21. When a business has perishable items in its inventories, which cost assumption method is most likely to be used? a. LIFO b. FIFO c. Weighted Average 22. In a period of rising prices, which inventory method will result in lower net income? a. Weighted average b. LIFO c. FIFO 23. The total of ending inventory plus cost of goods sold will equal a. Beginning inventory b. Sales revenue c. Goods available for sale d. Gross margin 24. The designation FOB Destination indicates that the shipping charges will be paid by a. The seller b. The buyer c. The Easter Bunny 25. A return of purchases by the buyer will result in a. A reversal of the sales transaction on the purchasers books b. A reversal of the purchase transaction on the sellers books c. No effect on the purchasers or the sellers books d. A reversal of the purchase transaction on the purchasers books 26. The expression 1/15, n/60 indicates that a. A 1% discount is available to the purchaser if the purchaser pays within 15 days b. A 15% discount is available to the purchaser if the purchaser pays within 60 days c. The seller will receive a 1% discount if the purchaser pays within 15 days d. None of the above. 27. A medical practice purchases vacant land for $100,000 cash and later sells it for $140,000 cash. This results in a. A $40,000 gain on sale which will be part of operating income on the income statement b. A $40,000 gain on sale which will be shown as non-operating income on the income statement c. A $40,0000 dividend to the medical practice d. A $40,000 reduction in liabilities 28. If a catastrophe totally destroys inventory and an estimate of its cost is required for insurance purposes, a. The value can be estimated using the gross profit (margin) percentage b. The value can be determined by using the equipment account c. The value can be determined by using the dividends account d. The value can be determined by consulting Santa Claus. 29. A perpetual inventory system a. Is the same as a periodic system b. Continuously updates the inventory account for purchases and sales c. Involves hand counting the inventory d. Will always give an accurate inventory valuation 30. The cost of not taking advantage of discounts for prompt payment of inventory can be calculated using: a. The cost of financing inventory b. The matching concept c. The accrual basis d. An estimate 31. From the standpoint of the seller, a sales discount is: a. A reduction in sales revenue b. An increase in accounts payable c. An addition to cost of goods sold d. None of the above. 32. In calculating the gross profit (margin) percentage, 100% is always a. Net sales b. Cost of goods sold c. Ending inventory d. None of the above. 33. Which is of following is NOT a cost flow assumption for inventory purposes? a. LIFO b. Specific identification c. FIFO d. Weighted average 34. For inventory purposes, the IRS requires that a. LIFO be used for financial reporting if it is used for tax purposes b. Inventory must always be valued at selling price c. Cost of goods sold must always be less than sales price d. Inventory be counted by Santa Claus and his elves. 35. In a period of rising prices, a company using FIFO would a. Sell the cheapest goods first b. Sell the most expensive goods first c. Not be able to determine the cost of inventory 36. The weighted average inventory method is most appropriate a. When ingredients are mixed together b. When inventory is in a warehouse c. When inventory is moving on a conveyor belt d. In a service business. 37. Of the various types of audit opinions, which would be least favored by management? a. unqualified b. qualified c. adverse d. disclaimer 38. What is the name given to the petty cash system whereby funds distributed from petty cash are periodically replenished and the total of the cash and currency plus receipts equals the original balance? a. Conservative b. Matching c. Imprest d. Cost basis 39. The bookkeeper of a business opens the monthly bank statement and notices that a check from a customer has been returned as NSF not sufficient funds. When the monthly bank statement is reconciled, which amount will the bookkeeper adjust to account for the NSF check? a. the balance shown on the bank statement b. the cash balance on the companys books. 40. If a companys books are being audited by a CPA, what type of opinion will the companys management seek? a. disclaimer of opinion b. qualified opinion c. unqualified opinion d. adverse opinion