Which of the following is not an advantage of a perpetual inventory system? assists in the prevention of stockouts requires less data processing effort than periodic systems maintains up-to-date inventory and cost of goods sold balances provides evidence of inventory shrinkage 4. A retail firm would normally use an inventory account titled Finished Goods Inventory Merchandise Inventory Goods in Process Inventory Raw Materials Inventory 5. Which of the following is not a disadvantage of using the FIFO cost flow assumption? creates the highest outflow for income taxes during periods of rising prices does not match current costs against current revenues includes all the holding gains in income during periods of rising prices provides a relevant ending inventory value 6. Which one of the following is not an advantage of LIFO? In periods of rising prices, less income taxes are paid. In periods of rising prices, less holding gains are reported in net income. Record keeping and financial statement preparation are easier. Conservative income statements and balance sheet disclosures result from rising prices. 7. Which one of the following cost-flow assumptions provides the lowest inventory value in periods of rising prices? 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? 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? 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? Include Include Exclude Include Exclude Exclude Exclude Exclude Exclude Exclude Include Exclude