Bryer Company has used the FIFO method of valuing its inventory for the prior 12 years. The accountants at Bryer Company would like to switch to LIFO since the economy is suffering from severe inflation. For the switch to occur Bryer Company must have its auditor's approval and place a note in its financial statements, also, the auditor must refer to the change in its audit opinion. Bryer Company cannot make a change to its inventory valuation method once a method is chosen. Bryer Company must remain consistent with or without placing a note in the financial statements. Bryer Company must remain consistent with or without auditor approval. Bryer Company must remain consistent and keep LIFO in place for a minimum of 15 years. QUESTIONS In a transaction where the merchandise invoice indicates F.O.B. shipping point, who pays the cost of shipping? The freight forwarder The common carrier The seller The buyer None of the above QUESTION 10 The lower-of-cost-or-market practice is based on the consistency principle. reliability principle. conservatism principle. entity concept. historical cost concept. Table 7-3 Alton Company had the following activity in its inventory account during April 20X9. Cost per Date Activity Units Unit Cost Total April 1 Beginning inventory 100 $3.00 $300 April 3 Purchase 40 3.10 124 April 7 Sale 50 April 12 Purchase 50 3.20 160 April 16 Sale 70 April 23 Sale 40 April 30 Purchase 60 3.30 198 Units in beginning inventory 100 units Units purchased 150 units Units sold 160 units Referring to Table 7-3, what is the ending inventory at April 30, 20X9, for Alton Company if the company uses periodic weighted average as its inventory valuation method (round all calculations to the nearest penny)? $290.70 $285.60 $294.00 $281.70 $290.22 QUESTION 4 Which of the following statements is correct? The perpetual inventory system requires a closing entry in order to determine cost of goods sold before cost of goods sold can be closed to the income summary account. The purchases account is used under both the periodic and perpetual inventory systems. Under the periodic inventory system, neither the cost of goods sold account nor the inventory account is computed on a daily basis. The perpetual inventory system continually updates the inventory, purchase discounts, and cost of goods sold accounts. Purchase returns and allowances are accounted for separately under the perpetual inventory system but are combined into the inventory account under the periodic inventory system. Cost per Date Activity Units Unit Cost Total April 1 Beginning inventory 100 $3.00 $300 April 3 Purchase 40 3.10 124 April 7 Sale 50 April 12 Purchase 50 3.20 160 April 16 Sale 70 April 23 Sale 40 April 30 Purchase 60 3.30 198 Units in beginning inventory 100 units Units purchased 150 units Units sold 160 units Referring to Table 7-3, what is the ending inventory balance at April 30, 20X9, for Alton Company if the company uses perpetual FIFO as its inventory valuation method? $297.50 $270.00 $358.00 $198.00 $294.00 QUESTION 2 Given the following data, what is cost of goods sold? Sales revenue $10,000 Beginning inventory 3,000 Ending inventory 7,000 Purchases of inventory 5,000 $12,000 $9,000 $8,000 $ 7,000 $1,000 Sandork, Inc., has 200 units of inventory which are currently priced $4.90 per unit at the market. Originally this inventory cost $5.50 per unit from an order of 400. Sandork, Inc., should take what following step? Loss on inventory write-down 120 Inventory 120 Loss on inventory write-down 240 Inventory 240 Inventory Loss on inventory write-down Inventory 120 Loss on inventory write-down 120 Make no entry. 240 240 QUESTION 6 LIFO tends to decrease taxes when costs are declining. LIFO will always yield the lowest possible taxes. costs are increasing. costs are constant. Impossible to determine without specific cost data QUESTION 7 If a company uses a perpetual inventory system, it will maintain all the following accounts except: O purchases. o inventory sales. cost of goods sold. All of the above accounts are used with a perpetual inventory system