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Exam 6: Inventories

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Question 41

Multiple Choice

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If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity?

A) Understated
B) Overstated
C) Correctly Stated
D) None of the above

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

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Question 42

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Use of the retail inventory method requires taking a physical count of inventory.

A) True
B) False

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Question 43

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Safeguarding inventory and proper reporting of the inventory in the books are the reasons for controlling the inventory.

When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the FIFO method?

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

Use the following information 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. Assuming that the company uses the perpetual inventory system, determine the ending inventory for the month of May using the LIFO inventory cost method.

Based on the following information: compute (a) Inventory turnover; (b) Average daily cost of merchandise sold; and (c) Number of days' sales in inventory for 2011. Use a 365-day year. (d) If an inventory turnover of 12 is average for the industry, how is this company doing?

Basic inventory data for April 30 are presented below for a business that employs the lower of cost or market basis of inventory valuation.

The lower of cost or market is a method of inventory valuation.

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. Indicate which items should be added to (answer: yes) and which items should not be added to (answer: no) the December 31 inventory count.

On the basis of the following data, estimate the cost of the merchandise inventory at March 31 by the retail method:

Which of the following companies would be more likely to use the specific identification inventory costing method?

Beginning inventory, purchases, and sales for Product - Weld TM are as follows: Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30.

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.

On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order.

If a company uses the periodic inventory system to cost its inventory, the gross profit method is a method that can be used to check on theft when the actual inventory is taken by the company.

Determine the total value of the merchandise using Net Realizable Value:

On the basis of the following data for Barker Industries as of December 31, 2011, determine the value of the inventory at the lower of cost or market. Also, show how the merchandise inventory would appear on the balance sheet (assume that the cost was determined by the FIFO method).

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