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CHAPTER 6
REPORTING AND ANALYZING INVENTORY
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOM’S TAXONOMY
Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT

True-False Statements
1. 1 K 10. 1 K 19. 3 K 28. 3 K 37. 5 K
2. 1 K 11. 2 K 20. 3 C 29. 3 K 38. 5 C
3. 1 K 12. 2 K 21. 3 C 30. 3 K 39. 6 K
4. 1 K 13. 2 K 22. 3 C 31. 3 K 40. 6 K
5. 1 K 14. 2 K 23. 3 K 32. 3 K *41. 7 K
6. 1 K 15. 2 K 24. 3 K 33. 4 K *42. 7 K
7. 1 K 16. 2 K 25. 3 K 34. 4 K *43. 8 K
8. 1 K 17. 3 K 26. 3 K 35. 4 K *44. 8 K
9. 1 K 18. 3 K 27. 3 K 36. 4 K
Multiple Choice Questions
45. 1 K 75. 2 AP 105. 2 AP 135. 3 C 165. 5 AP
46. 1 K 76. 2 AP 106. 2 K 136. 3 K 166. 5 C
47. 1 K 77. 2 AP 107. 2 C 137. 3 C 167. 5 AP
48. 1 K 78. 2 AP 108. 3 AP 138. 3 AP 168. 5 AP
49. 1 K 79. 2 AP 109. 3 AP 139. 3 AP 169. 5 AP
50. 1 K 80. 2 AP 110. 3 AP 140. 3 AP 170. 5 AP
51. 1 K 81. 2 AP 111. 3 AP 141. 3 K 171. 6 K
52. 1 K 82. 2 AP 112. 3 AP 142. 3 C 172. 6 K
53. 1 K 83. 2 AP 113. 3 AP 143. 3 C 173. 6 K
54. 1 K 84. 2 K 114. 3 AP 144. 3 C 174. 6 AP
55. 1 K 85. 2 K 115. 3 AP 145. 4 K 175. 6 C
56. 1 K 86. 2 K 116. 2 AP 146. 4 K 176. 6 C
57. 1 K 87. 2 C 117. 3 AP 147. 4 K 177. 6 AN
58. 1 K 88. 2 AP 118. 2 AP 148. 4 K 178. 6 AN
59. 1 K 89. 2 AP 119. 3 AP 149. 4 AP 179. 6 AN
60. 1 AP 90. 2 AP 120. 2 AP 150. 4 AN 180. 6 C
61. 1 AP 91. 2 AP 121. 2 AP 151. 4 AN 181. 7 K
62. 1 K 92. 2 K 122. 2 AP 152. 5 C 182. 7 AP
63. 1 C 93. 2 K 123. 2 AP 153. 5 AN 183. 7 AP
64. 2 K 94. 2 K 124. 3 AP 154. 5 AN 184. 7 AP
65. 2 K 95. 2 K 125. 3 C 155. 5 AN 185. 7 AP
66. 2 AP 96. 2 K 126. 3 C 156. 5 AN 186. 7 AP
67. 2 AP 97. 2 K 127. 3 C 157. 5 C 187. 8 AN
68. 2 AP 98. 2 K 128. 3 C 158. 5 K *188. 8 AN
69. 2 C 99. 2 K 129. 3 C 159. 5 K *189. 8 AN
70. 2 AP 100. 2 K 130. 3 C 160. 5 K *190. 8 C
71. 2 AP 101. 2 AP 131. 3 C 161. 5 C *191. 8 C
72. 2 AP 102. 2 AP 132. 3 C 162. 5 AP
73. 2 AP 103. 2 AP 133. 3 K 163. 5 AP
74. 2 AP 104. 2 AP 134. 3 K 164. 5 AP
Brief Exercises
192. 1 K 194. 2 AP 196. 2 C 198. 5 AP
193. 2 AP 195. 2 AP 197. 4 AP
FOR INSTRUCTOR USE ONLY

6-2 Test Bank for Financial Accounting: Tools for Business Decision Making, Seventh Edition
Exercises
199. 1 AN 204. 2 AP 209. 2 AP 214. 6 AP *219. 8 AN
200. 1 AN 205. 2 AP 210. 2 AP 215. 6 AP *220. 8 AN
201. 1 AN 206. 2 AP 211. 4 AP *216. 7 AP *221. 8 AN
202. 2 AP 207. 2 AP 212. 5 AN *217. 7 AP *222. 8 AN
203. 2 AP 208. 2 AP 213. 6 AN *218. 7 AP *223. 8 AN
Completion Statements
224. 1 K 227. 2 K 230. 2 K 233. 5 K
225. 1 K 228. 3 K 231. 2 K 234. 6 K
226. 1 K 229. 3 K 232. 4 K
Matching
235. 1-6 K
Short Answer Essay
236. 1 K 238. 3 C 240. 3 C 242. 4 C 244. 1 E
237. 2 K 239. 3 K 241. 3 C 243. 6 C 245. 1 AN
*This topic is dealt with in an Appendix to the chapter.
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE

Learning Objective 1
Item Type Item Type Item Type Item Type Item Type Item Type
1. TF 8. TF 49. MC 56. MC 63. MC 226. CS
2. TF 9. TF 50. MC 57. MC 192. BE 235. Ma
3. TF 10. TF 51. MC 58. MC 199. Ex 236. SA
4. TF 45. MC 52. MC 59. MC 200. Ex 244. SA
5. TF 46. MC 53. MC 60. MC 201. Ex 245. CS
6. TF 47. MC 54. MC 61. MC 224. CS
7. TF 48. MC 55. MC 62. MC 225. CS
11. TF 72. MC 86. MC 100. MC 194. BE 231. CS
12. TF 73. MC 87. MC 101. MC 195. BE 235. Ma
13. TF 74. MC 88. MC 102. MC 196. BE 237. SA
14. TF 75. MC 89. MC 103. MC 202. Ex
15. TF 76. MC 90. MC 104. MC 203. Ex
16. TF 77. MC 91. MC 105. MC 204. Ex
64. MC 78. MC 92. MC 106. MC 205. Ex
65. MC 79. MC 93. MC 116. MC 206. Ex
66. MC 80. MC 94. MC 118. MC 207. Ex
67. MC 81. MC 95. MC 120. MC 208. Ex
68. MC 82. MC 96. MC 121. MC 209. Ex
69. MC 83. MC 97. MC 122. MC 210. Ex
70. MC 84. MC 98. MC 123. MC 227. CS
71. MC 85. MC 99. MC 193. BE 230. CS

Reporting and Analyzing Inventory 6-3
Item Type Item Type Item Type Item Type Item Type Item Type
17. TF 26. TF 110. MC 125. MC 134. MC 143. MC
18. TF 27. TF 111. MC 126. MC 135. MC 144. MC
19. TF 28. TF 112. MC 127. MC 136. MC 228. CS
20. TF 29. TF 113. MC 128. MC 137. MC 229. CS
21. TF 30. TF 114. MC 129. MC 138. MC 235. Ma
22. TF 31. TF 115. MC 130. MC 139. MC 238. SA
23. TF 32. TF 117. MC 131. MC 140. MC 239. SA
24. TF 108. MC 119. MC 132. MC 141. MC 240. SA
25. TF 109. MC 124. MC 133. MC 142. MC 241. SA
33. TF 36. TF 147. MC 150. MC 211. Ex 242. SA
34. TF 145. MC 148. MC 151. MC 232. CS
35. TF 146. MC 149. MC 197. BE 235. Ma
37. TF 155. MC 160. MC 165. MC 170. MC
38. TF 156. MC 161. MC 166. MC 198. BE
152. MC 157. MC 162. MC 167. MC 212. Ex
153. MC 158. MC 163. MC 168. MC 233. CS
154. MC 159. MC 164. MC 169. MC 235. Ma
39. TF 172. MC 175. MC 178. MC 213. Ex 234. CS
40. TF 173. MC 176. MC 179. MC 214. Ex 235. Ma
171. MC 174. MC 177. MC 180. MC 215. Ex 243. SA
41. TF 181. MC 183. MC 185. MC 216. Ex 218. Ex
42. TF 182. MC 184. MC 186. MC 217. Ex
43. TF 187. MC 189. MC 191. MC 220. Ex 222. Ex
44. TF 188. MC 190. MC 219. Ex 221. Ex 223. Ex
Note: TF = True-False C = Completion

MC = Multiple Choice Ex = Exercise
Ma = Matching SA = Short Answer Essay

CHAPTER LEARNING OBJECTIVES
1. Determine how to classify Inventory and inventory quantities. Merchandisers need only
one inventory classification. merchandise inventory to describe the different items that make
up total inventory. Manufacturers, on the other hand, usually classify inventory into three
categories: finished goods work in process and raw materials. To determine inventory
quantities, manufacturers (1) take a physical inventory of goods on hand and (2) determine
the ownership of goods in transit on an consignment.
2. Explain the basis of accounting for inventories and apply the inventory cost flow
methods under a periodic inventory system. The primary basis of accounting for
inventories is cost. Cost includes all expenditures necessary to acquire goods and place
them in a condition ready for sale. Cost of goods available for sale includes (a) cost of
beginning inventory and (b) cost of goods purchased. The inventory cost flow methods are:
specific identification and three assumed cost flow methods—FIFO, LIFO, and average-cost.
3. Explain the financial statement and tax effects of each of the inventory cost flow
assumptions. The cost of goods available for sale may be allocated to cost of goods sold
and ending inventory by specific identification or by a method based on an assumed cost
flow. When prices are rising, the first-in, first-out (FIFO) method results in lower cost of goods
sold and higher net income than the average-cost and the last-in, first-out (LIFO) methods.
The reverse is true when prices are falling. In the balance sheet, FIFO results in an ending
inventory that is closest to current value, whereas the inventory under LIFO is the farthest
from current value. LIFO results in the lowest income taxes (because of lower taxable
income).
4. Explain the lower-of-cost-or-market basis of accounting for inventories. Companies use
the lower-of-cost-or-market (LCM) basis when the current replacement cost (market) is less
than cost. Under LCM, companies recognize the loss in the period in which the price decline
occurs.
5. Compute and interpret the inventory turnover. The inventory turnover is calculated as
cost of goods sold divided by average inventory. It can be converted to average days in
inventory by dividing 365 days by the inventory turnover. A higher turnover or lower average
days in inventory suggests that management is trying to keep inventory levels low relative to
its sales level.
6. Describe the LIFO reserve and explain its importance for comparing results of
different companies. The LIFO reserve represents the difference between ending inventory
using LIFO and ending inventory if FIFO were employed instead. For some companies this
difference can be significant, and ignoring it can lead to inappropriate conclusions when
using the current ratio or inventory turnover.
*7. Apply the inventory cost flow methods to perpetual inventory records. Under FIFO, the
cost of the earliest goods on hand prior to each sale is charged to cost of goods sold. Under
LIFO, the cost of the most recent purchase prior to sale is charged to cost of goods sold.
Under the average-cost method, a new average cost is computed after each purchase.

* 8. Indicate the effects of inventory errors on the financial statements. In the income
statement of the current year: (1) An error in beginning inventory will have a reverse effect on
net income (e.g. overstatement of inventory results in understatement of net income, and
vice versa). (2) An error in ending inventory will have a similar effect on net income (e.g.
overstatement of inventory results in overstatement of net income). If ending inventory errors
are not corrected in the following period, their effect on net income for that period is reversed,
and total net income for the two years will be correct. In the balance sheet: Ending inventory
errors will have the same effect on total assets and total stockholders’ equity and no effect on
liabilities.

TRUE-FALSE STATEMENTS
1. Raw materials inventories are the goods that a manufacturing company has completed
and are ready to be sold to customers.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
2. A manufacturer’s inventory consists of raw materials, work in process, and finished goods.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
3. When the terms of sale are FOB shipping point, legal title to the goods remains with the
seller until the goods reach the buyer.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
4. Goods in transit shipped FOB shipping point should be included in the buyer’s ending
inventory.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
5. Goods that have been purchased FOB destination but are in transit, should be excluded
from a physical count of goods by the buyer.
Reporting
6. If the ownership of merchandise passes to the buyer when the seller ships the
merchandise, the terms are stated as FOB destination.
Reporting
7. Under the periodic inventory system, both the sales amount and the cost of goods sold
amount are recorded when each item of merchandise is sold.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
8. Under a periodic inventory system, the merchandise on hand at the end of the period is
determined by a physical count of the inventory.
Reporting
9. Consigned goods are held for sale by one party although ownership of the goods is
retained by another party.
Reporting
10. Goods held on consignment should be included in the consignor’s ending inventory.
Reporting
11. In accounting for inventory, the assumed flow of costs must match the physical flow of
goods.
Business Economics

12. Inventory methods such as FIFO and LIFO deal more with flow of costs than with flow of
goods.
Business Economics
13. The average cost inventory method relies on a simple average calculation.
Business Economics
14. If prices never changed there would be no need for alternative inventory methods.
Business Economics
15. The specific identification method of costing inventories tracks the actual physical flow of
the goods available for sale.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: Business Economics
16. Management may choose any inventory costing method it desires as long as the cost flow
assumption chosen is consistent with the physical movement of goods in the company.
17. The First-in, First-out (FIFO) inventory method results in an ending inventory valued at the
most recent cost.
Reporting
18. The expense recognition principle requires that the cost of goods sold be matched against
the ending merchandise inventory in order to determine income.
Reporting
19. The specific identification method of inventory valuation is desirable when a company
sells a large number of low-unit cost items.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
20. If a company has no beginning inventory and the unit cost of inventory items does not
change during the year, the value assigned to the ending inventory will be the same under
LIFO and average cost flow assumptions.
Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
21. If the unit price of inventory is increasing during a period, a company using the LIFO
inventory method will show less gross profit for the period, than if it had used the FIFO
inventory method.
Reporting
22. If a company has no beginning inventory and the unit price of inventory is increasing
during a period, the cost of goods available for sale during the period will be the same
under the LIFO and FIFO inventory methods.
Reporting

23. A company may use more than one inventory cost flow method at the same time.
Reporting
24. Use of the LIFO inventory valuation method enables a company to report paper or
phantom profits.
Reporting
25. The LIFO inventory method agrees with the actual physical movement of goods in most
businesses.
Reporting
26. In periods of falling prices, LIFO will result in a higher ending inventory valuation than
FIFO.
27. In periods of falling prices, FIFO will result in a larger net income than the LIFO method.
28. If a company changes its inventory valuation method, the effect of the change on net
income should be disclosed in the financial statements.
Reporting
29. A major criticism of the FIFO inventory method is that it magnifies the effects of the
business cycle on business income.
Reporting
30. The LIFO method is rarely used because most companies do not sell the last goods they
purchase first.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,
31. The LIFO inventory method tends to smooth out the peaks and valleys of a business
cycle.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,
32. Computers has made the periodic inventory system more popular and easier to apply.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA BB: Leverage Technology, AICPA FN: Leverage Technology, AICPA PC:
None, IMA: Business Applications
33. When the market value of inventory is lower than its cost, the inventory is written down to
its market value.
34. The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost
that is in excess of its market value.
Reporting

35. Accountants believe that the write down from cost to market should not be made in the
period in which the price decline occurs.
36. Under the LCM basis, market is defined as selling price, not current replacement cost.
Reporting
37. The inventory turnover is calculated as cost of goods sold divided by ending inventory.
Business Economics
38. An inventory turnover that is too high may indicate that the company is losing sales
opportunities because of inventory shortages.
Business Economics
39. The LIFO reserve is the difference between ending inventory using LIFO and ending
inventory if FIFO were used instead.
Reporting
40. The FIFO reserve is a required disclosure for companies that use FIFO.
Reporting
*41. When the average cost method is applied in a perpetual inventory system, the sale of
goods will change the unit cost that remains in inventory.
Reporting
*42. When the average cost method is applied to a perpetual inventory system, a moving
average cost per unit is computed with each purchase.
Reporting
*43. An error in the ending inventory of the current period will have a similar effect on net
income of the next accounting period.
Reporting
*44. An error that overstates the ending inventory will also cause net income for the period to
be overstated.
Reporting

Answers to True-False Statements

1. F 9. T 17. T 25. F 33. T *41. F
2. T 10. T 18. F 26. T 34. T *42. T
3. F 11. F 19. F 27. F 35. F *43. F
4. T 12. T 20. T 28. T 36. F *44. T
5. T 13. F 21. T 29. T 37. F
6. F 14. T 22. T 30. F 38. T
7. F 15. T 23. T 31. T 39. T
8. T 16. F 24. F 32. F 40. F
MULTIPLE CHOICE QUESTIONS

45. Manufactured inventory that has begun the production process but is not yet completed is
a. work in process.
b. raw materials.
c. merchandise inventory.
d. finished goods.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
46. The factor which determines whether or not goods should be included in a physical count
of inventory is
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase price has been paid.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
47. If goods in transit are shipped FOB destination

a. the seller has legal title to the goods until they are delivered.
b. the buyer has legal title to the goods until they are delivered.
c. the transportation company has legal title to the goods while the goods are in transit.
d. no one has legal title to the goods until they are delivered.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
48. Independent internal verification of the physical inventory process occurs when
a. the employee is required to count all items twice for sake of verification.
b. the items counted are compared to the inventory account balance.
c. a second employee counts the inventory and compares the result to the count made
by the first employee.
d. all prenumbered inventory tags are accounted for.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,

49. An employee assigned to counting computer monitors in boxes should

a. estimate the number if there is a large quantity to be counted.
b. read each box and rely on the box description for the contents.
c. determine that the box contains a monitor.
d. rely on the warehouse records of the number of computer monitors.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: Internal Controls
50. After the physical inventory is completed,

a. quantities are listed on inventory summary sheets.
b. quantities are entered into various general ledger inventory accounts.
c. the accuracy of the inventory summary sheets is checked by the person listing the
quantities on the sheets.
d. unit costs are determined by dividing the quantities on the summary sheets by the
total inventory costs.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: Internal Controls
51. When is a physical inventory usually taken?

a. When goods are not being sold or received.
b. When the company has its greatest amount of inventory.
c. At the end of the company’s fiscal year.
d. When the company has its greatest amount of inventory and at the end of the
company's fiscal year.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,
52. Which of the following should not be included in the physical inventory of a company?
a. Goods held on consignment from another company.
b. Goods in transit from another company shipped FOB shipping point.
c. Goods shipped on consignment to another company.
d. All of these answer choices should be included.
Reporting
53. Tidwell Company's goods in transit at December 31 include sales made

(1) FOB destination
(2) FOB shipping point
and purchases made
(3) FOB destination
(4) FOB shipping point.
Which items should be included in Tidwell's inventory at December 31?
a. Sales made FOB shipping point and purchase made FOB destination
b. (1) and (4)
c. (1) and (3)
d. (2) and (4)
Reporting

54. The term "FOB" denotes

a. free on board.
b. freight on board.
c. free only (to) buyer.
d. freight charge on buyer.
Reporting
55. Goods held on consignment are

a. never owned by the consignee.
b. included in the consignee’s ending inventory.
c. kept for sale on the premises of the consignor.
d. included as part of no one’s ending inventory.
Reporting
56. Many companies use just-in-time inventory methods. Which of the following is not an
advantage of this method?
a. It limits the risk of having obsolete items in inventory.
b. Companies may not have quantities to meet customer demand.
c. It lowers inventory levels and costs.
d. Companies can respond to individual customer requests.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,
57. When a perpetual inventory system is used, which of the following is a purpose of taking a
physical inventory?
a. To check the accuracy of the perpetual inventory records
b. To determine cost of goods sold for the accounting period
c. To compute inventory ratios
d. All are a purpose of taking a physical inventory when a perpetual inventory system is
used.
Reporting
58. Which statement is false?

a. Taking a physical inventory involves actually counting, weighing, or measuring each
kind of inventory on hand.
b. No matter whether a periodic or perpetual inventory system is used, all companies
need to determine inventory quantities at the end of each accounting period.
c. An inventory count is generally more accurate when goods are not being sold or
received during the counting.
d. Companies that use a perpetual inventory system must take a physical inventory to
determine inventory on hand on the balance sheet date and to determine cost of
goods sold for the accounting period.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting

59. Reeves Company is taking a physical inventory on March 31, the last day of its fiscal year.
Which of the following must be included in this inventory count?
a. Goods in transit to Reeves, FOB destination
b. Goods that Reeves is holding on consignment for Parker Company
c. Goods in transit that Reeves has sold to Smith Company, FOB shipping point
d. Goods that Reeves is holding in inventory on March 31 for which the related Accounts
Payable is 15 days past due
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
60. At December 31, 2014 Mohling Company’s inventory records indicated a balance of
$602,000. Upon further investigation it was determined that this amount included the
following:
• $112,000 in inventory purchases made by Mohling shipped from the seller 12/27/14
terms FOB destination, but not due to be received until January 2nd
• $74,000 in goods sold by Mohling with terms FOB destination on December 27th. The
goods are not expected to reach their destination until January 6th.
• $6,000 of goods received on consignment from Dollywood Company
What is Mohling’s correct ending inventory balance at December 31, 2014?

a. $490,000
b. $596,000
c. $410,000
d. $484,000
Ans: D, LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution: $602,000 − $112,000 − $6,000 = $484,000
61. At December 31, 2014 Howell Company’s inventory records indicated a balance of
$858,000. Upon further investigation it was determined that this amount included the
following:
• $168,000 in inventory purchases made by Howell shipped from the seller 12/27/14
terms FOB destination, but not due to be received until January 2nd
• $111,000 in goods sold by Howell with terms FOB destination on December 27th. The
goods are not expected to reach their destination until January 6th.
• $9,000 of goods received on consignment from Westwood Company
What is Howell’s correct ending inventory balance at December 31, 2014?
a. $690,000
b. $849,000
c. $570,000
d. $681,000
Ans: D, LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:
Problem Solving, IMA: Reporting
Solution: $858,000 − $168,000 − $9,000 = $681,000
62. Manufacturers usually classify inventory into all the following general categories except:
a. work in process
b. finished goods
c. merchandise inventory
d. raw materials
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting

63. For companies that use a perpetual inventory system, all of the following are purposes for
taking a physical inventory except to:
a. check the accuracy of the records.
b. determine the amount of wasted raw materials.
c. determine losses due to employee theft.
d. determine ownership of the goods.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
64. Inventory costing methods place primary reliance on assumptions about the flow of
a. goods.
b. costs.
c. resale prices.
d. values.
Reporting
65. The LIFO inventory method assumes that the cost of the latest units purchased are
a. the last to be allocated to cost of goods sold.
b. the first to be allocated to ending inventory.
c. the first to be allocated to cost of goods sold.
d. not allocated to cost of goods sold or ending inventory.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA:
Reporting
66. Alpha First Company just began business and made the following four inventory
purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are 210 units on
hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $1,092
b. $1,131
c. $1,386
d. $1,368
Ans: B, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:
Solution: $780 + [($1,170  200)  (210 − 150)] = $1,131

67. Baker Bakery Company just began business and made the following four inventory
purchases in June:
June 10 200 units 1,170
June 15 200 units 1,260
$4,200
hand. Using the FIFO inventory method, the amount allocated to ending inventory for
June is
a. $1,092
b. $1,131
c. $1,368
d. $1,386
Ans: C, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:
Solution: $990 + [($1,260  200)  (210 − 150)] = $1,368
68. Charlene Cosmetics Company just began business and made the following four inventory
purchases in June:
June 10 200 units 1,170
June 15 200 units 1,260
$4,200
hand. Using the average cost method, the amount allocated to the ending inventory on
June 30 is
a. $1,229.
b. $1,368.
c. $1,323.
d. $1,260.
Solution: ($4,200  700)  210 = $1,260
69. Echo Sound Company just began business and made the following four inventory
purchases in June:
June 10 200 units 1,170
June 15 200 units 1,260
$4,200
hand. The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the average cost method.
d. not determinable.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:

70. Atom Company just began business and made the following four inventory purchases in
June:
June 10 200 units 1,120
June 15 200 units 1,140
$3,970
hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $1,105.
b. $1,100.
c. $1,170.
d. $1,180.
Ans: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:
Solution: $825 + [($1,120  200)  (200 − 150)] = $1,105
71. Quark Inc. just began business and made the following four inventory purchases in June:
June 10 200 units 1,120
June 15 200 units 1,140
$3,970
hand. Using the FIFO inventory method, the amount allocated to ending inventory for
June is
a. $1,105.
b. $1,100.
c. $1,170.
d. $1,180.
Solution: $885 + [($1,140  200)  (200 − 150)] = $1,170
72. A company just began business and made the following four inventory purchases in June:
June 10 200 units 1,120
June 15 200 units 1,140
$3,970
hand. Using the average-cost method, the amount allocated to the ending inventory on
June 30 is
a. $1,134.
b. $1,180.
c. $1,100.
d. $1,120.
Solution: [($3,970  700)  200] = $1,134

73. A company purchased inventory as follows:

200 units at $5.00
300 units at $5.50
The average unit cost for inventory is
a. $5.00.
b. $5.25.
c. $5.30.
d. $5.50.
Ans: C, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Business Economics
Solution: [($200  $5.00) + (300  $5.50)]  (200 + 300) = $5.30
74. Noise Makers Inc has the following inventory data:

July 1 Beginning inventory 20 units at $19 $ 380
7 Purchases 70 units at $20 1,400
22 Purchases 10 units at $22 220
$2,000
A physical count of merchandise inventory on July 30 reveals that there are 32 units on
hand. Using the average cost method, the value of ending inventory is
a. $620.
b. $640.
c. $651.
d. $660.
Solution: [($2,000  100)  32] = $640
75. Olympus Climbers Company has the following inventory data:

$2,000
hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for
July is
a. $620.
b. $660.
c. $1,340.
d. $1,380.
Solution: $380 + [(100 − 32 − 20)  $20] = $1,340

76. Pop-up Party Favors Inc has the following inventory data:
$2,000
hand. Using the FIFO inventory method, the amount allocated to ending inventory for July
is
a. $620.
b. $660.
c. $640.
d. $704.
Solution: $220 + [(32 − 10)  $20] = $660
77. Quiet Phones Company has the following inventory data:

$2,000
hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for
July is
a. $620.
b. $660.
c. $1,340.
d. $1,380.
Solution: $220 + [(100 − 32 − 10)  $20] = $1,380
78. Radical Radials Company has the following inventory data:

$2,000
hand. Using the LIFO inventory method, the amount allocated to ending inventory for July
is
a. $620
b. $608
c. $640
d. $704.
Solution: $380 + [(32 − 20)  $20] = $620

79. Orange-Aide Company has the following inventory data:

$2,090
hand. Using the average cost method, the value of ending inventory is
a. $535
b. $523
c $525
d $550
Solution: [($2,090  100)  $25] = $523
80. Peach Pink Inc. has the following inventory data:

$2,090
hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for
July is
a. $1,555
b. $1,585
c. $1,505.
d. $1,540.
Solution: $400 + [(100 − 25 − 20)  $21] = $1,555
81. Grape Gratuities Company has the following inventory data:

$2,090
hand. Using the FIFO inventory method, the amount allocated to ending inventory for July
is
a. $585.
b. $505.
c. $535.
d. $550.
Solution: $220 + [(25 − 10)  $21] = $535

82. Apple-A-Day Company has the following inventory data:

$2,090
hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for
July is
a. $1,585
b. $1,540
c. $1,555.
d. $1,540.
Solution: $220 + [(100 − 25 − 10)  $21] = $1,585
83. Bonkers Bananas has the following inventory data:

$2,090
hand. Using the LIFO inventory method, the amount allocated to ending inventory for July
is
a. $550
b. $505
c. $535
d. $500.
Solution: $400 + [(25 − 20)  $21] = $505
84. Which of the following is an inventory costing method?

a. Periodic
b. Specific identification
c. Perpetual
d. Lower of cost or market
Reporting
85. Inventory costing methods place primary reliance on assumptions about the flow of
a. good.
b. costs.
c. resale prices.
d. values.
Reporting

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© Wide World Photos
PARIS, FRANCE—A SALUTATION FROM M. BLERIOT

One of the first lessons was the “three sixty”—so named because its
completion required a total change in direction of three hundred and
sixty degrees. The cadet would take-off and climb to eight hundred
or a thousand feet. The higher he went the less difficulty he had in
properly completing the maneuver. Then he would fly into the wind
directly over a landing “T” in the center of the field. As the plane
passed over the “T” he throttled his motor and made a quick bank
either to the right or left depending upon his preliminary instructions.
The object was to make a complete circle and land without using the
motor, bringing the plane to a stop beside the “T.”
“One eightys” were the next requirement and they were probably the
cause of more crashes than any other maneuver. They were started
in the same manner as the “three sixty,” but with the plane heading
down wind and at only five hundred feet altitude. They required quick
manipulation of controls and a steep bank into the field just before
landing.
Next came acrobatics. Loops, spins, barrel rolls, Jenny Immelmans,
figure-eights, wing-overs, and reversements, every one of which
each cadet had to master thoroughly during his course at Brooks.
After the first few weeks had passed we became more or less
accustomed to life in the cadet detachment, and found a little time
now and then to look around the country and even spend a night in
San Antonio. Our examinations were purposely given on Saturday
morning so that we would not spend the week-end studying. It was
well known that too much studying affected a cadet’s flying and the
school schedule was arranged with that in mind.
Our day began with first call at five forty-five and flying started about
seven. At eleven we returned to the barracks and from one to five
o’clock was devoted to ground school. After supper we could study
until bed check at ten o’clock. Plenty of sleep is a necessity for the
student pilot, and that fact is recognized nowhere more than in the
army schools. Every week night at ten p.m. the cadet officer of the
day checks each bunk and turns in the names of any vacant ones.
Some of our academic subjects, such as aerodynamics and machine
guns required nearly all of our time after school because of
approaching examinations, whereas others were comparatively easy
and the classroom instruction was sufficient in itself. When we were
not studying there were always plenty of other things to attract our
attention. If one of the boys left the post, as sometimes happened,
he often returned to find his belongings heaped together in the
middle of the floor with the army cots piled on top. Several times
some cadet returned at midnight to find his equipment carefully
transferred and set up on the roof or in the mess-hall. Another one of
the favorite sports was to put a hose in the bed of a sound sleeper at
two a.m. or, if he slept with his mouth open, to fill it from a tube of
shaving cream or hair grease.
One of the fellows found a scorpion in his bed and each night for a
week thereafter looked through the bedding for another, but finally
became careless and forgot to look. His nearest neighbor promptly
placed a number of grasshoppers between the sheets near the foot
of the bed.
Another evening it was reported that three pole-cats had crawled into
a culvert in front of the barracks. For an hour we attempted to smoke
them out. When that failed the fire department was called and we
washed them out. The smoke had evidently taken effect, however,
and soon three dead pole-cats came floating out from the culvert.
The next problem was how to make use of such possibilities. That
question was worthy of a most careful consideration. After a survey
of the barracks we found that our cadet first sergeant was in San
Antonio. There was scarcely one of us who did not have some small
score to settle with him so we took one of the pillows from his bed
and after removing the pillow case, placed it behind one of the pole-
cats. The desired results were then obtained by stepping on the back
end of the cat, and after cautiously inserting the pillow back in its
case, we replaced it on the first sergeant’s bunk. The results were far
above expectation. One by one the occupants of that bay arose and
carried their cots outside, until by midnight, when our sergeant
returned, there were only a half dozen bunks left including his own.
By that time the odor had permeated through the other bedding and
he was unable to locate the pillow as being the primary cause of
offense. Any night for nearly two weeks thereafter our first sergeant
and his cot might be located out behind the barracks, and the
inspection of quarters, which was to have been held the following
morning, was postponed indefinitely.
During our last six weeks at Brooks, life became much less difficult.
Most of us who had survived the check pilots and “Benzine Board”
were reasonably sure of graduating and although our studies were
just as exacting as ever, we were able to absorb them much more
easily. Also we had passed our primary flying tests and were making
cross country flights in T.W.3’s; and learning formation flying in
Voughts. And finally we were given a few hours in De Havilands in
preparation for the advanced training at Kelly.
We were paired up for the cross country flights. One of us flew on
the way out, while the second acted as observer. On the return flight
we traded about, so that each achieved an equal amount of
experience, both as an observer and as a pilot. These trips were
usually laid out in a triangular course, and included landing at each
corner of the triangle.
While on one of our first trips from the home airdrome, we landed in
the designated field alongside of a road just as a load of
watermelons was passing by, so we carried several of them back to
the Detachment in our plane.
Always there was some new experience, always something
interesting going on to make the time spent in Brooks and Kelly one
of the banner years in a pilot’s life. The training is rigid and difficult
but there is none better. A cadet must be willing to forget all other
interest in life when he enters the Texas flying schools and he must
enter with the intention of devoting every effort and all of the energy
during the next twelve months towards a single goal. But when he
receives the wings at Kelly a year later he has the satisfaction of
knowing that he has graduated from one of the world’s finest flying
schools.
VI
RECEIVING A PILOT’S WINGS
IN September, 1924, we were transferred to Kelly. The time we had

looked forward to for half a year had arrived. We were through the
period of just learning how to fly and were entering a new
experience; that of learning how to make use of our flying ability in
actual service. We would no longer be floating around the airdrome
in machines whose only purpose was to stand up under the hard
knocks of inexperienced pilots; but we were going to fly planes which
had an actual military value in warfare.
PARIS, FRANCE—PAUL PAINLEVÉ, FRENCH MINISTER OF

WAR, EXTENDS HIS WELCOME. ON THE RIGHT IS
AMBASSADOR MYRON T. HERRICK
PARIS, FRANCE—WITH M. DOUMERQUE AND AMBASSADOR

HERRICK
We were old cadets and felt the importance of our experience. We

were no longer treated as rookies but as potential officers. Before
leaving Brooks we had conformed with cadet traditions and allowed
groups of the new class to gather around us while we gravely spoke
of examinations, check pilots, “Benzine Boards,” and “washouts.” We
thoroughly enjoyed the awe inspired by our seventy-five hours of
flying experience.
At Kelly our difficulties set in with renewed vigor. The De Havilands
did not maneuver like the training Jennies, and we were required to
fly as we had never flown before. If a cadet was not able to handle
his ship in a maneuver which was at least equal to the standard, he
was usually heading towards home within a week.
We were allowed a few days to become accustomed to flying the
new type of plane, then an instructor would go up with us to see if
our progress had been satisfactory. If so we were sent to the next
stage; if not we went up with a check pilot.
From landings we went to the “eight” stage, where were assigned
two landmarks such as a tree and a haystack several hundred feet
apart, and required to do figure-eights around them. Then came the
spot landing stage, when we throttled our engine at about a
thousand feet and were required to land in a large white circle
without using our motor. On this stage we were graded on our take-
off, climb, approach, landing, roll, distance from mark, and method of
handling the ship. In fact at Kelly we were constantly under
observation and our only method of relaxation while flying was when
the sky was cloudy and we could get above the clouds.
On one occasion we were flying with a low ceiling and the visibility
was not very good. In fact it was an ideal day to do the things we
were not supposed to. I was hedgehopping along over the country
when I saw another D.H. playing around on my right. I flew over, and
after chasing each other around for a while we proceeded to do
chandelles, vertical banks, wing-overs, and everything else we could
think of; all within a few feet of the ground as the clouds themselves
were only about three hundred feet high. At last I decided to go up
close to the other plane for a little low formation flying, but as I
approached I saw that there were two men in the ship and that I had
been breaking every rule ever established about low flying with an
instructor watching me from another ship. I left that locality with wide
open motor and for several days expected to be called on the carpet
before the commanding officer on a washout offense. That instructor
must have been a good sport, however, because I never heard from
him and never was able to find out who he was.
On another occasion, near the end of my course, I came very near
being washed out for something I knew nothing about. I had been
practicing landings in an S.E.-5 on one corner of Kelly Field. When
my time had expired, I landed on the pursuit stage, taxied up to the
line, and turned the ship over to the mechanics. That afternoon I was
called from class and ordered to report to the operations officer;
whereupon he informed me that my flying days were over and that
as I knew why, there was no use in explaining further. I was then
ordered to report back to my studies.
It came out of a clear sky. I knew of a number of offenses I had
committed but none of them at that time. I had actually no idea of
what the operations officer was talking about.
When school was over I returned to the operations hut and
requested an account of the alleged offense. It appeared that the
propeller on my S.E.-5 was cracked, and the spreader board broken
on the landing gear. The crew chief had reported this together with a
statement that there were corn stalks hanging on the landing gear,
and as there was no corn growing on Kelly Field, that was a sure
sign that I had landed away from the airdrome without reporting the
fact. A washout offense. We drove to the pursuit stage and found
conditions exactly as stated, except that the corn stalks turned out to
be weeds, and it was decided that the damage had been caused by
a stake left standing in the corner of Kelly Field where I had been
landing, although I had not felt the ship strike anything. The cadet
who flew the plane earlier in the morning was using the same part of
the field and said that he felt it strike a bump on one of his take-offs
but did not believe any damage had been done. Who was flying the
ship made little difference, however, because as long as he had not
landed away from the airdrome without authority, the slight damage
was of no consequence. I had come very close to the “Benzine
Board” for an offense of which I knew nothing, but it was probably
only the open-mindedness and sense of fair play of the operations
officer that kept me from being washed out as a result.
PARIS, FRANCE—CROWDS AT THE CITY HALL AT THE

OFFICIAL RECEPTION
PARIS, FRANCE—GUESTS AT THE LUNCHEON OF M. BLERIOT

LEFT TO RIGHT: PAUL PAINLEVÉ, CHARLES LINDBERGH, M.
BLERIOT, AMBASSADOR HERRICK
One day during the beginning of our term at Kelly, someone decided
that the cadets should stand reveille. How it came about or who
caused the decision was never known by the detachment, but there
was a strong rumor circulated to the effect that our beloved Cadet
Sergeant had not forgotten the episode of the pole-cats. It was an
unheard of thing for the cadets of Kelly to stand formations. We had
graduated from that when we left Brooks, and the thought of
continuing it in our advanced status was, we concluded,
degenerating to the morale of the detachment.
Consequently, when our first sergeant himself delighted us with
verbal visions of being tumbled out of bed at first call if we were not
up at the blast of his whistle, we decided that if it were in the
combined power of the detachment, the first call should not sound
the next morning. We could not disobey an order; army training
banishes even the remotest thought of that; but we might prevent
that order from being given. The Cadet Captain and first sergeant
were assigned to a private room together. The rest of us were given
cots in the barracks. While supper was in progress that night the
hands on the sergeant’s alarm clock were so manipulated that the
alarm would sound exactly one hour after the time set. At two o’clock
the next morning a padlock was placed on the hasp outside of his
door, and when first call blew a few hours later the cadet detachment
slept soundly on.
From spot landings we passed to hurdles. Hurdles require the ship to
be brought down without assistance from the engine, and after just
passing over a line stretched about eight feet above the ground, to
be landed as close as possible to the hurdle. This gave us excellent
practice for landing over a fence in a small field.
One of the traditions at Kelly was that anyone knocking down the
hurdle must treat the rest to a case of refreshments. It often
happened that a pilot was so intent on getting over the hurdle string
that he did not notice that his plane was in a stall, and about the time
he was over the hurdle the bottom would fall out from under him and
his plane would pancake into the ground. Almost every class had
one or two minor crack-ups as a result of stalling over the hurdle
string.
The De Havilands were not considered safe for hard stunting and as
a result we were only allowed to do wing-overs and split air turns.
Diving in excess of one hundred and fifty miles per hour was also
forbidden. Consequently only air work allowing us to be thoroughly
accustomed to the plane was included in the flying schedule before
our formation training began.
The strange field landing training was one of the most interesting
parts of our schooling. An instructor would lead a number of planes
and land in some field we had never seen before. Then each cadet
was required to land and take-off after the instructor. Some of the
fields were small and full of obstructions. Yet we had comparatively
few even minor crack-ups. Later each cadet was given an
opportunity to lead the rest and pick out a field for them to land in
while the instructor trailed.
At Kelly we were given more and longer cross country trips than at
Brooks. One of the most important parts of flying training is cross
country experience. We made flights to Corpus Christi, Galveston,
Laredo and a number of other places.
Each class spent about two weeks on a gunnery expedition at
Ellington Field between Houston and Galveston. Ellington Field was
one of the few double fields built during the war, but was later
abandoned and, except for a National Guard squadron, was entirely
deserted.
We set up our mess in the clubhouse and made the old building
which had served as officers’ quarters as comfortable as possible.
This was in winter and the weather was cold, even in Texas, unusual
though it might have been. There were no stoves available so we
contrived all sorts of makeshifts to hold a little fire in. If nothing better
was obtainable, we shovelled several inches of earth on the floor
and devised a hood of some kind leading through a few lengths of tin
pipe to the chimney. Of course these fires could not be left
unguarded, so it was necessary to put them out in the morning to be
rekindled at the close of operations for the day.
Our gunnery work was divided into three parts: ground targets,
shadow targets and tow targets. The ground targets were large
sheets of paper similar to those used on a rifle range and were set
up at an angle on the ground. We shot at these with both the
Browning and Lewis machine guns.
The Browning guns on a De Haviland were mounted rigidly in front of
the pilot and were synchronized with the engine to shoot between
the blades of the propeller. They were capable of firing up to twelve
hundred rounds a minute, depending on the motor R.P.M. when they
were fired.
Several of us would form a large circle with our planes, and starting
our dive from about one thousand feet, would fire short bursts into
the target on the ground. After completing our bursts we would zoom
back up into the circle while the next ship started its dive. Each plane
had its individual target.
After emptying the Browning guns we gave our observers a chance
with their Lewises by circling low around the targets. On the next
flight the pilot and observer traded places.
The Lewis gun is mounted on a turret on the rear cockpit. Two guns
were usually used together and they could be pointed in any
direction.
After a few days on ground targets we were sent out over Trinity Bay
for shadow targets. One plane is flown fairly high over the water
while another fires at its shadow. The splashes from the bullets are
easily seen and the accuracy of marksmanship very apparent.
The tow targets are by far the most difficult of the three varieties, and
require skillful maneuvering and excellent marksmanship. They
consist of a cloth sleeve similar to a wind sock which is towed a few
hundred feet behind a De Haviland flying at sixty or sixty-five miles
an hour.
When the forward or Browning guns were used, the attacking ship
approached the tow target head on, firing one or two short bursts as
it passed. In this way there was no danger of the occupants of the
towing plane being struck by a wild shot. The De Havilands were
much too large to use the forward guns effectively on a tow target.
Any accurate shooting required the quick maneuverability of a
pursuit ship.
The Lewis guns were used while flying parallel with the target and
were very effective. When we were close enough we could often see
the tracers pass directly through the cloth sleeve.
After returning from Ellington Field we were given a few hours in
each of the various types of service airplanes. The M.B.-3 and the
S.E.-5 scouts; the Martin Bombers with their twin Liberty engines;
the T.W.-5 two-place transition planes; and the little Sperry
messengers. In this way we obtained experience in each branch:
pursuit, attack, observation and bombardment. Later we were given
our choice of which we desired to specialize in. If our wishes
corresponded with the judgment of the instructors we were assigned
to that branch.
Together with three other cadets and four student officers, I was sent
to the pursuit stage, where we spent the few remaining weeks of our
course, piloting the S.E.-5 and the M.B.-3 single seaters.
Pursuit combines a little of every branch of the air corps. In addition
to formation combat, dog fighting, and ground strafing, the pursuit
pilot is often called upon to make observations and do light bombing.
A great deal of our time was devoted to formation flying. Air combat
of the future will probably often be between large formations rather
than individual pilots, and it is accordingly of utmost importance for
the pursuit pilot to hold his place in formation instinctively, so that his
entire attention can be devoted to the enemy rather than to his own
formation.
We often maneuvered our flights while the individual planes were
less than ten feet apart and it was not unusual to dive vertically for
several thousand feet in a fairly close formation.
We learned the use of Lufberry circles, cross over turns, and other
formation tactics. Our formations were often tight, it is true, but
strange as it may seem, very few accidents occur from too close
flying. A pilot is constantly alert when his plane is only a short
distance from the one in front and nothing is allowed to distract his
attention. On the other hand, when there is quite some distance
separating them he is often more engrossed in lighting a cigarette or
watching some object on the ground than in his own formation.
In pursuit flying we came to have great confidence in our parachutes.
The planes we were flying were kept in excellent condition and none
ever failed, notwithstanding the fact that we placed them under every
conceivable strain imaginable. But the knowledge that we did not
have to concern ourselves about whether they did fall apart or not
was an invaluable factor in building up our morale. Our formations
were tighter, the combats faster, and our flying better as a result.
We had a number of close calls but considering the amount of flying
we had done, and that all of it was military flying, which cannot be
ever compared to commercial traffic as far as safety is concerned,
our accidents were remarkably few and none resulted seriously.
No one knows of the risk he takes better than the pursuit pilot and no
one is less concerned about it. Every move, although at lightning
speed, is made with a coolness born of experience and love of flying.
The army Air Corps is built up of men who fly for the love of flying.
Their only mission in life is to build up the finest air corps in the
world, and their greatest desire is to be given the opportunity to do
so without restriction. If an officer is lost in duty he would be the last
one to wish for resulting restrictions on his comrades.
A week of our pursuit training was spent on a gunnery expedition at
Galveston. We flew there from Kelly Field in M.B.3A. machines and
fired on tow targets exclusively. Our field was close to the Gulf, and
when the day’s operations had been completed we were free to go
about as we chose. Consequently a large part of the evening was
spent along the rocky beach.
On the night of our last day at Galveston several of us were holding
a contest to decide which could reach the most distant rock between
the breakers, before the next wave rolled in. One of the fellows was
outstanding in his accomplishments. In fact he was so dextrous that
none of us could compete, so we were all loud in our praises and
unanimously agreed that there was not a rock in the gulf too obscure
for him. There was, however, a rock a number of feet beyond the
most distant point any of us had attained, which was visible only for
an instant as the last breaker receded and before the next arrived.
Even this was possible, we confidently assured him.
He watched that rock intently for several minutes; then bolstered up
by our praise and his own confidence, he stood poised and ready. At
the proper moment he nimbly leaped from boulder to boulder after
the retreating surf but just before the final rock was touched a large
wave towered above it. Too late! The chance of retreat had never
been considered and its opportunity had passed. With do or die
determination he leaped onto the boulder and into the breaking
wave. This incident would not have been serious or its
consequences important had we been able to carry any extra
equipment in our pursuit planes, but as it was, extra clothing was a
scarce article, and when we took off for San Antonio and Kelly the
following morning, it was necessary for him to send his wet clothes
back in a De Haviland and make his flight in a bearskin flying suit
without insulation against the bearskin.
In warm weather these suits acquired an odor similar to that of a
goat which has been in the barn all winter and the fur itself was far
from comfortable. On the trip back a piston froze in the engine. For
two days the cadet was alternately roasting in the southern sun and
freezing in the Texas nights while he guarded his ship and waited for
a new engine.
After our return from Galveston while we were practicing formation
attack on two seaters, I experienced one of the incidents of the
military pilot’s life. I made my first emergency parachute jump. When
an Army plane crashes, the pilot is required to write a detailed report
of the crash. My account was as follows:
“A nine-ship SE-5 formation, commanded by Lieut. Blackburn, was
attacking a DH4B, flown by Lieut. Maughan at about a 5,000 foot
altitude and several hundred feet above the clouds. I was flying on
the left of the top unit, Lieut. McAllister on my right, and Cadet Love
leading. When we nosed down on the DH, I attacked from the left
and Lieut. McAllister from the right. After Cadet Love pulled up, I
continued to dive on the DH for a short time before pulling up to the
left. I saw no other ship nearby. I passed above the DH and a
moment later felt a slight jolt followed by a crash. My head was
thrown forward against the cowling and my plane seemed to turn
around and hang nearly motionless for an instant. I closed the
throttle and saw an SE-5 with Lieut. McAllister in the cockpit, a few
feet on my left. He was apparently unhurt and getting ready to jump.
“Our ships were locked together with the fuselages approximately
parallel. My right wing was damaged and had folded back slightly,
covering the forward right-hand corner of the cockpit. Then the ships
started to mill around and the wires began whistling. The right wing
commenced vibrating and striking my head at the bottom of each
oscillation. I removed the rubber band safetying the belt, unbuckled
it, climbed out past the trailing edge of the damaged wing, and with
my feet on the cowling on the right side of the cockpit, which was
then in a nearly vertical position, I jumped backwards as far from the
ship as possible. I had no difficulty in locating the pull-ring and
experienced no sensation of falling. The wreckage was falling nearly
straight down and for some time I fell in line with its path and only
slightly to one side. Fearing the wreckage might fall on me, I did not
pull the rip cord until I dropped several hundred feet and into the
clouds. During this time I had turned one-half revolution and was
falling flat and face downward. The parachute functioned perfectly;
almost as soon as I pulled the rip cord the riser jerked on my
shoulders, the leg straps tightened, my head went down, and the
chute fully opened.
“I saw Lieut. McAllister floating above me and the wrecked ships
pass about 100 yards to one side, continuing to spin to the right and
leaving a trail of lighter fragments along their path. I watched them
until, still locked together, they crashed in the mesquite about 2000
feet below and burst into flames several seconds after impact.
PARIS, FRANCE—WITH AMBASSADOR HERRICK ON THE

STEPS OF THE EMBASSY, JUST AFTER ARRIVAL IN PARIS
LONDON, ENGLAND—THE WELCOME AT CROYDEN FIELD

WHERE A MILLING MOB OF NEARLY HALF A MILLION HAD
GATHERED
“Next I turned my attention to locating a landing place. I was over

mesquite and drifting in the general direction of a plowed field which
I reached by slipping the chute. Shortly before striking the ground, I
was drifting backwards, but was able to swing around in the harness
just as I landed on the side of a ditch less than 100 feet from the
edge of the mesquite. Although the impact of landing was too great
for me to remain standing, I was not injured in any way. The
parachute was still held open by the wind and did not collapse until I
pulled in one group of shroud fines.

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SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE

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Note: TF = True-False C = Completion

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CHAPTER LEARNING OBJECTIVES

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Answers to True-False Statements

MULTIPLE CHOICE QUESTIONS

47. If goods in transit are shipped FOB destination

FOR INSTRUCTOR USE ONLY

49. An employee assigned to counting computer monitors in boxes should

50. After the physical inventory is completed,

51. When is a physical inventory usually taken?

53. Tidwell Company's goods in transit at December 31 include sales made

FOR INSTRUCTOR USE ONLY

54. The term "FOB" denotes

55. Goods held on consignment are

58. Which statement is false?

FOR INSTRUCTOR USE ONLY

What is Mohling’s correct ending inventory balance at December 31, 2014?

Solution: $602,000 − $112,000 − $6,000 = $484,000

Solution: $858,000 − $168,000 − $9,000 = $681,000

FOR INSTRUCTOR USE ONLY

Solution: $780 + [($1,170  200)  (210 − 150)] = $1,131

FOR INSTRUCTOR USE ONLY

Solution: $990 + [($1,260  200)  (210 − 150)] = $1,368

Solution: ($4,200  700)  210 = $1,260

FOR INSTRUCTOR USE ONLY

Solution: $825 + [($1,120  200)  (200 − 150)] = $1,105

Solution: $885 + [($1,140  200)  (200 − 150)] = $1,170

Solution: [($3,970  700)  200] = $1,134

FOR INSTRUCTOR USE ONLY

73. A company purchased inventory as follows:

Solution: [($200  $5.00) + (300  $5.50)]  (200 + 300) = $5.30

74. Noise Makers Inc has the following inventory data:

Solution: [($2,000  100)  32] = $640

75. Olympus Climbers Company has the following inventory data:

Solution: $380 + [(100 − 32 − 20)  $20] = $1,340

FOR INSTRUCTOR USE ONLY

Solution: $220 + [(32 − 10)  $20] = $660

77. Quiet Phones Company has the following inventory data:

Solution: $220 + [(100 − 32 − 10)  $20] = $1,380

78. Radical Radials Company has the following inventory data:

Solution: $380 + [(32 − 20)  $20] = $620

FOR INSTRUCTOR USE ONLY

79. Orange-Aide Company has the following inventory data:

Solution: [($2,090  100)  $25] = $523