ACC 231 UPDATED EXAMINERS SET
QUESTIONS AND ANSWERS SURE A+
✔✔Price Increasing (^) - ✔✔*LIFO
COGS ^ higher
Inventory - lower
Net income -lower
Taxes - lower
*FIFO
COGS - lower
Inventory ^ higher
Net income ^ higher
Taxes ^ higher
✔✔Price Decreasing - ✔✔*LIFO
COGS - lower
Inventory ^ higher
Net income ^ higher
Taxes ^ higher
*FIFO
COGS ^ higher
Inventory - lower
, Net income -lower
Taxes - lower
✔✔First-In First-Out (FIFO) - ✔✔costs flow in the order of purchase (oldest inventory
items are sold first)
✔✔Last-In First-Out (LIFO) - ✔✔-costs flow in the reverse order of purchase (newest
inventory items are sold first)
-only used in the U.S.
✔✔Average Cost Method - ✔✔costs flow at an average of the cost of available
inventory
✔✔Calculating the Average Cost - ✔✔add up the total units of inventory, calculate the
total $ amount of the inventory, and then divide that by the total number of units
✔✔Specific Identification Method - ✔✔each item of inventory can be matched with a
specific purchase and invoice ex. buying a car, custom items
✔✔Lower of Cost or Market - ✔✔-inventory must be reported at market value when
market value is lower than the cost of our inventory
-write down = cost - market value
✔✔Securities and Exchange Commission (SEC) - ✔✔-approves the standards FASB
and U.S. GAAP set
-governs the U.S. stock exchange
-main goal is to protect investors
✔✔Internal Control - ✔✔-plan to safeguard assets
-helps companies operate efficiently/effectively
-improves the accuracy and reliability of financial reporting and compliance with
accounting laws
✔✔Elements of Internal Control - ✔✔-Control environment
-Risk assessment
-Control activities
-Information and communication to employees
-Monitored for weaknesses
✔✔Control Environment - ✔✔-the set of standards, processes, and structures that help
carrying out internal control across the organization
-reflects attitudes of management and sets the tone for the firm
✔✔Risk Assessment - ✔✔a process that identifies and analyzes potenetial risks and
takes steps to reduce them from occurring
QUESTIONS AND ANSWERS SURE A+
✔✔Price Increasing (^) - ✔✔*LIFO
COGS ^ higher
Inventory - lower
Net income -lower
Taxes - lower
*FIFO
COGS - lower
Inventory ^ higher
Net income ^ higher
Taxes ^ higher
✔✔Price Decreasing - ✔✔*LIFO
COGS - lower
Inventory ^ higher
Net income ^ higher
Taxes ^ higher
*FIFO
COGS ^ higher
Inventory - lower
, Net income -lower
Taxes - lower
✔✔First-In First-Out (FIFO) - ✔✔costs flow in the order of purchase (oldest inventory
items are sold first)
✔✔Last-In First-Out (LIFO) - ✔✔-costs flow in the reverse order of purchase (newest
inventory items are sold first)
-only used in the U.S.
✔✔Average Cost Method - ✔✔costs flow at an average of the cost of available
inventory
✔✔Calculating the Average Cost - ✔✔add up the total units of inventory, calculate the
total $ amount of the inventory, and then divide that by the total number of units
✔✔Specific Identification Method - ✔✔each item of inventory can be matched with a
specific purchase and invoice ex. buying a car, custom items
✔✔Lower of Cost or Market - ✔✔-inventory must be reported at market value when
market value is lower than the cost of our inventory
-write down = cost - market value
✔✔Securities and Exchange Commission (SEC) - ✔✔-approves the standards FASB
and U.S. GAAP set
-governs the U.S. stock exchange
-main goal is to protect investors
✔✔Internal Control - ✔✔-plan to safeguard assets
-helps companies operate efficiently/effectively
-improves the accuracy and reliability of financial reporting and compliance with
accounting laws
✔✔Elements of Internal Control - ✔✔-Control environment
-Risk assessment
-Control activities
-Information and communication to employees
-Monitored for weaknesses
✔✔Control Environment - ✔✔-the set of standards, processes, and structures that help
carrying out internal control across the organization
-reflects attitudes of management and sets the tone for the firm
✔✔Risk Assessment - ✔✔a process that identifies and analyzes potenetial risks and
takes steps to reduce them from occurring
