollar.)

A) $554B) $537C) $490D) $560

TRUE/FALSE.

12)With a periodic inventory method, purchases, purchase discounts, and purchase returns and allowances are recorded in separate accounts.

13)With a periodic inventory method, it is necessary to conduct a physical count of inventory to determine cost of goods sold.

MULTIPLE CHOICE.

14)Which of the following would appear on the income statement of a company that uses the periodic inventory method, but would NOT appear on the income statement of a company that uses the perpetual inventory method?

A)Cost of goods soldB) Insurance expenses

C) Net salesD) Cost of goods available for sale

15)A company uses the periodic inventory method. Which of the following entries would be made to record a $1,200 purchase of inventory on account?

A)The accounting entry would be a $1,200 debit to Inventory and a $1,200 credit to Accounts payable.

B)The accounting entry would be a $1,200 debit to Accounts payable and a $1,200 credit to Inventory.

C)The accounting entry would be a $1,200 debit to Accounts payable and a $1,200 credit to Purchases.

D)The accounting entry would be a $1,200 debit to Purchases and a $1,200 credit to Accounts payable.

TRUE/FALSE.

16)Under the Sarbanes-Oxley Act, the outside auditor must issue an internal control report

17)The Public Company Oversight Board oversees the work of auditors of public companies.

18)Under the Sarbanes-Oxley Act, accounting firms are prohibited from both auditing a client and providing certain consulting services for the same client.

19)Under the Sarbanes-Oxley Act, violators may be sentenced to prison for securities fraud.

MULTIPLE CHOICE.

20)Which of the following is a requirement of the Sarbanes-Oxley Act?

A)The outside auditor must issue an internal control report for each public company.

B)Accounting firms may not both audit a public client and provide certain consulting services for the same client.

C)The Public Company Oversight Board must create new accounting standards.

D)The Public Company Oversight Board must conduct audits of public companies.