ACG TEST BANK 2026 EXAM REVIEW WITH
SOLVED QUESTIONS GRADED A+
◉ Net sales are $2,400,000, cost of goods sold is $1,260,000, and
average inventory is $40,000. How many days' sales are in inventory.
Answer: Days' sales in inventory is calculated as 365 days divided by
inventory turnover.
Inventory turnover = $1,260,000/$40,000 = 31.5 times
Days' sales in inventory = 365/31.5 = 11.6 days
◉ Which one of the following is not a consideration that affects the
selection of an inventory costing method?
a) Tax effects
b) Balance sheet effects
c) Income statement effects
d) Perpetual versus periodic inventory system
, e) All of these are considerations affecting the choice of an inventory
costing method. Answer: d) Perpetual vs periodic inventory system
why:
Management chooses the company's inventory costing method (i.e.,
FIFO, LIFO, average, specific identification). Management also chooses
the company's inventory system (i.e., perpetual versus periodic). These
two choices are independent; one choice does not affect the other. On the
other hand, the choice of inventory costing method affects the amount
reported as inventory, cost of goods sold, net income and other items
(including taxable income). Consideration of these affects should be
taken into account when choosing an inventory costing method.
◉ A company started business in August and it made the following
purchases of inventory:
(1) on August 1, it purchased 100 units for $1,500;
(2) on August 12, it purchased 100 units for $1,550; and
(3) on August 24, it purchased 100 units for $1,575.
A physical count of the inventory on August 31 reveals that there are 500
units on hand. What inventory method produces the lowest gross profit
for August. Answer: LIFO
SOLVED QUESTIONS GRADED A+
◉ Net sales are $2,400,000, cost of goods sold is $1,260,000, and
average inventory is $40,000. How many days' sales are in inventory.
Answer: Days' sales in inventory is calculated as 365 days divided by
inventory turnover.
Inventory turnover = $1,260,000/$40,000 = 31.5 times
Days' sales in inventory = 365/31.5 = 11.6 days
◉ Which one of the following is not a consideration that affects the
selection of an inventory costing method?
a) Tax effects
b) Balance sheet effects
c) Income statement effects
d) Perpetual versus periodic inventory system
, e) All of these are considerations affecting the choice of an inventory
costing method. Answer: d) Perpetual vs periodic inventory system
why:
Management chooses the company's inventory costing method (i.e.,
FIFO, LIFO, average, specific identification). Management also chooses
the company's inventory system (i.e., perpetual versus periodic). These
two choices are independent; one choice does not affect the other. On the
other hand, the choice of inventory costing method affects the amount
reported as inventory, cost of goods sold, net income and other items
(including taxable income). Consideration of these affects should be
taken into account when choosing an inventory costing method.
◉ A company started business in August and it made the following
purchases of inventory:
(1) on August 1, it purchased 100 units for $1,500;
(2) on August 12, it purchased 100 units for $1,550; and
(3) on August 24, it purchased 100 units for $1,575.
A physical count of the inventory on August 31 reveals that there are 500
units on hand. What inventory method produces the lowest gross profit
for August. Answer: LIFO
