7. Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices? (Points: 4) FIFO periodic LIFO periodic FIFO perpetual moving average 8. What is the effect on net income if a company fails to record a purchase in transit (FOB shipping point) and also fails to include the purchase in physical inventory? (Points: 4) Income is overstated. Income is understated. Income is correct. Not enough information is provided to determine the answer. 9. Which of the following items would not be used in the calculation of the cost-to-retail ratio if the FIFO retail inventory method were used to determine the ending inventory? (Points: 4) net markdowns purchases beginning inventory freight-in charges 10. With the retail inventory method, how is the total beginning inventory value used in the calculation of the cost-to-retail ratio for the current period under the following cost flow assumptions? (Points: 4) Include Include Exclude Include Exclude Exclude Exclude Exclude Exclude Exclude Include Exclude 11. If the net markdowns are excluded from the calculation of the cost-to-retail ratio in the retail inventory method, the ending inventory's valuation is lower because of which of the following effects on the cost-to-retail ratio? (Points: 4) The denominator of the ratio will be lower, which results in a higher cost-to-retail ratio. The denominator of the ratio will be higher, which results in a lower cost-to-retail ratio. The numerator of the ratio will be higher, which results in a higher cost-to-retail ratio. The numerator of the ratio will be lower, which results in a lower cost-to-retail ratio. 12. Debras Card Shop uses the average cost retail inventory method to determine the ending inventory. Debra's accounting records for 2010 contained the following information: In addition, sales returns for 2010 were $28,000, and employee discounts taken were $6,000. What is the cost of the ending inventory at December 31, 2010? In addition, sales returns for 2010 were $28,000, and employee discounts taken were $6,000. What is the cost of the ending inventory at December 31, 2010? (Points: 4) $21,000 $35,000 $50,400 $54,600 13. Sherries Shoes uses the FIFO retail inventory method to determine its ending inventory. The accounting records for Sherries Shoes contained the following information: The freight-in charges for the merchandise were $7,500. What is the cost of ending inventory for Sherries Shoes? (Points: 4) $49,280 $55,792 $57,200 $59,400 14. The Beta Company uses the retail inventory method for valuation of its inventory. If an item had a cost of $45, was originally marked to sell at $60, was later priced at $55, and finally was priced at $63, the final price change is a (Points: 4) net markup of $18 markdown of $5 and a markup of $8 net markdown of zero and an additional markup of $3 net markdown of $5 and a net markup of $18 15. Concerning current accounting for oil and gas properties, which statement is true? (Points: 4) The successful-efforts method must be used. The reserve-recognition method must be used. Either the successful-efforts method or the full-cost method may be used. The full-cost method must be used. 16. The costs of drilling an unsuccessful well are expensed under (Points: 4) the successful-efforts method the full-cost method both the successful-efforts method and the full-cost method neither the successful-efforts method nor the full-cost method 17. According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations? (Points: 4) when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis when an asset is used in other than the earning activities of the firm when an asset is ready for its intended use when an asset is being constructed for a firm's own use 18. When exchanging nonmonetary assets (Points: 4) boot must be associated with the transaction in order to recognize a gain or loss recognized gain or loss can occur depending on the fair value of the asset surrendered and the fair value of the asset received a loss can be recognized only when the fair value of the asset received plus boot is greater than the book value of the asset surrendered recognized gain or loss can occur depending on the book value of the asset surrendered and the fair value of the asset surrendered