Week 2 Theory of Accounts Part 2 – INVENTORY VALUATION QUIZ

Assuming no beginning inventory, what can be said about the trend of inventory pries if cost of goods
sold using the FIFO method exceeds cost of goods sold using the average method?

Select one:
a. Price remained unchanged.
b. Price decreased.
c. Price trend cannot be determined from the information.
d. Priced increased.

Which inventory cost flow assumption provides the best measure of earnings, where "best" means most
appropriate for predicting future earnings, when prices have been declining?

Select one:
a. LIFO
b. Specific identification
c. FIFO
d. Average cost

Which of the following cost flow assumptions is used for inventory system when an entity builds
townhouses?

Select one:
a. FIFO
b. Specific Identification
c. Weighted Average
d. Any of these cost flow assumptions.

Which of the following is likely to be a circumstance where the specific identification method can be
used?

Select one:
a. Inventory turnover is low.
b. All of the choices are likely circumstances.
c. Unit price is low.
d. Inventory quantities are large.

Which is the reason why the specific identification method may be considered ideal for assigning cost to
inventory and cost of goods sold?

Select one:
a. The cost flow matches the physical cost flow.
b. It is applicable to all types of inventory.
c. The potential for manipulation of net income is reduced.
d. There is no arbitrary allocation of cost.
What is the inventory pricing procedure in which the oldest cost rarely has an effect on the ending
inventory?

Select one:
a. Specific identification
b. LIFO
c. FIFO
d. Weighted average

In a period of rising prices, the inventory cost allocation method that tends to result in the lowest
reported net income is

Select one:
a. Weighted average
b. LIFO
c. Moving average
d. FIFO

IFRS prohibits which of the following cost flow assumptions?

Select one:
a. Any of these cost flow assumptions
b. LIFO
c. Specific Identification
d. Weighted Average

Cost of goods sold is the same under a periodic system as under a perpetual system when an entity uses

Select one:
a. Specific Identification
b. Weighted average
c. FIFO
d. LIFO

In a period of falling prices, the use of which inventory cost flow method would typically result in the
highest cost of goods sold?

Select one:
a. FIFO
b. Specific identification
c. LIFO
d. Weighted average

The inventory cost was lower using FIFO than LIFO. If there is no beginning inventory, what direction did
the cost of purchases move during the year?

Select one:
a. Steady
 b. Cannot be determined
c. Up
d. Down

Which inventory cost flow assumption would consistently result in the highest income in a period of a
sustained inflation?

Select one:
a. FIFO
b. LIFO
c. Specific identification
d. Weighted average

Which method of inventory pricing best approximates specific identification of the actual flow of costs
and units?

Select one:
a. LIFO
b. FIFO
c. Moving average
d. Weighted average

In a period of falling prices, which inventory method generally provides the lowest amount of ending
inventory?

Select one:
a. Specific identification
b. Moving average
c. Weighted average
d. FIFO

The costing of inventory must be deferred until the end of the reporting period under which of the
following method of inventory valuation?

Select one:
a. LIFO perpetual
b. Weighted average
c. Moving average
d. FIFO perpetual

During period of rising prices, when the FIFO inventory cost flow method is used, a perpetual inventory
system would

Select one:
a. Result in the same ending inventory as a periodic inventory system
Result in a higher ending inventory than a periodic inventory system
b. Result in a lower ending inventory than a periodic inventory system
 c. Not be permitted.

In a period of declining price, the inventory method which tends to give the highest amount of cost of
goods sold is

Select one:
a. LIFO
b. Average cost
c. Specific identification
d. FIFO

Which of following inventory method measures most closely the current cost of inventory?

Select one:
a. Specific identification
b. LIFO
c. Weighted average
d. FIFO

The cost of inventories that are not ordinarily interchangeable and goods or services produced and
segregated for specific projects shall be measured using

Select one:
a. Average method
b. Specific identification
c. FIFO
d. LIFO

In a period of falling prices, which inventory method generally provides the lowest amount of net income?

Select one:
a. Specific identification
b. Weighted average
c. Moving average
d. FIFO