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60. Baden Shoe Store has a beginning merchandise inventory of $15,000. During the period, purchases were $60,000; purchase returns, $2,000; and freight-in $5,000. A physical count of inventory at the end of the period revealed that $10,000 was still on hand. The cost of goods available for sale was a. $72,000 b. $68,000 c. $78,000 d. $82,000

61. Cost of goods sold is computed from the following equation: a. beginning inventory – cost of goods purchased + ending inventory. b. sales – cost of goods purchased + beginning inventory – ending inventory. c. sales + gross profit – ending inventory + beginning inventory. d. beginning inventory + cost of goods purchased – ending inventory

62. A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be a. $65. b. $75. c. $60. d. $50.

63. The LIFO inventory method assumes that the cost of the latest units purchased are a. the last to be allocated to cost of goods sold. b. the first to be allocated to ending inventory. c. the first to be allocated to cost of goods sold. d. not allocated to cost of goods sold or ending inventory.

Use the following information for questions 64–67.

A company just starting business made the following four inventory purchases in June: June 1 150 units $ 750 June 10 200 units 1,200 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.

64. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $1,350. b. $1,620. c. $2,580. d. $2,850.

65. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is a. $1,620. b. $1,350. c. $2,580. d. $2,850.

66. Using the average cost method, the amount allocated to the ending inventory on June 30 is a. $4,200. b. $2,700. c. $1,495. d. $1,500.

67. The inventory method which results in the highest gross profit for June is a. the FIFO method. b. the LIFO method. c. the weighted average unit cost method. d. not determinable.

68. A company purchased inventory as follows: 200 units at $27 300 units at $30 The average unit cost for inventory is a. $27.00. b. $28.50. c. $28.80. d. $30.00.

69. Which of the following items will increase inventoriable costs for the buyer of goods? a. Purchase returns and allowances granted by the seller b. Purchase discounts taken by the purchaser c. Freight charges paid by the seller d. Freight charges paid by the purchaser

70. Inventoriable costs may be thought of as a pool of costs consisting of which two elements? a. The cost of beginning inventory and the cost of ending inventory b. The cost of ending inventory and the cost of goods purchased during the year c. The cost of beginning inventory and the cost of goods purchased during the year d. The difference between the costs of goods purchased and the cost of goods sold during the year

71. The cost of goods available for sale is allocated between a. beginning inventory and ending inventory. b. beginning inventory and cost of goods on hand. c. ending inventory and cost of goods sold. d. beginning inventory and cost of goods purchased.

72. Ken's Used Cars uses the specific identification method of costing inventory. During March, Ken purchased three cars for $5,000, $6,000, and $8,000, respectively. During March, two cars are sold for $8,500 each. Ken determines that at March 31, the $8,000 car is still on hand. What is Ken’s gross profit for March? a. $4,000. b. $6,000. c. $3,000. d. $9,000.

73. Of the following companies, which one would not likely employ the specific identification method for inventory costing? a. Music store specializing in organ sales b. Farm implement dealership c. Antique shop d. Hardware store

74. A problem with the specific identification method is that a. inventories can be reported at actual costs. b. management can manipulate income. c. matching is not achieved. d. the lower of cost or market basis cannot be applied.

75. The selection of an appropriate inventory cost flow assumption for an individual company is made by a. the external auditors. b. the SEC. c. the internal auditors. d. management.

76. Which of the following is not a common cost flow assumption used in costing inventory? a. First-in, first-out b. Middle-in, first-out c. Last-in, first-out d. Average cost

77. The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is a. called the matching principle. b. called the consistency principle. c. nonexistent; that is, there is no accounting requirement. d. called the physical flow assumption.

78. Which of the following statements is true regarding inventory cost flow assumptions? a. A company may use more than one costing method concurrently. b. A company must comply with the method specified by industry standards. c. A company must use the same method for domestic and foreign operations. d. A company may never change its inventory costing method once it has chosen a method.

79. Which of the following statements is correct with respect to inventories? a. The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. b. It is generally good business management to sell the most recently acquired goods first. c. Under FIFO, the ending inventory is based on the latest units purchased. d. FIFO seldom coincides with the actual physical flow of inventory.

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