D103 OA2 Intermediate Accounting I (Units 5–7) Quiz 2026 UPDATE
1. When goods are shipped F.O.B. destination, when does the legal title pass to the buyer?
A. When the goods leave the seller’s shipping dock
B. When the goods are received by the buyer
C. When the carrier picks up the goods
D. When the invoice is paid by the buyer
Answer: B
Rationale: Under F.O.B. destination, the seller maintains ownership and risk of loss until
the goods reach the buyer’s location.
2. Under the FIFO cost flow assumption, which costs are assigned to the ending inventory?
A. The oldest costs incurred
B. The average of all costs incurred
C. The most recent costs incurred
D. The specific costs of each unit remaining
Answer: C
Rationale: First-In, First-Out (FIFO) assumes the first units purchased are the first sold,
leaving the most recent purchase costs in ending inventory.
,3. Which inventory method results in the highest net income during a period of rising prices?
A. LIFO
B. Specific Identification
C. Weighted Average
D. FIFO
Answer: D
Rationale: In rising prices, FIFO assigns older (lower) costs to COGS, resulting in higher net
income compared to LIFO.
4. If ending inventory is overstated at the end of Year 1, what is the effect on Year 2’s net
income?
A. Overstated
B. Understated
C. No effect
D. Correctly stated
Answer: B
Rationale: Ending inventory of Year 1 becomes beginning inventory of Year 2. Overstated
beginning inventory overstates COGS and understates net income in Year 2.
, 5. What is the primary valuation basis for inventory under GAAP for companies not using LIFO
or the retail method?
A. Lower of Cost or Market (LCM)
B. Historical Cost
C. Lower of Cost or Net Realizable Value (LCNRV)
D. Fair Value
Answer: C
Rationale: For FIFO and Weighted Average users, GAAP requires reporting at LCNRV.
6. Which method is commonly used to estimate inventory when a physical count is not
possible (e.g., fire loss)?
A. LIFO Reserve
B. Gross Profit Method
C. Dollar-Value LIFO
D. Net Realizable Value Method
Answer: B
Rationale: The Gross Profit Method uses historical gross profit percentages to estimate
ending inventory.
1. When goods are shipped F.O.B. destination, when does the legal title pass to the buyer?
A. When the goods leave the seller’s shipping dock
B. When the goods are received by the buyer
C. When the carrier picks up the goods
D. When the invoice is paid by the buyer
Answer: B
Rationale: Under F.O.B. destination, the seller maintains ownership and risk of loss until
the goods reach the buyer’s location.
2. Under the FIFO cost flow assumption, which costs are assigned to the ending inventory?
A. The oldest costs incurred
B. The average of all costs incurred
C. The most recent costs incurred
D. The specific costs of each unit remaining
Answer: C
Rationale: First-In, First-Out (FIFO) assumes the first units purchased are the first sold,
leaving the most recent purchase costs in ending inventory.
,3. Which inventory method results in the highest net income during a period of rising prices?
A. LIFO
B. Specific Identification
C. Weighted Average
D. FIFO
Answer: D
Rationale: In rising prices, FIFO assigns older (lower) costs to COGS, resulting in higher net
income compared to LIFO.
4. If ending inventory is overstated at the end of Year 1, what is the effect on Year 2’s net
income?
A. Overstated
B. Understated
C. No effect
D. Correctly stated
Answer: B
Rationale: Ending inventory of Year 1 becomes beginning inventory of Year 2. Overstated
beginning inventory overstates COGS and understates net income in Year 2.
, 5. What is the primary valuation basis for inventory under GAAP for companies not using LIFO
or the retail method?
A. Lower of Cost or Market (LCM)
B. Historical Cost
C. Lower of Cost or Net Realizable Value (LCNRV)
D. Fair Value
Answer: C
Rationale: For FIFO and Weighted Average users, GAAP requires reporting at LCNRV.
6. Which method is commonly used to estimate inventory when a physical count is not
possible (e.g., fire loss)?
A. LIFO Reserve
B. Gross Profit Method
C. Dollar-Value LIFO
D. Net Realizable Value Method
Answer: B
Rationale: The Gross Profit Method uses historical gross profit percentages to estimate
ending inventory.
