1 Which of the following methods is also referred as parking transactions a Consignment sales b Sales on installment c Sales with high rates of return d Sales with buyback agreement 2 Under what circumstances should a company with high rate of return on sales consider the inventory sold a When it can reasonably estimate the amount of returns b When the retailer gives a confirmation that the goods won t be returned c When the goods are sold on installment d When the payment for goods is received 3 How is a significant amount of consignment inventory reported in the balance sheet a The inventory is reported separately on the consignor s balance sheet b The inventory is combined with other inventory on the consignor s balance sheet c The inventory is reported separately on the consignee s balance sheet d The inventory is combined with other inventory on the consignee s balance sheet 4 Where should goods in transit that were recently purchased f o b destination be included on the balance sheet a Accounts payable b Inventory c Equipment d Not on the balance sheet 5 If a company uses the periodic inventory system what is the impact on the current ratio of including goods in transit f o b shipping point in purchases but not ending inventory a Overstate the current ratio b Understate the current ratio c No effect on the current ratio d Not sufficient information to determine effect on the current ratio 6 Goods in transit which are shipped f o b shipping point should be a included in the inventory of the seller b included in the inventory of the buyer c included in the inventory of the shipping company d none of these answers are correct 7 During 2014 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2015 Nolan then used the inventory as collateral to borrow from Norwalk Bank remitting the proceeds to Carne In 2015 when Carne repurchased the inventory Nolan used the proceeds to repay its bank loan On whose books should the cost of the inventory appear at the December 31 2014 balance sheet date a Carne Corporation b Nolan Corporation c Norwalk Bank d Nolan Corporation with Carne making appropriate note disclosure of the transaction 8 Valuation of inventories requires the determination of all of the following except a the costs to be included in inventory b the physical goods to be included in inventory c the cost of goods held on consignment from other companies d the cost flow assumption to be adopted 9 If the beginning inventory for 2014 is overstated the effects of this error on cost of goods sold for 2014 net income for 2014 and assets at December 31 2015 respectively are a overstatement understatement overstatement b overstatement understatement no effect c understatement overstatement overstatement d understatement overstatement no effect 10 Green Co received merchandise on consignment As of January 31 Green included the goods in inventory but did not record the transaction The effect of this on its financial statements for January 31 would be a net income current assets and retained earnings were overstated b net income was correct and current assets were understated c net income and current assets were overstated and current liabilities were understated d net income current assets and retained earnings were understated 11 What is the effect of a 50 000 overstatement of last year s inventory on current years ending retained earning balance a Understated by 50 000 b No effect c Overstated by 50 000 d Need more information to determine 12 All of the following costs should be charged against revenue in the period in which costs are incurred except for a manufacturing overhead costs for a product manufactured and sold in the same accounting period b costs which will not benefit any future period c costs from idle manufacturing capacity resulting from an unexpected plant shutdown d costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory 13 The use of a Purchase Discounts Lost account implies that the recorded cost of a purchased inventory item is its a invoice price b invoice price plus the purchase discount lost c invoice price less the purchase discount taken d invoice price less the purchase discount allowable whether taken or not 14 During 2014 which was the first year of operations Oswald Company had merchandise purchases of 985 000 before cash discounts All purchases were made on terms of 2 10 n 30 Three fourths of the items purchased were paid for within 10 days of purchase All of the goods available had been sold at year end Which of the following recording procedures would result in the highest cost of goods sold for 2014 1 Recording purchases at gross amounts 2 Recording purchases at net amounts with the amount of discounts not taken shown under other expenses in the income statement a 1 b 2 c Either 1 or 2 will result in the same cost of goods sold d Cannot be determined from the information provided 15 The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation a moving average b weighted average c LIFO perpetual d FIFO 16 An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the cost of goods sold is a FIFO b LIFO c base stock d weighted average 17 Assuming no beginning inventory what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method a Prices decreased b Prices remained unchanged c Prices increased d Price trend cannot be determined from information given 18 In a period of rising prices the inventory method which tends to give the highest reported cost of goods sold is a FIFO b average cost c LIFO d None of these choices are correct 19 The acquisition cost of a certain raw material changes frequently The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the a weighted average method b moving average method c LIFO method d FIFO method 20 In a period of rising prices which inventory method generally provides the lowest amount of net income a Average cost b FIFO c LIFO d Specific identification 21 In a period of falling prices which inventory method generally provides