ACC 212 Exam #3 questions with
complete solutions
Buy finished goods, sell finished goods. Inventory consists of goods that have been acquired by
a distributor, wholesaler, or retailer from suppliers, with the intent of selling the goods to third
parties - ANS ✔✔Merchandiser's Inventory
Buy raw materials, produce and sell finished goods. Their inventory refers to all work that has
occurred - raw materials, partially finished products, finished products prior to sale and
departure from the manufacturing system - ANS ✔✔Manufacturer's Inventory
Equation for perpetual inventory system - ANS ✔✔Cost of Goods Sold Equation: BI + P - COGS =
EI
Updates inventory records every time an item is bought, sold, or returned - ANS ✔✔Perpetual
inventory system
Advantages/Disadvantages of perpetual inventory system - ANS ✔✔Advantages- provides the
best inventory control
Disadvantages- high cost, may malfunction
Updates the inventory records for merchandise purchases, sales, and returns only at the end of
the accounting period - ANS ✔✔Periodic inventory system
Equation for periodic inventory system - ANS ✔✔Cost of Goods Sold Equation: BI + P - EI = COGS
Advantages/Disadvantages for periodic inventory system - ANS ✔✔Advantages- no need to
have separate accounts for raw materials, work in progress, and finished goods inventory
, Disadvantages- missing info sometimes, not as accurate, and not as controlled
Between FIFO and LIFO, which one produces the highest net income? - ANS ✔✔FIFO
Between FIFO and LIFO, which will produce the lowest net income? - ANS ✔✔LIFO
Between FIFO and LIFO, which will pay lower taxes? (due to lower profit) - ANS ✔✔LIFO
Between FIFO and LIFO, which will pay higher taxes? (due to higher profit) - ANS ✔✔FIFO
Between FIFO and LIFO, which reports a higher turnover ratio? - ANS ✔✔LIFO
FIFO- income statement or balance sheet? - ANS ✔✔Balance sheet
LIFO- income statement or balance sheet? - ANS ✔✔Income statement
A rule that requires that the same inventory cost flow be used on the financial statements as is
used on the income tax return. - ANS ✔✔LIFO conformity rule
What do you do when you see LIFO for income taxes? - ANS ✔✔Use it for financial statements
Are any assets that can be turned over to cash within one fiscal year or one operating cycle.
These are more liquid than long term assets - ANS ✔✔Current assets
Accounts receivable, inventory, Cash, anything Prepaid, Supplies are examples of what kind of
asset? - ANS ✔✔Current assets
complete solutions
Buy finished goods, sell finished goods. Inventory consists of goods that have been acquired by
a distributor, wholesaler, or retailer from suppliers, with the intent of selling the goods to third
parties - ANS ✔✔Merchandiser's Inventory
Buy raw materials, produce and sell finished goods. Their inventory refers to all work that has
occurred - raw materials, partially finished products, finished products prior to sale and
departure from the manufacturing system - ANS ✔✔Manufacturer's Inventory
Equation for perpetual inventory system - ANS ✔✔Cost of Goods Sold Equation: BI + P - COGS =
EI
Updates inventory records every time an item is bought, sold, or returned - ANS ✔✔Perpetual
inventory system
Advantages/Disadvantages of perpetual inventory system - ANS ✔✔Advantages- provides the
best inventory control
Disadvantages- high cost, may malfunction
Updates the inventory records for merchandise purchases, sales, and returns only at the end of
the accounting period - ANS ✔✔Periodic inventory system
Equation for periodic inventory system - ANS ✔✔Cost of Goods Sold Equation: BI + P - EI = COGS
Advantages/Disadvantages for periodic inventory system - ANS ✔✔Advantages- no need to
have separate accounts for raw materials, work in progress, and finished goods inventory
, Disadvantages- missing info sometimes, not as accurate, and not as controlled
Between FIFO and LIFO, which one produces the highest net income? - ANS ✔✔FIFO
Between FIFO and LIFO, which will produce the lowest net income? - ANS ✔✔LIFO
Between FIFO and LIFO, which will pay lower taxes? (due to lower profit) - ANS ✔✔LIFO
Between FIFO and LIFO, which will pay higher taxes? (due to higher profit) - ANS ✔✔FIFO
Between FIFO and LIFO, which reports a higher turnover ratio? - ANS ✔✔LIFO
FIFO- income statement or balance sheet? - ANS ✔✔Balance sheet
LIFO- income statement or balance sheet? - ANS ✔✔Income statement
A rule that requires that the same inventory cost flow be used on the financial statements as is
used on the income tax return. - ANS ✔✔LIFO conformity rule
What do you do when you see LIFO for income taxes? - ANS ✔✔Use it for financial statements
Are any assets that can be turned over to cash within one fiscal year or one operating cycle.
These are more liquid than long term assets - ANS ✔✔Current assets
Accounts receivable, inventory, Cash, anything Prepaid, Supplies are examples of what kind of
asset? - ANS ✔✔Current assets
