Accounting … Home Work

FHome WorkE
1- Harold Company overstated its inventory by $15,000 at
December 31, 2010. It did not correct the error in 2011. As a
result, Harold’s equity was :-
A)Overstated at December 31,2010, and understated at December
31,2011.
B) Overstated at December 31,2010, and properly stated at
December 31,2011.
C)Understated at December 31,2010, and understated at December
31,2011.
D)Overstated at December 31,2010, and overstated at December
31,2011.
2- All of the following would be classified as inventory except :-
A)Merchandise inventory.
B) Raw materials.
C)Supplies.
D)Work in process.
3- Companies using a periodic inventory system take a physical
inventory for each of the following purposes except to
determine the :-
A)Cost of goods sold for the period.
B) Inventory on hand at the balance sheet date.
C)Amount of inventory lost due to shoplifting or employee theft.
D)All of the above are correct.
4- Goods in transit should be included in the inventory of the
buyer when the :-
A)Public carrier accepts the goods from the seller .
B) Goods reach the buyer.
C)Terms of sale are FOB destination.
D)Terms of sale are FOB shipping point.

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Mr: Kareem Abo Zeed
Accounting … Home Work
5- When the terms of sale are FOB destination , ownership of the
goods remains with the seller until the goods :-
A)Are accepted by the public carrier.
B) Are shipped.
C)Reach the buyer.
D)Are paid for by the buyer.
6- The cost flow method that often parallels the actual physical
flow of merchandise is THE :-
A)FIFO method.
B) LIFO method.
C)Average – cost method.
D)Gross profit method.
7- The first costs assigned to ending inventory are the costs of the
beginning inventory under the :-
A) FIFO method.
B) LIFO method.
C) Average – cost method.
D) Gross profit method.
8- In a period of inflation , which cost flow method produces the
highest net income ?
A)FIFO method.
B) LIFO method.
C)Average – cost method.
D)Gross profit method.
9- In a period of inflation , the cost flow method that results in the
lowest income taxes is the :-
A)FIFO method.
B) LIFO method.
C)Average – cost method.
D)Gross profit method.

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Mr: Kareem Abo Zeed
Accounting … Home Work
10- When the current replacement cost of inventory is less than
its cost, it is written down to :-
A)FIFO value.
B) LIFO value.
C)Market value.
D)Average – cost value.
11- Under the LCM approach market value is defined as :-
A)FIFO cost.
B) LIFO cost.
C)Current replacement cost.
D)Selling price.
12- Overstating beginning inventory will overstate :-
A)Assets.
B) Cost of goods sold.
C)Net income.
D)Owner’s equity.
13- Understating ending inventory will overstate :-
A)Assets.
B) Cost of goods sold.
C)Net income.
D)Owner’s equity.
14- The inventory turnover ratio is computed by dividing cost of
goods sold by :-
A)Beginning inventory.
B) Ending inventory.
C)Average inventory.
D)365 days.
15- Merchandise inventory includes :-
A)All goods owned by a company and held for sale.
B) All goods in transit.
C)All goods on consignment.
D)Only damaged goods.

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Mr: Kareem Abo Zeed
Accounting … Home Work
16- Goods in transit are included in a purchaser’s inventory :-
A)At any time during transit.
B) When the purchaser is responsible for paying freight charges.
C)When the supplier is responsible for freight charges.
D)If the goods are shipped FOB destination.
17- Goods on consignment :-
A)Are goods shipped by the owner to the consignee who sells the
goods for the owner.
B) Are reported in the consignee’s books as inventory.
C)Are goods shipped to the consignor who sells the goods for the
owner.
D)Are always paid for by the consignee when they take
possession.
18- Regardless of the inventory costing system used, cost of
goods available for sale must be allocated between :-
A)Beginning inventory and net purchases during the period.
B) Ending inventory and beginning inventory.
C)Net purchases during the period and ending inventory.
D)Ending inventory and cost of goods sold.
19- 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 errors in the current periods is :-
Cost of Goods Sold Net Income
A) Understated Understated
B) Overstated Overstated
C) Understated Overstated
D) Overstated Understated

20- If beginning inventory is understated by $10,000, the effect

of this error in the current period is :-
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Mr: Kareem Abo Zeed
Accounting … Home Work
Cost of Goods Sold Net Income
A) Understated Understated
B) Overstated Overstated
C) Understated Overstated
D) Overstated Understated
21- A company uses the periodic inventory method and the
beginning inventory is overstated by $4,000 because the ending
inventory in the previous period is overstated by $4,000. The
amount reflected in the current end of the period balance sheet
are :-
assets Net Income
A) Overstated Overstated
B) Correct Correct
C) Understated Understated
D) Overstated Correct
22- The lower of Cost or Market basis may be applied to :-
A)Individual inventory items.
B) Major categories.
C)Total inventory.
D)All of these.
23- The most common practice in applying the lower of Cost or
Market to inventory valuation is to use :-
A)Average inventories.
B) Major categories of inventory.
C)Total inventories.
D)Individual inventory items.

24- Under the lower of Cost or Market basis of valuing

inventory , market is defined as :-
A)Current Replacement cost.
B) Selling price.
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Mr: Kareem Abo Zeed
Accounting … Home Work
C)Historical Cost Plus 10%.
D)Selling price less market.
25- The following information is available for knot Company at
December 31,2008 : beginning inventory $80,000 ; ending
inventory $120,000 ; cost of goods sold $900,000 ; and sales
$1,200,000. Knot’s inventory turnover in 2008 is :-
A)12 times.
B) 11.3 times.
C)9 times.
D)7.5 times.
26- Issac Company developed the following about its inventories
in applying the lower – of – cost – or – market (LCM) basis in
valuing inventories :-
Product Cost Market
A $ 110,000 $ 120,000
B 80,000 76,000
C 160,000 162,000
If Issac applies the LCM basis , the value of the inventory
reported on the balance sheet would be :-
A)$ 350,000.
B) $ 342,000.
C)$ 346,000.
D)$ 362,000.

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Mr: Kareem Abo Zeed