ACG 3173 -Exam 2 UCF Final Test
Questions Solved Correctly 2025-2026
Updated.
Prepaid Expenses - Answer Expenses that have been paid in the current fiscal period but will
not be subtracted from revenue until a subsequent fiscal period
How would you write a $12,000 prepaid insurance expense for the year (12 months)?
How would you adjust it after a month? - Answer (DB)Prepaid Insurance 12,000
(CR)Cash 12,000
(DB)Insurance Expense 1,000
(CR)Prepaid Insurance 1,000
What are the 4 methods of Inventory Costing? - Answer Specific Identification, FIFO, LIFO
Average Cost
What is inventory costing used for? - Answer To determine the cost of their inventory
Specific Identification - Answer -Only appropriate for unique items items such as custom
musical instruments, custom built furniture, etc.
-If the inventory consists of perfect substitutes for one another, the cost/benefit ratio does not
justify the expense of tracking individual items of inventory.
-Under Specific Identification, the company simply tracks the cost of each individual item in
inventory, usually by assigning individual invoices to specific inventory items
FIFO - Answer -First In First Out
-The company assumes that the first items into inventory are the first items out of inventory
-Accordingly, The last items into inventory are the items reported one the balance sheet
LIFO - Answer -Last In Last Out
-The company assumes that the last items inn inventory are the first ones out
-Accordingly, the first items into inventory are the items reported on the balance sheet
, -This can lead to inventory valuation problems to the extent that sales<purchases because the
old items can remain inn inventory for a LONG time. Since prices usually increase over time, the
result can be inventory reported at the original cost which can be dramatically lower than
current cost
Average Cost - Answer -The total cost divided by the quantity produced
-The company calculates the total cost of its inventory available for sale and divides that total bu
the units of inventory
-Hybrid between FIFO & LIFO
What are the differences between LIFO & FIFO? - Answer FIFO: Inventory in the balance
sheet is closest to the inventory's current cost so it can be considered a "Balance Sheet
Approach"
LIFO: COGS is closest to current cost so Net income is arguably more representative of profits;
considered an "Income Statement Approach"
Most companies use ____________(FIFO/LIFO) because it's intuitive - Answer FIFO
What is the inventory effect of FIFO for rising costs? - Answer -Lower COGS
-Higher Net Income
-Higher Inventory
-Higher Assets
What is the inventory effect of LIFO for rising costs? - Answer -Higher COGS
-Lower Net Income
-Lower Inventory
-Lower Assets
What is the inventory effect of LIFO for declining costs? - Answer -Lower COGS
-Higher Net Income
-Higher Inventory
-Higher Assets
What is the inventory effect of FIFO for declining costs? - Answer -Higher COGS
-Lower Net Income
-Lower Inventory
Questions Solved Correctly 2025-2026
Updated.
Prepaid Expenses - Answer Expenses that have been paid in the current fiscal period but will
not be subtracted from revenue until a subsequent fiscal period
How would you write a $12,000 prepaid insurance expense for the year (12 months)?
How would you adjust it after a month? - Answer (DB)Prepaid Insurance 12,000
(CR)Cash 12,000
(DB)Insurance Expense 1,000
(CR)Prepaid Insurance 1,000
What are the 4 methods of Inventory Costing? - Answer Specific Identification, FIFO, LIFO
Average Cost
What is inventory costing used for? - Answer To determine the cost of their inventory
Specific Identification - Answer -Only appropriate for unique items items such as custom
musical instruments, custom built furniture, etc.
-If the inventory consists of perfect substitutes for one another, the cost/benefit ratio does not
justify the expense of tracking individual items of inventory.
-Under Specific Identification, the company simply tracks the cost of each individual item in
inventory, usually by assigning individual invoices to specific inventory items
FIFO - Answer -First In First Out
-The company assumes that the first items into inventory are the first items out of inventory
-Accordingly, The last items into inventory are the items reported one the balance sheet
LIFO - Answer -Last In Last Out
-The company assumes that the last items inn inventory are the first ones out
-Accordingly, the first items into inventory are the items reported on the balance sheet
, -This can lead to inventory valuation problems to the extent that sales<purchases because the
old items can remain inn inventory for a LONG time. Since prices usually increase over time, the
result can be inventory reported at the original cost which can be dramatically lower than
current cost
Average Cost - Answer -The total cost divided by the quantity produced
-The company calculates the total cost of its inventory available for sale and divides that total bu
the units of inventory
-Hybrid between FIFO & LIFO
What are the differences between LIFO & FIFO? - Answer FIFO: Inventory in the balance
sheet is closest to the inventory's current cost so it can be considered a "Balance Sheet
Approach"
LIFO: COGS is closest to current cost so Net income is arguably more representative of profits;
considered an "Income Statement Approach"
Most companies use ____________(FIFO/LIFO) because it's intuitive - Answer FIFO
What is the inventory effect of FIFO for rising costs? - Answer -Lower COGS
-Higher Net Income
-Higher Inventory
-Higher Assets
What is the inventory effect of LIFO for rising costs? - Answer -Higher COGS
-Lower Net Income
-Lower Inventory
-Lower Assets
What is the inventory effect of LIFO for declining costs? - Answer -Lower COGS
-Higher Net Income
-Higher Inventory
-Higher Assets
What is the inventory effect of FIFO for declining costs? - Answer -Higher COGS
-Lower Net Income
-Lower Inventory
