Question :
41.In periods when costs rising, LIFO liquidations:
A.Can't occur.
B.Are used to : 1412709
41.In periods when costs are rising, LIFO liquidations:
A.Can't occur.
B.Are used to reduce tax liabilities.
C.Are a source of off-balance-sheet financing.
D.Distort the net income.
42.The use of LIFO during a long inflationary period can result in:
A.A net increase in income tax expense.
B.An inflated balance sheet.
C.Significant cash flow advantages over FIFO.
D.A reduction in inventory turnover over FIFO.
43.Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A's gross profit and inventory turnover ratio, compared to Company B's, would be:
Gross profitInventory turnover
a.lowerlower
b.higherhigher
c.higherlower
d.lowerhigher
A.Option A
B.Option B
C.Option C
D.Option D
44.Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be:
Gross profitInventory turnover
a.higherhigher
b.higherlower
c.lowerlower
d.lowerhigher
A.Option A
B.Option B
C.Option C
D.Option D
45.Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):
• 40 units at $100
• 70 units at $80
• 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.
Ending inventory using the average cost method (rounded) is:
A.$650.
B.$1,000.
C.$707.
D.$600.
[(40 × $100) + (70 × $80) + (170 × $60)] = $19,800 ÷ 280 units = $70.71 per unit
10 units × $70.71 = $707 (rounded)
46.Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):
• 40 units at $100
• 70 units at $80
• 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.
Ending inventory using the FIFO method is:
A.$650.
B.$1,000.
C.$707.
D.$600.
10 units × $60 = $600.
47.Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):
• 40 units at $100
• 70 units at $80
• 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.
Ending inventory using the LIFO method is:
A.$650.
B.$1,000.
C.$707.
D.$600.
10 units × $100 = $1,000.
48.Nu Company reported the following pretax data for its first year of operations.
Net sales2,800
Cost of goods available for sale2,500
Operating expenses880
Effective tax rate40%
Ending inventories:
If LIFO is elected820
If FIFO is elected1,060
What is Nu's net income if it elects FIFO?
A.$480.
B.$288.
C.$1,360.
D.$144.
Net sales$2,800
Cost of goods sold ($2,500 – $1,060)1,440
Gross profit1,360
Operating expenses880
Income before taxes480
Income tax ($480 x 40%)192
Net income$ 288
49.Nu Company reported the following pretax data for its first year of operations.
Net sales2,800
Cost of goods available for sale2,500
Operating expenses880
Effective tax rate40%
Ending inventories:
If LIFO is elected820
If FIFO is elected1,060
What is Nu's net income if it elects LIFO?
A.$288.
B.$144.
C.$240.
D.$480.
Net sales$2,800
Cost of goods sold ($2,500 – 820)1,680
Gross profit1,120
Operating expenses880
Income before taxes240
Income tax ($240 x 40%)96
Net income$ 144
50.Nu Company reported the following pretax data for its first year of operations.
Net sales2,800
Cost of goods available for sale2,500
Operating expenses880
Effective tax rate40%
Ending inventories:
If LIFO is elected820
If FIFO is elected1,060
What is Nu's gross profit ratio if it elects LIFO?
A.80%.
B.49%.
C.40%.
D.5%.
Net sales$2,800
Cost of goods sold ($2,500 – $820)1,680
Gross profit ratio1,120
$1,120ç$2,800 = 40%
