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80. The cost of goods available for sale is allocated to the cost of goods sold and the a. beginning inventory. b. ending inventory. c. cost of goods purchased. d. gross profit.

81. In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the a. FIFO method. b. LIFO method. c. average cost method. d. tax method.

82. Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using a. LIFO will have the highest ending inventory. b. FIFO will have the highest cost of good sold. c. FIFO will have the highest ending inventory. d. LIFO will have the lowest cost of goods sold.

83. If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the a. cost of goods sold of the companies will be identical. b. cost of goods available for sale of the companies will be identical. c. ending inventory of the companies will be identical. d. net income of the companies will be identical.

84. In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a. FIFO b. LIFO c. Average Cost d. Income tax expense for the period will be the same under all assumptions.

85. The specific identification method of costing inventories is used when the a. physical flow of units cannot be determined. b. company sells large quantities of relatively low cost homogeneous items. c. company sells large quantities of relatively low cost heterogeneous items. d. company sells a limited quantity of high-unit cost items.

86. The specific identification method of inventory costing a. always maximizes a company's net income. b. always minimizes a company's net income. c. has no effect on a company's net income. d. may enable management to manipulate net income.

87. The managers of Teng Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices? a. LIFO b. Average Cost c. FIFO d. Physical inventory method

88. In periods of inflation, phantom or paper profits may be reported as a result of using the a. perpetual inventory method. b. FIFO costing assumption. c. LIFO costing assumption. d. periodic inventory method.

89. Selection of an inventory costing method by management does not usually depend on a. the fiscal year end. b. income statement effects. c. balance sheet effects. d. tax effects.

90. The accountant at Kline Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $4,600. The LIFO method will result in income before taxes of $3,850. What is the difference in tax that would be paid between the two methods? a. $750. b. $525. c. $225. d. Cannot be determined from the information provided.

91. The accountant at Carey Company has determined that income before income taxes amounted to $8,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $300 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption? a. $8,300. b. $9,000. c. $7,000. d. $7,700.

92. The manager of Wyatt Company is given a bonus based on income before income taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 for LIFO. The tax rate is 30%. The bonus rate is 10%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO? a. $250. b. $140. c. $200. d. $700.

93. The consistent application of an inventory costing method is essential for a. conservatism. b. accuracy. c. comparability. d. efficiency.

94. Inventory is reported in the financial statements at a. cost. b. market. c. the higher of cost or market. d. the lower of cost or market.

95. The lower of cost or market basis of valuing inventories is an example of a. comparability. b. the cost principle. c. conservatism. d. consistency.

96. Under the lower of cost or market basis in valuing inventory, market is defined as a. current replacment cost. b. selling price. c. historical cost plus 10%. d. selling price less markup.

97. The lower of cost or market (LCM) basis may be be used with all of the following methods except a. average cost. b. FIFO. c. LIFO. d. The LCM basis may be used with all of these.

98. Isaac Company developed the following information about its inventories in applying the lower of cost or market (LCM) basis in valuing inventories: Product Cost Market A $ 82,000 $ 85,000 B 50,000 48,000 C 100,000 105,000 If Isaac applies the LCM basis, the value of the inventory reported on the balance sheet would be a. $232,000. b. $238,000. c. $230,000. d. $240,000.

99. An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is Cost of Goods Sold Net Income a. Understated Understated b. Overstated Overstated c. Understated Overstated d. Overstated Understated

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