Question Details

Which inventory costing method most closely approximates current cost for ending inventory 



Use the following information for questions 1 and 2.

During 2010, which was the first year of operations, Oswald Company had merchandise purchases of $985,000 before cash discounts.  All purchases were made on terms of 2/10, n/30.  Three-fourths of the items purchased were paid for within 10 days of purchase.  All of the goods available had been sold at year end.

	1.	Which of the following recording procedures would result in the highest cost of goods sold for 2010?
1.	Recording purchases at gross amounts
2. 	Recording purchases at net amounts, with the amount of discounts not taken shown under "other income and expense" in the income statement
a. 	1
b.	2
c.	Either 1 or 2 will result in the same cost of goods sold.
d.	Cannot be determined from the information provided.

	2.	Which of the following recording procedures would result in the highest net income for 2010?
1. 	Recording purchases at gross amounts
2.	Recording purchases at net amounts, with the amount of discounts not taken shown under "other income and expense" in the income statement
a.	1
b.	2
c.	Either 1 or 2 will result in the same net income.
d.	Cannot be determined from the information provided.

	3.	When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold?
a.	Trade discounts applicable to purchases during the period
b.	Cash (purchase) discounts taken during the period
c.	Purchase returns and allowances of merchandise during the period
d.	Cost of transportation-in for merchandise purchased during the period

 
	4.	Which inventory costing method most closely approximates current cost for ending inventory ?
a.	Average
b.	FIFO
c.	LIFO
d.	Specific identification

	5.	The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation:
a.	moving average.
b.	weighted-average.
c.	specific identification.
d.	FIFO.



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