Question :
61.In a period when costs falling and inventory quantities stable, : 1412711
61.In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:
A.Weighted average.
B.LIFO.
C.Moving average.
D.FIFO.
62.The primary reason for the popularity of LIFO is that it:
A.Provides better matching of physical flow and cost flow.
B.Saves income taxes currently.
C.Simplifies recordkeeping.
D.Provides a permanent reduction of income taxes.
63.When reported in financial statements, a LIFO allowance account usually:
A.Is shown in the firm's income statement.
B.Is added to LIFO cost to indicate what the inventory would cost on a FIFO basis.
C.Indicates the effect on income if LIFO were not used.
D.Shows the current rate of inflation for that asset.
64.If a company uses LIFO, a LIFO liquidation causes a company's income taxes to increase:
A.When inventory purchase costs are rising.
B.When inventory purchase costs are declining.
C.Whether inventory purchase costs are declining or rising.
D.LIFO liquidations have no effect on a company's income taxes.
When costs are rising, a liquidation causes pre-tax income and income taxes to rise.
65.GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2016 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2015. Assuming GG has a 40% income tax rate:
A.Its reported cost of goods sold for 2016 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
B.Its reported cost of goods sold for 2016 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
C.Its reported net income for 2016 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
D.Its reported net income for 2016 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
This is (1 - tax rate) × the pre-tax effect of $15 million.
66.HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2016 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2015. Assuming HH has a 30% income tax rate:
A.Its reported cost of goods for 2016 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements.
B.Its reported cost of goods for 2016 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements.
C.Its reported cost of goods sold for 2016 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements.
D.Its reported cost of goods sold for 2016 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements.
67.During 2016, WW Inc. reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $50 million. WW has a 40% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation:
A.Its 2016 net income would have been $30 million lower because inventory purchase prices were rising.
B.Its 2016 net income would have been $30 million lower because inventory purchase prices were declining.
C.Its 2016 net income would have been $30 million higher because inventory purchase prices were rising.
D.Its 2016 net income would have been $30 million higher because inventory purchase prices were declining.
The effect of WW's LIFO liquidation was a reduction in pre-tax income by $50 million and a reduction in net income by $30 million. This would have been avoided if the supplier problems had been avoided. The inventory prices were declining because the effect of using older inventory prices was to increase cost of goods sold.
68.Thompson TV and Appliance reported the following in its 2016 financial statements:
2016
Sales$420,000
Cost of goods sold:
Inventory, January 182,000
Net purchases340,000
Goods available for sale422,000
Inventory, December 3186,000
Cost of goods sold336,000
Gross profit$ 84,000
Thompson's 2016 gross profit ratio is:
A.25%.
B.19%.
C.20%.
D.None of these is correct.
69.Thompson TV and Appliance reported the following in its 2016 financial statements:
2016
Sales$420,000
Cost of goods sold:
Inventory, January 182,000
Net purchases340,000
Goods available for sale422,000
Inventory, December 3186,000
Cost of goods sold336,000
Gross profit$ 84,000
Thompson's 2016 inventory turnover ratio is:
A.3.91.
B.4.00.
C.4.88.
D.5.00.
70.Robertson Corporation's inventory balance was $22,000 at the beginning of the year and $20,000 at the end. The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%. What were net sales for the year?
A.$126,000.
B.$200,000.
C.$120,000.
D.$210,000.
Average inventory = $21,000 × 6.0 = $126,000 = cost of goods sold
$126,000 ÷ (1 - .40) = $210,000
