Prelim-Quiz23

At December 31, 2017, Hillsborough Corporation reports the following inventory

amounts ($ per unit):
Item # of Units Cost NRV
A 100 $4 $3
B 150 $8 $6
The year‐end adjustment using the lower of cost and net realizable value would
include:
A. A debit to Cost of Goods Sold for $300
B. A debit to Inventory for $500
C. A credit to Inventory for $400
D. A credit to Cost of Goods Sold for $900
C. A credit to Inventory for $400

When the value of inventory falls below its cost, companies other than those that
use LIFO have the option of recording the inventory at cost or the lower net
realizable value
A. True
B. False
B. False

The principle of using the lower of cost or net realizable value to value inventory
reflects which of the following?
A. Periodicity
B. Matching
C. Revenue recognition
D. Historical cost
B. Matching

The higher the inventory turnover, the lower the days' inventory on hand.
A. True
B. False
A. True

Hayne Corporation had average inventory of $1,000 and cost of goods sold of
$5,000 during 2017. Hayne's
inventory turnover ratio is 0.5.
A. True
B. False
B. False

Under the periodic inventory system, cost of goods sold is recorded throughout the
accounting period as inventory is sold.
A. True
B. False
B. False
An advantage of using the periodic inventory system is that it requires less
recordkeeping than the perpetual
inventory system.
A. True
B. False
A. True

Big Valley Farms, Inc. uses a periodic inventory system. Big Valley purchased seed
from Midwest Co., Inc. at a cost of $20,000, payable at time of delivery. The entry
to record the delivery would be
a. Inventory ..........................20,000
Cash ................................................20,000
b. Purchases .........................20,000
Accounts Payable ....................20,000
c. Purchases ..........................20,000
Cash ...............................................20,000
d. Inventory ............................20,000
Accounts Payable ....................20,000
c. Purchases..............20,000
Cash ...................................20,000

A company should classify a building and land held for a new plant facility as
A. an investment.
B. a current asset.
C. an intangible asset.
D. property, plant, and equipment.
A. an investment.

Kensal Green, Inc. purchases land with a building on it and immediately tears down
the building so that the
land can be used for the construction of a new plant facility. The costs incurred to
tear down the building
should be
A. expensed as incurred.
B. added to the cost of the new plant facility.
C. added to the cost of the land.
D. spread over the estimated time period between the tearing down of the
building and the completion of the plant.
C. added to the cost of the land.

Greenwich Company purchased a $1,000,000 tract of land that is

intended to be the site of a new office complex. Greenwich
incurred additional costs and realized salvage proceeds as
follows:
Demolition of existing building on site $150,000
Legal and other fees to close escrow 15,000
Proceeds from sale of demolition scrap 10,000
What would be the capitalized cost of the land?
A. $1,175,000
B. $1,155,000
C. $1,015,000
D. $1,000,000
B. $1,155,000

Bampton Corporation purchases a tract of land to construct a new building. Which

of the following costs would not be included in the land account?
A. Grading the land
B. Sewer assessment from local government
C. Cost of making a driveway
D. Commission to real estate agent
C. Cost of making a driveway