The determination for allocating the cost of goods available for sale between ending inventory and cost of goods sold depends on the inventory cost flow assumption. Which of the following inventory costing methods allocates the cost of purchases according to the physical flow of goods through inventory? a. First-in, first-out (FIFO) O b. Average cost Oc. Specific identification Od. Last-in, first-out (LIFO) When purchase prices are falling, which of the following inventory costing methods produces the lowest cost for ending inventory? a. Last-in, first-out (LIFO) O b. Specific identification Oc. Average cost Od. First-in, first-out (FIFO) Sequoia Company reported net income of $168,750 at the end of year 1. The balance sheet reported ending inventory of $89,700. Early in year 2, the company discovered that ending inventory should have been reported at $76,200. Which of the following statements is correct? a. Net income was overstated $13,500. b. Assets were overstated by $79,050, c. Expenses were understated by $ 79,050. Od. Equity was understated by $13,500. A high inventory turnover ratio suggests that a. the company is efficiently managing its inventory. b. when inventory is turned quickly, there will not be any inventory for seasonal sales. c. the higher inventory will cause the purchase of new inventory to be accelerated. O d. the company is turning its inventory so fast that it will run out of inventory to sell. The following information is available for the fiscal year-end for two retail companies, Parker Company and Morgan Enterprises Compute the inventory turnover ratio for (1) Parker Company and (2) Morgan Enterprises, which company appears to be selling its inventory more rapidly? Account Net sales Cost of goods sold Gross profit Beginning inventory Ending inventory O a. (1) 8.230; (2) 6,043; Parker O b. (1) 9.196; (2) 6.297; Parker O c. (1) 8.686; (2) 6.168; Parker Od. (1) 2.818; (2) 2.655; Parker Parker $221,930 167,560 54,360 18,220 20,360 Morgan $34,230 23,930 10,300 3,800 3,960 Inventory represents products held for resale and is classified on the balance sheet as an) a. asset b. current liability c. current asset d. liability, Which of the following inventory costing methods results in the more realistic amount for the balance sheet? a. Last-in, first-out (LIFO) O b. Specific identification O c. Average cost Od. First-in, first-out (FIFO) Which of the following ratios describes how quickly inventory is purchased (or produced) and sold? a. The inventory turnover ratio b. The current ratio c. The accounts receivable turnover ratio Od. The gross profit ratio How is ending inventory calculated? a. Ending inventory equals beginning inventory plus purchases made during the period minus cost of goods available for sale. O b. Ending inventory equals beginning inventory plus sales of merchandise less cost of goods sold. c. Ending inventory equals beginning inventory plus purchases made during the period minus cost of goods sold. Od. Ending inventory equals beginning inventory plus purchases made during the period. Credit terms of 2/10, 1/30 indicate that the customer is eligible for O a. a 10% discount b. no discount c. a 30% discount Od. a 2% discount