Question
6) A company should NOT change the inventory costing method each period in order to maximize net income. This is an example of the disclosure
6) A company should NOT change the inventory costing method each period in order to maximize net income. This is an example of the disclosure principle.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question
7) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?
A) $1,000 B) $1,500 C) $1,250 D) $2,250
8) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average-cost inventory costing method, what is the amount of ending inventory on December 31?
A) $1,000 B) $1,250 C) $1,500 D) $2,250
9) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the Last-In, First-Out inventory costing method, what is the amount of ending inventory on December 31?
A) $1,250 B) $2,250 C) $1,000 D) $1,500
10) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-In, First-Out inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?
A) $4,000 B) $3,750 C) $6,750 D) $3,500
11) A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the average cost inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?
A) $3,750 B) $6,750 C) $3,500 D) $4,000
TRUE/FALSE.
12) An overstatement of ending inventory in the current period results in the understatement of Ne income in the current year.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question
13) Ending inventory for the current year is overstated by $20,000. What effect will this error have on the following year's Net income?
A) The inventory overstatement will not affect Net income.
B) Net income will be understated by $40,000.
C) Net income will be understated by $20,000.
D) Net income will be overstated by $20,000.
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