AFE Quiz 18: Inventory – Accounting for Everyone

Which of the following best defines inventory?

Goods held for sale in the ordinary course of business
Office supplies used in daily operations
Equipment used to manufacture products
Cash held for emergencies

Inventory is classified as which type of account?

Current asset
Non-current asset
Liability
Expense

Which of the following is NOT included in the cost of inventory?

Purchase price
Freight-in
Sales commissions
Import duties

Which inventory system records inventory purchases and sales continuously?

Periodic
Perpetual
Hybrid
Manual

Which of the following is a common inventory costing method?

FIFO
LIFO
Weighted Average
All of the above

What is the formula for Cost of Goods Sold (COGS) under the periodic system?

Beginning Inventory + Purchases – Ending Inventory
Purchases + Sales – Ending Inventory
Sales – Purchases + Ending Inventory
Ending Inventory – Purchases + Sales

Which of the following would result in an increase in inventory?

Purchasing merchandise on account
Selling merchandise for cash
Writing off obsolete inventory
Recording shrinkage

Which of the following is a reason for taking a physical inventory count?

To verify the accuracy of inventory records
To calculate depreciation
To record sales revenue
To determine cash on hand

Which of the following is true about the lower of cost or market (LCM) rule?

Inventory is reported at the higher of cost or market
Inventory is reported at the lower of cost or market
Inventory is always reported at cost
Inventory is always reported at market value

Which account is credited when inventory is sold under the perpetual system?

Inventory
Purchases
Sales
Cost of Goods Sold