Quiz 4

14-4-23 11:56

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ACCT5930-Financial Accounting - Session 1, 2014

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Started on Wednesday, 23 April 2014, 11:45 PM

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Quiz 4

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Completed on Wednesday, 23 April 2014, 11:55 PM

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Question 1
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10 out of a maximum of 10 (100%)

Which of the following statements about the use

of the first-in, first-out (FIFO) assumption is
false?
Select one:
a. The FIFO assumption assigns the more
recent purchase costs to the balance sheet
inventory asset account.
b. Ending inventory valuation using the FIFO
assumption is not affected by the inventory
control method used.
c. In periods of rising prices FIFO produces a
higher profit than last-in first-out (LIFO)
assumption.
d. The FIFO assumption produces inventory
asset values that are based on older
purchase costs.
e. The FIFO assumption is allowed in
Australia.
The correct answer is: The FIFO assumption
produces inventory asset values that are based
on older purchase costs.

Question 2
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A company has four products and has 100 units

of each in stock. The cost and net realisable
value of each of the products are:
Product V: Cost $10, Net Realisable Value $8

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Flag question

Product X: Cost $8, Net Realisable Value $7

Product Y: Cost $8, Net Realisable Value $9
Product Z: Cost $5, Net Realisable Value $10

The value of inventory in the balance sheet after

applying the lower of cost and net realisable
value rule should be:
Select one:
a. $1,300
b. $1,500
c. $2,800
d. $3,100
e. $3,400
The correct answer is: $2,800

Question 3
Correct
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Which of the following statements about last-in,

first-out (LIFO) assumption is true?
Select one:
a. LIFO assumes that inventory on hand
consists of the oldest units.
b. LIFO assumes that ending inventory and
cost of goods sold are comprised of a
mixture of old and new units.
c. LIFO results in newer costs appearing in
the balance sheet.
d. LIFO assumes that cost of goods sold
consists of the oldest units.
e. LIFO results in the same ending inventory
valuation irrespective of whether a periodic
or perpetual control method is used.
The correct answer is: LIFO assumes that
inventory on hand consists of the oldest units.

Question 4
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Which of the following statements about the use

of the weighted average / moving average
assumption is true?
Select one:
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a. The valuation of inventory in the balance

sheet is between that which would be the
case with the use of last-in first-out (LIFO)
assumption and the first-in first-out (FIFO)
assumption.
b. When prices are rising, it shows lower
balance sheet figures than the last-in first-out
(LIFO) assumption.
c. When prices are falling, it shows lower
balance sheet figures than the first-in firstout (FIFO) assumption.
d. Its use is not permitted in Australia.
e. The valuation of inventory in the balance
sheet is unaffected by the use of either the
periodic or perpetual inventory control
methods.
The correct answer is: The valuation of inventory
in the balance sheet is between that which would
be the case with the use of last-in first-out (LIFO)
assumption and the first-in first-out (FIFO)
assumption.

Question 5
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The following lots of a particular commodity were

available for sale during the year:
10 units at $60 Beginning inventory
25 units at $63 First purchase
30 units at $64 Second purchase
15 units at $70 Third purchase
The firm uses the periodic inventory control
system and there are 20 units of the commodity
on hand at the end of the year.
What is the valuation of inventory at the end of
the year using the first-in first-out assumption?
Select one:
a. $1,200
b. $1,230
c. $1,286
d. $1,370
e. $1,400
The correct answer is: $1,370

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Question 6
Correct
Mark 1 out of 1
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In a period of rising purchase prices, which cost

flow assumption provides the highest net profit?
Select one:
a. First-in first-out (FIFO)
b. Last-in first-out (LIFO)
c. Moving / weighted average
d. Specific identification
e. It depends on the rate of inflation
The correct answer is: First-in first-out (FIFO)

Question 7
Correct
Mark 1 out of 1
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The lower of cost and net realisable value rule

for inventory is an example of the principle of:
Select one:
a. conservatism
b. consistency
c. historic cost
d. relevance
e. reliability
The correct answer is: conservatism

Question 8
Correct
Mark 1 out of 1
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The perpetual inventory control method has

which of the following advantages over the
periodic control method?
Select one:
a. ability to distinguish theft from other
sources of inventory loss
b. availability of details of number of items on
hand
c. elimination of inventory shortages
d. lower cost of operation
e. physical count of inventory (i.e.,
stocktakes) not required
The correct answer is: availability of details of
number of items on hand

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Question 9
Correct
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During the year ended 30 June 2010, Rico Ltd

has net sales of $750,000 and net purchases of
$440,000. Cost of goods sold was $475,000.
What was Rico Ltd's gross profit for the year
ended 30 June 2010?
Select one:
a. $240,000
b. $275,000
c. $310,000
d. $475,000
e. $750,000
The correct answer is: $275,000

Question 10
Correct
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The following information relates to Moderate

Ltd:
Net Sales: $345,000
Beginning Inventory: $60,000
Ending Inventory: $36,000
Cost of Goods Sold: $210,000

What were the purchases for the period?

Select one:
a. $135,000
b. $186,000
c. $234,000
d. $246,000
e. $306,000
The correct answer is: $186,000

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