1. Which inventory method results in the lowest cost of goods sold and highest net
income in a period of rising prices?
A. Weighted average
B. Average cost
C. Last in, first out
D. First in, first out - Answer-D. First in, first out
/.2. A seller of recreational vehicles (RVs) wants to keep track of the actual cost of each
item sold.
Which inventory costing method should this business use to meet this goal?
A. Last in, first out
B. Specific identification
C. Average cost
D. First in, first out - Answer-B. Specific identification
/.3. A company sells baseball bats. The following record shows the inventory activity for
the month of October:
Number of Bats Unit Cost
Oct 1 (beginning inventory) 50 $105
Purchases:
Oct 12 100 $108
Oct20 100 $110
Oct 25 200 $112
October Sales 350
Using the average cost method, what is the ending inventory balance?
A. $ 10,650
B. $10,875
C. $10,989
D. $11,200 - Answer-# Units = 450
Total Cost for Units available = $49,450
Average cost per Unit = $49,450/450 = $109.89
Ending Inventory = 350
Cost of ending inventory = 350 x $109.89 = $38,462
$49,450-38,462= $10,989
C. $10,989
/.4. A company sells baseball bats. The following record shows the inventory activity for
the month of October:
Number of Bats Unit Cost
Oct 1 (beginning inventory) 50 $105
Purchases:
,Oct 12 100 $108
Oct 20 100 $110
Oct 25 200 $112
October Sales 350
Using the first in, first out method, what is the value of inventory on October 31 (rounded
to the nearest dollar)?
A. $10,650
B. $10,875
C. $10,989
D. $11,200 - Answer-Total COU Oct25=$22,400
Ending Inventory = 100 * $112= $11,200
D. $11,200
/.5. What is the normal method of amortizing a patent?
A. Sum of the year's digits
B. Units of activity
C. Double declining balance
D. Straight line - Answer-D. Straight line
/.6. In July 2013, a company purchased a mine at a cost of $18,000,000. The mine has
an estimated life of ten years with no estimated salvage value. The mine is estimated to
contain 500,000 tons of ore. During 2013, 120,000 tons of ore were extracted and sold.
What is the depletion expense in year 2013?
A. $900,000
B. $1,800,000
C. $2,160,000
D. $4,320,000 - Answer-Cost per Ton = 18,000,000/500,000 = 36
36 x 120,000 = 4,320,000
D. $4,320,000
http://accountingexplained.com/financial/non-current-assets/depletion-expense
/.7. A machine was purchased for $95,000. Freight charges amounted to $ 6,200 and
there was a cost of $ 33,000 for building a foundation and mounting the machine. It is
estimated that the machine will have a $ 25,000 salvage value at the end of its five-year
useful life.
What will the depreciation expense be each year using the straight-line method?
A. $19,445
B. $21,840
, C. $22,400
D. $23,000 - Answer-Cost ($134,200) - Salvage Value ($25,000)/Useful Life (5)
B. $21,840
/.8. The beginning book value on a piece of machinery was reported at $5,000. The
machine has an overall useful life of four years and no estimated salvage value.
What is the depreciation expense at the end of the first year of operation using the
double-declining-balance?
A. $1,250
B. $1,850
C. $2,500
D. $3,250 - Answer-Double Depreciation for a period = (100%/useful life of asset) x
book value at beginning of period.
Straight Line Rate = 100%/4= .25
DDB Rate = .25 x 2 =.50
.50 x 5000 =
C. $2,500
/.9. A manufacturing service just purchased office furniture for $9,000. The furniture has
a useful life of five years and no estimated salvage value.
What will the second year depreciation expense be using the sum-of-the-years-digits
method?
A. $ 1,800
B. $2,400
C. $ 3,000
D. $ 3 ,250 - Answer-(4/15) x $9000
B. $2,400
/.10. On July 1, a company sold a delivery truck for $5,000 cash. The cost of the truck
was $30,000. Accumulated depreciation as of December 31 of the previous year was
$24,000. Depreciation for the first six months of the current year should be $2,000.
What is the journal entry to record the sale of the truck on July 1 ?
A. Cash $5,000
Equipment $30,000
Accumulated Depreciation-Equipment $26,000
Gain on Sale of Equipment $9,000
B. Cash $5,000
