Which of the following statements is not true concerning interim financial reporting and inventories? A company that uses LIFO and encounters a temporary partial a) liquidation of its base period inventory must include the effects of the liquidation in the period in which it occurred. b) Provisions for write-downs to market should generally be the same for both the annual and interim reporting. A company that utilizes a periodic inventory system and uses c) estimated gross profit rates to determine costs of goods sold during interim periods should disclose any significant adjustments that result from reconciliation with the annual physical inventory. d) The same inventory pricing method used for annual reporting should generally be used for interim reporting.

Companies can use various methods to determine the cost of inventory, including FIFO, LIFO, and average cost. In a period in which the cost of inventory is rising, which of the following statements is true? The LIFO method will result in the lowest income tax expense. The LIFO method will result in the highest inventory balance at year-end. The average cost method will result in the highest net income. The LIFO method will result in the lowest cost of goods sold. The average cost method will result in the lowest inventory balance at year-end. The average cost method will result in the highest inventory balance at year-end. The FIFO method will result in the lowest net income. None of the listed choices are correct.

The accountant for the Fred Company did not record a purchase of merchandise on credit or include the items in the ending inventory. The effect of these omissions on assets, liabilities, and retained earnings would be (assume a periodic inventory system): Assets Liabilities Retained Earnings a. Understate Understate Understateb. Understate Understate No effectc. No effect Understate No effectd. Understate No effect Understate

Identify which of the following statement is correct for perpetual inventory system? When valuing ending inventory under a perpetual inventory system, weighted average cost method requires that a new weighted average unit cost be calculated after every sale. When valuing ending inventory under a perpetual inventory system, valuation using weighted average is the same as the valuation using weighted average under the periodic inventory system. When valuing ending inventory under a perpetual inventory system, oldest units purchased during the period using FIFO are allocated to the cost of goods sold when units are sold. 5 Under the perpetual inventory system, on the purchase of inventory purchase account is debited. 7

For each change or error below, indicate how it would be accounted for.  1. Change due to understatement of inventory. options: A.) accounted for prospectively  b.) prior period adjustment    2.  change from direct write-off to allowance method of accounting for bad debts. Options: a.) accounted for retrospectively b.) prior period adjustment

When a company uses the perpetual inventory system in accounting for its merchandise inventory, which of the following is true?  Multiple Choice  The inventory account is updated after each sale  The inventory account is updated throughout the year as purchases are made.  Cost of goods sold is computed at the end of the accounting period rather than at each sale.  None of the other alternatives are correct  Purchases are recorded in the cost of goods sold account.

State how each of the following items is reflected in thefinancial statements.(a) Change from FIFO to LIFO method for inventoryvaluation purposes.(b) Charge for failure to record depreciation in a previousperiod.(c) Litigation won in current year, related to prior period.(d) Change in the realizability of certain receivables.(e) Write-off of receivables.(f) Change from the percentage-of-completion to thecompleted-contract method for reporting net income.

Petco Inc. uses the periodic inventory system. Assess the effect on net income of including goods in transit f.o.b shipping point in purchases, but not in ending inventory. a. Overstate net income. b. No effect on net income. O c. Not sufficient information is provided to assess the effect on net income. O d. Understate net income.