D103 OA2 Intermediate Accounting I (Units 5–7) Quiz 2026 UPDATE
1. Which inventory method generally results in the highest ending inventory during a period
of rising prices?
A. FIFO
B. LIFO
C. Weighted-average cost
D. Specific identification
Answer: A
Rationale: FIFO assumes the earliest goods purchased are the first ones sold. In periods of
rising prices, the remaining inventory consists of the most recent, higher-cost purchases.
2. When applying the lower-of-cost-or-net-realizable-value (LCNRV) rule, net realizable value
is defined as:
A. Selling price minus costs to complete and dispose
B. Selling price plus costs to complete and dispose
C. Replacement cost
D. Selling price
Answer: A
,Rationale: Net realizable value (NRV) is the estimated selling price in the ordinary course
of business, less reasonably predictable costs of completion and disposal.
3. Which of the following costs should be capitalized as part of the cost of land?
A. Fencing and parking lots
B. Excavation costs for a new building
C. Back taxes paid by the buyer at the time of purchase
D. Depreciation on the building
Answer: C
Rationale: Costs necessary to get the land ready for its intended use, such as title fees and
back taxes, are capitalized to the Land account.
4. Under the periodic inventory system, how is the cost of goods sold (COGS) determined?
A. By recording it at the time of each sale
B. By performing a physical count of items sold
C. By adding purchases to the beginning inventory
D. By subtracting ending inventory from the cost of goods available for sale
Answer: D
Rationale: In a periodic system, COGS is a residual amount calculated at the end of the
period: Beginning Inventory + Purchases - Ending Inventory.
, 5. Which depreciation method does not use salvage value in its initial calculation of the
depreciation base for each period?
A. Straight-line
B. Sum-of-the-years’-digits
C. Double-declining balance
D. Units-of-production
Answer: C
Rationale: Double-declining balance applies a constant rate to the book value (Cost minus
Accumulated Depreciation) without subtracting salvage value first, though the asset is not
depreciated below its salvage value.
6. A company exchanges an old machine for a new one. The transaction lacks commercial
substance. If a loss is indicated, the company should:
A. Recognize the loss only if boot is received
B. Defer the loss and adjust the cost of the new machine
C. Recognize the loss immediately
D. Ignore the loss
Answer: C
Rationale: Losses on nonmonetary exchanges are always recognized immediately,
regardless of whether the transaction has commercial substance.
1. Which inventory method generally results in the highest ending inventory during a period
of rising prices?
A. FIFO
B. LIFO
C. Weighted-average cost
D. Specific identification
Answer: A
Rationale: FIFO assumes the earliest goods purchased are the first ones sold. In periods of
rising prices, the remaining inventory consists of the most recent, higher-cost purchases.
2. When applying the lower-of-cost-or-net-realizable-value (LCNRV) rule, net realizable value
is defined as:
A. Selling price minus costs to complete and dispose
B. Selling price plus costs to complete and dispose
C. Replacement cost
D. Selling price
Answer: A
,Rationale: Net realizable value (NRV) is the estimated selling price in the ordinary course
of business, less reasonably predictable costs of completion and disposal.
3. Which of the following costs should be capitalized as part of the cost of land?
A. Fencing and parking lots
B. Excavation costs for a new building
C. Back taxes paid by the buyer at the time of purchase
D. Depreciation on the building
Answer: C
Rationale: Costs necessary to get the land ready for its intended use, such as title fees and
back taxes, are capitalized to the Land account.
4. Under the periodic inventory system, how is the cost of goods sold (COGS) determined?
A. By recording it at the time of each sale
B. By performing a physical count of items sold
C. By adding purchases to the beginning inventory
D. By subtracting ending inventory from the cost of goods available for sale
Answer: D
Rationale: In a periodic system, COGS is a residual amount calculated at the end of the
period: Beginning Inventory + Purchases - Ending Inventory.
, 5. Which depreciation method does not use salvage value in its initial calculation of the
depreciation base for each period?
A. Straight-line
B. Sum-of-the-years’-digits
C. Double-declining balance
D. Units-of-production
Answer: C
Rationale: Double-declining balance applies a constant rate to the book value (Cost minus
Accumulated Depreciation) without subtracting salvage value first, though the asset is not
depreciated below its salvage value.
6. A company exchanges an old machine for a new one. The transaction lacks commercial
substance. If a loss is indicated, the company should:
A. Recognize the loss only if boot is received
B. Defer the loss and adjust the cost of the new machine
C. Recognize the loss immediately
D. Ignore the loss
Answer: C
Rationale: Losses on nonmonetary exchanges are always recognized immediately,
regardless of whether the transaction has commercial substance.
