Leaming Obiestive: Ch5-C2 8. Physical counts of inventory A) Are not necessary under the perpetual systemease B) Are necessary to measure and adjust for inventory shrinkage. C) Must be taken at least once a month D) Requires the use of hand-held portable computers, ) Are not necessary under the cost-to benefit constraint. Ch5-A2 9. The understatement of the ending inventory balance causes A) Cost of goods sold to be overstated and net income to B) Cost of goods sold to be overstated and net inccme C) Cost of goods sold to be understated and net income to be understated. D) Cost of goods sold to be understated and net incoeme t E) Cost of goods sold to be overstated and net income to be correct be understated to be overstated be overstated Leaming Obiective: Ch5-A3 10. The inventory turnover ration A) Is used to analyze profitability B) Is used to measure solvency C) Measures D) Validates the acid-test ratio. E) Calculation depends on the company's inventory valuation how quickly a company turns over its merchandise inventory. method. Lcarning Obiective: Ch5-PI inventory valustion method that identifies the invoice cot of each item in ending inventory to determine the cost assigned to A) Weighted-average inventory method. B) First-in, first-out method. C) Last-in, first-out method. D) Specific identification method E) Retail inventory method. 12. A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they parchased 10 units at $22 each On November 6 they purchased 6 units at $25 each. On November 8, they sold 18 unsits for $54 each. Using the LIFO inventory method, what was the cost of the 18 units sold? A) $395. B) $410. C) $450. D) $510. E) $520. Learning Objective: Ch5-PI, AI 13. Identify the inventory valuation method that is being described for each situation below. In all cases, assume a period of rising 1. The method that can only be used if each inventory item can be matched with a specific purchase and its invoice. 2. The method that will cause the company to have the lowest income taxes. 3. The method that will cause the company to have the lowest cost of goods sold 4. The method that will tend to smooth out erratic changes in costs. prices. A. Specific Identification B. First-In, First-Out C. Last-In, First-Out D. Weighted A verage Ch5-P2 14. Generally accepted acounting principles require that the inventory of a company be reported at A) Market value. B) Historical cost C) Lower of cost or market D) Replacement cost E) Retail value