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Exam 6: Inventories

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Question 81

Multiple Choice

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The inventory method that assigns the most recent costs to cost of merchandise sold is

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

E) None of the above
F) All of the above

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Question 82

Multiple Choice

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During a period of falling prices,which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

A) average cost method
B) LIFO method
C) FIFO method
D) cannot tell without more information

E) None of the above
F) C) and D)

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Question 83

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During periods of rapidly rising costs,the use of the LIFO method results in illusory or inventory profits.

Use the information below to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. $\begin{array}{|c|l|c|c|}\hline \text { Date } & {\text { Blankets }} & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \\\hline 10 & \text { Sale } & 3 & \\\hline 17 & \text { Purchase } & 10 & \$ 24 \\\hline 20 & \text { Sale } & 6 & \\\hline 23 & \text { Sale } & 3 & \\\hline 30 & \text { Purchase } & 10 & \$ 30 \\\hline\end{array}$ -Assuming that the company uses the perpetual inventory system,determine the ending inventory for the month of May using the LIFO inventory cost method.

Under a periodic inventory system

Which document establishes an initial record of the receipt of the inventory?

Of the three widely used inventory costing methods FIFO,LIFO,and average cost,the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first.

A company will most likely use an estimated method of determining inventory when

The average cost method will always yield results between FIFO and LIFO.

If a company mistakenly counts less items during a physical inventory than actually exist,how will the error affect the cost of merchandise sold?

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?

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

Garrison Company uses the retail method of inventory costing.It started the year with an inventory that had a retail cost of $45,000.During the year,Garrison purchased an inventory with a retail sales value of $300,000.After performing a physical inventory,Garrison calculated the inventory at retail to be $80,000.The mark up is 100% of cost.Determine the ending inventory at its estimated cost.

The primary objectives of control over inventory are

For the year ended December 31,Depot Max's cost of merchandise sold was $56,900.Inventory at the beginning of the year was $6,540.Ending inventory was $7,250.Depot Max's number of days' sales in inventory is closest to

During the taking of its physical inventory on December 31,Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000.Indicate the effects of the misstatement on Almond Supplies Company's balance sheet and income statement for the year ended December 31.