Pre-Assessment Questions and Answers Updated 2024

Pre-Assessment Questions and Answers Updated 2024 1. Which inventory method results in the lowest cost of goods sold and highest net income in a period of rising prices? A. Weighted average B. Average cost C. Last in, first out D. First in, first out - Answer-D. First in, first out 2. A seller of recreational vehicles (RVs) wants to keep track of the actual cost of each item sold. Which inventory costing method should this business use to meet this goal? A. Last in, first out B. Specific identification C. Average cost D. First in, first out - Answer-B. Specific identification GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 2/39 3. A company sells baseball bats. The following record shows the inventory activity for the month of October: Number of Bats Unit Cost Oct 1 (beginning inventory) 50 $105 Purchases: Oct 12 100 $108 Oct20 100 $110 Oct 25 200 $112 October Sales 350 Using the average cost method, what is the ending inventory balance? A. $ 10,650 B. $10,875 C. $10,989 D. $11,200 - Answer-# Units = 450 Total Cost for Units available = $49,450 Average cost per Unit = $49,450/450 = $109.89 GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 3/39 Ending Inventory = 350 Cost of ending inventory = 350 x $109.89 = $38,462 $49,450-38,462= $10,989 C. $10,989 4. A company sells baseball bats. The following record shows the inventory activity for the month of October: Number of Bats Unit Cost Oct 1 (beginning inventory) 50 $105 Purchases: Oct 12 100 $108 Oct 20 100 $110 Oct 25 200 $112 October Sales 350 Using the first in, first out method, what is the value of inventory on October 31 (rounded to the nearest dollar)? GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 4/39 A. $10,650 B. $10,875 C. $10,989 D. $11,200 - Answer-Total COU Oct25=$22,400 Ending Inventory = 100 * $112= $11,200 D. $11,200 5. What is the normal method of amortizing a patent? A. Sum of the year's digits B. Units of activity C. Double declining balance D. Straight line - Answer-D. Straight line 6. In July 2013, a company purchased a mine at a cost of $18,000,000. The mine has an estimated life of ten years with no estimated salvage value. The mine is estimated to contain 500,000 tons of ore. During 2013, 120,000 tons of ore were extracted and sold. GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 5/39 What is the depletion expense in year 2013? A. $900,000 B. $1,800,000 C. $2,160,000 D. $4,320,000 - Answer-Cost per Ton = 18,000,000/500,000 = 36 36 x 120,000 = 4,320,000 D. $4,320,000 7. A machine was purchased for $95,000. Freight charges amounted to $ 6,200 and there was a cost of $ 33,000 for building a foundation and mounting the machine. It is estimated that the machine will have a $ 25,000 salvage value at the end of its five-year useful life. What will the depreciation expense be each year using the straight-line method? GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 6/39 A. $19,445 B. $21,840 C. $22,400 D. $23,000 - Answer-Cost ($134,200) - Salvage Value ($25,000)/Useful Life (5) B. $21,840 8. The beginning book value on a piece of machinery was reported at $5,000. The machine has an overall useful life of four years and no estimated salvage value. What is the depreciation expense at the end of the first year of operation using the double- declining-balance? A. $1,250 B. $1,850 C. $2,500 D. $3,250 - Answer-Double Depreciation for a period = (100%/useful life of asset) x book value at beginning of period. Straight Line Rate = 100%/4= .25 GRACEAMELIA 2024/2025 ACADEMIC YEAR ©2024. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER, 2024 Page 7/39 DDB Rate = .25 x 2 =.50 .50 x 5000 = C. $2,500 9. A manufacturing service just purchased office furniture for $9,000. The furniture has a useful life of five years and no estimated salvage value. What will the second year depreciation expense be using the sum-of-the-years-digits method? A. $ 1,800 B. $2,400 C. $ 3,000 D. $ 3 ,250 - Answer-(4/15) x $9000