AFC AFC Inventory Management

Question 1

Under the FIFO (First-In, First-Out) inventory method, which units are assumed to be sold first?

Accepted Answer

The oldest purchased units

Answer

The most recently purchased units

Answer

The highest-cost units

Answer

Units are sold in random order

Question 2

Which inventory costing method typically results in the highest net income during a period of rising prices?

Accepted Answer

FIFO

Answer

LIFO

Answer

Weighted-average

Answer

Specific identification

Question 3

A company uses the weighted-average cost method. It has 100 units at $10 and purchases 200 more units at $13. What is the weighted-average cost per unit?

Accepted Answer

$12.00

Answer

$11.00

Answer

$11.50

Answer

$12.50

Question 4

Under the lower-of-cost-or-net-realizable-value (LCNRV) rule, inventory is written down when:

Accepted Answer

Its net realizable value falls below its recorded cost

Answer

Its market value exceeds its cost

Answer

Its cost exceeds the replacement cost

Answer

Its carrying value equals net realizable value

Question 5

Which inventory system records cost of goods sold and updates inventory balances after each individual sale?

Accepted Answer

Perpetual system

Answer

Periodic system

Answer

Weighted-average system

Answer

Consignment system

Question 6

Goods in transit shipped FOB shipping point should be included in whose inventory at year-end?

Accepted Answer

The buyer's inventory

Answer

The seller's inventory

Answer

Neither party's inventory

Answer

Both parties' inventories equally