Accounting

1.  The primary reason for the popularity of LIFO is that it:

A. Provides better matching of physical flow and cost flow.

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B. Saves income taxes currently.

C. Simplifies recordkeeping.

D. Provides a permanent reduction of income taxes.

 

2.  The use of LIFO during a long inflationary period can result in:

A. A net increase in income tax expense.

B. An inflated balance sheet.

C. Significant cash flow advantages over FIFO.

D. A reduction in inventory turnover over FIFO.

 

3.  The Mateo Corporation’s inventory at December 31, 2013, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following:

 

▪ Merchandise costing $30,000, shipped f.o.b. shipping point from a vendor on December 30, 2013, was received on January 5, 2014.

▪ Merchandise costing $22,000, shipped f.o.b. destination from a vendor on December 28, 2013, was received on January 3, 2014.

▪ Merchandise costing $38,000 was shipped to a customer f.o.b. destination on December 28, arrived at the customer’s location on January 6, 2014.

▪ Merchandise costing $12,000 was being held on consignment by Traynor Company.

 

What amount should Mateo Corporation report as inventory in its December 31, 2013, balance sheet?

A. $367,000.

B. $427,000.

C. $405,000.

D. $325,000.

 

4.  Northwest Fur Co. started 2013 with $94,000 of merchandise inventory on hand. During 2013, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system.

What is ending inventory assuming Northwest uses the gross method to record purchases?

A. $112,490.

B. $112,550.

C. $116,500.

D. $120,300.

 

5.  Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

A. $492,500.

B. $496,500.

C. $490,500.

D. $492,550.

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