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ACG 2021 Exam 2 Ch 5,6, & 8 Practice Questions and Correct Answers
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In a period of inflation, the costs allocated to ending inventory will approximate their current cost if a. the FIFO method is used b. the LIFO method is used c. the average method is used d. all of these a. the FIFO method is used In a period of inflation, the inventory cost flow method that resu...

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  • August 11, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • acg 2021 exam 2 ch 56 8 practice questions and
  • in a period of inflation the costs allocated to e
  • in a period of inflation the inventory cost flow

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  • ACG 2021
  • ACG 2021

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ACG 2021 Exam 2 Ch 5,6, & 8 Practice
Questions and Correct Answers
In a period of inflation, the costs allocated to ending inventory will approximate their
current cost if
a. the FIFO method is used
b. the LIFO method is used
c. the average method is used
d. all of these ✅a. the FIFO method is used

In a period of inflation, the inventory 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
e. none of these ✅b. LIFO method

A company reports the following:
2020 2019
Ending inventory $34,000 $32,000
Cost of goods sold. 182,000. 163,500
Sales revenue. 240,00. 233,000

What is the company's days in inventory for 2020? ✅Inventory turnover =
cost of goods sold/average inventory
= 182,000/[(34,000+32,000)/2] = 5.515

Days in inventory =
365/inventory turnover
=365/5.515 = 66.2 days

Understating ending inventory will overstate
a. assets.
b. net income
c. stockholders' equity.
d. cost of goods sold
e. none of these ✅d. cost of goods sold

a company has the following inventory data:
July 1. beginning inventory. 10 units at $1. $10
7. purchases. 70 units at $2. 140
22. purchases. 20 units at $3 60

, $210
A physical count of merchandise inventory on July 31 reveals that there are 15 units on
hand. Using the FIFO inventory method and a periodic inventory system, compute cost
of goods sold.
a. $165
b. $45
c. $190
d. $20
e. $210 ✅a. $165

costs of good available for sale = $210
the # of units available for sale = 100 units (10+70+20)
the # of units in ending inventory = 15 units (given)
the # of units sold = 85 units (100-15)

Using FIFO, cost of goods sold is computed using the cost of the oldest (first-in)
inventory

cost of goods sold=10x$1/unit+70x$2/unit+5x$3/unit= $10+140+15=$165

ending inventory = (20-5) x $3/unit = $45

Seminole company sold merchandise for $100,000 cash during the month of July. In
July, returns the customers totaled $5,000 and sales discounts totaled $4,000. If the
company's gross profit rate is 30%, the company will report monthly net sales revenue
and cost of goods sold of
a. $67,300
b. $22,700
c. $27,300
d. $63,700
e. $65,500 ✅a. $63,700

net sales=sales-sales returns&allowances-sale discounts
net sales = 100,000 - 5,000 - 4,000 = 91,000

gross profit rate = gross profit + net sales

re-arranging and solving for gross profit:
gross profit = gross profit rate x net sales
gross profit = 0.30 x 91,000 = 27,300

another important relation is the following:
gross profit = net sales - cost of goods sold

re-arranging, we solve for cost of goods sold:
cost of goods sold = net sales - gross profit

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