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Inventory Accounting True-False Quiz

This document contains 15 true-false questions about accounting for materials. Key points covered include: 1) Using FIFO vs LIFO inventory methods can impact reported income when prices are rising or falling. 2) Inventory methods cannot be changed at will to manipulate reported income. 3) An overstated ending inventory leads to understated net income. 4) An error in determining the cost of ending inventory generally misstates income for two periods.

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205 views1 page

Inventory Accounting True-False Quiz

This document contains 15 true-false questions about accounting for materials. Key points covered include: 1) Using FIFO vs LIFO inventory methods can impact reported income when prices are rising or falling. 2) Inventory methods cannot be changed at will to manipulate reported income. 3) An overstated ending inventory leads to understated net income. 4) An error in determining the cost of ending inventory generally misstates income for two periods.

Uploaded by

Athena Athena
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Accounting for Materials

TRUE-FALSE QUESTIONS

Indicate whether the following statements are true or false by inserting in the blank space
provided a capital “T” for true or “F” for false.

T 1. When prices are rising, higher income will be reported using FIFO as compared
with using LIFO.
F 2. Inventory methods can be changed at will to control reported net income.
F 3. An overstated ending inventory leads to understand net income.
T 4. An error in determining the cost of the ending inventory of a period generally results
in misstated income for two periods.
T 5. The net realizable value of an inventory item can never be greater than its expected
selling price.
F 6. An advantage of using LIFO yields the greatest cost of goods sold.
F 7. Spoiled goods may be sold at an amount higher than the regular sales price.
F 8. If spoilage in a job results is due to the exacting specifications of the job, the loss
resulting from the spoiled goods should be shared by all units manufactured during
the period.
F 9. The closing entries necessary under the perpetual and periodic inventory systems do
not differ because all expenses and revenues must be closed.
T 10. When a company changes from one inventory costing method to another, the change
must be fully disclosed in a footnote to the financial statements explaining the
reasons for the change.
T 11. Graphically, the economic order quantity (EOQ) is the point where the carrying cost
line interest the ordering cost line.
F 12. The primary goal of inventory management activity is to minimize the risks of a
stockout while maximizing the return on inventory.
F 13. When computing the economic production run size, the costs to set up a production
run are analogous to the carrying costs in the basic economic order quantity model.
F 14. The purchase price per unit of inventory is irrelevant in lathe economic order
quantity (EOQ) model.
F 15. The accounting for spoiled units and defective units is the same.

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