FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 7: Inventories

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

The inventory costing method that reports the most current prices in ending inventory is

A) FIFO
B) specific identification
C) LIFO
D) average cost

E) A) and D)
F) A) and C)

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Match each situation to its impact (a-c) on the current year's net income. -The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.

A) Net income for the current year will be overstated.
B) Net income for the current year will be understated.
C) There will be no error effect on net income.

D) A) and B)
E) A) and C)

Correct Answer

verified

Show Answer

Question 53

True/False

Review LaterAdd Note

If the perpetual inventory system is used, the merchandise inventory account is debited for purchases of merchandise.

Beginning inventory, purchases, and sales data for widgets are as follows:? $\begin{array} { | r | r | l | l | l | r | r | } \hline & \text { Apr. } 3 & \text { Inventory } & & 15 \text { units } & @ & \$ 30 \\\hline & 11 & \text { Purchase } & & 12 \text { units } & @ & \$ 27 \\\hline & 14 & \text { Sale } & & 18 \text { units } & & \\\hline &21 & \text { Purchase } & & 7 \text { units } & @ & \$ 25 \\\hline &25 & \text { Sale } & & 10 \text { units } & & \\\hline\end{array}$ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

Too much inventory on hand

Based on the following information compute (a) inventory turnover, (b) average daily cost of merchandise sold, and (c) days' sales in inventory for the current year. Use a 365-day year. (d) If an inventory turnover of 12 is average for the industry, how is this company doing? $\begin{array}{lrr}\text { Item }&\text { Prior Year } & \text { Current Year } \\\text { Cost of merchandise sold } & \$ 172,900 & \$ 215,000 \\\text { Inventory } & 18,000 & 12,000\end{array}$

List the internal control objectives illustrated by the following: (a)Keeping the inventory storeroom locked (b)Counting the inventory at the end of the accounting period and comparing it with the inventory ledger clerk's records (c)Using subsidiary ledgers and a perpetual inventory system

What is the amount of cost of merchandise sold for the year according to the FIFO method?

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work. $\begin{array} { | l | c | c | c | } \hline { \text { Item } } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \\\hline \text { Product C } & 300 & \$ 6 & \$ 5 \\\hline \text { Froduct D } & 420 & 12 & 14 \\\hline\end{array}$

If a fire destroys the merchandise inventory, the gross profit method can be used to estimate the cost of merchandise destroyed.

If ending inventory for the year is understated, net income for the year is overstated.

Use the information below to answer the following questions. The following units of an inventory item were available for sale during the year: $\begin{array}{ll}\text { Beginning inventory } & 10 \text { units at } \$ 55 \\\text { First purchase } & 25 \text { units at } \$ 60 \\\text { Second purchase } & 30 \text { units at } \$ 65 \\\text { Third purchase } & 15 \text { units at } \$ 70\end{array}$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold.? -The value of ending inventory using LIFO is?

If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

Hampton Co. took a physical count of its inventory on December 31. In addition, it had to decide whether or not the following items should be added to this count. (a)Merchandise on hand had been sold earlier in the year but had been returned by customers for various warranty repairs. (b)Hampton Co. sent merchandise on a consignment basis on December 31 just prior to the physical count. (c)On December 22, Hampton Co. ordered merchandise on FOB destination terms. The merchandise was shipped by the supplier on December 30 but had not been received by December 31. (d)On December 27, Hampton Co. ordered merchandise on FOB shipping point terms. The merchandise was shipped on December 29 but had not been received by December 31. (e)Merchandise sold FOB shipping point on December 31 was picked up by the freight company just before closing on December 31. (f)Merchandise shipped to a customer FOB destination was picked up by the freight company on December 28 but had not arrived at its destination as of December 31.​Answer "yes" or "no" to indicate which items should and should not be added to the December 31 inventory count.

Based on the following data, estimate the cost of ending merchandise inventory using the gross profit method. $\begin{array}{lr}\text { Sales } & \$ 250,000 \\\text { Estimated gross profit rate } & 25 \%\\\text { Beginning merchandise inventory } & \$ 9,000 \\\text { Purchases (net) } & 211,000 \\\text { Merchandise available for sale } & \$ 220,000\end{array}$

Match each description to the appropriate inventory system (a or b) .​ -Average cost is rarely used with this system.

In valuing merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal.

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: $\begin{array} { r l l } \text { Sept. } 1 & \text { Inventory } & 20 \text { units at } \$ 20 \\ 4 & \text { Sale } & 10 \text { units } \\ 10 & \text { Purchase } & 30 \text { units at } \$ 25 \\ 17 & \text { Sale } & 20 \text { units } \\ 30 & \text { Purchase } & 10 \text { units at } \$ 30 \end{array}$ -Under the _____ inventory method, accounting records maintain a continuously updated inventory value.

The inventory costing method that reports the earliest costs in ending inventory is

Damaged merchandise that can be sold only at prices below cost should be valued at