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Exam 6: Inventories

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Question 51

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Taking a physical count of inventory

A) is not necessary when a periodic inventory system is used
B) should be dine near year-end
C) has no internal control relevance
D) is not necessary when a perpetual inventory system is used

E) A) and B)
F) A) and C)

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Question 52

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During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method.

A) True
B) False

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Question 53

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Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory.

One effect of carrying too much inventory is risk that customers will change their buying habits.

Most large companies will use only one inventory costing methods for all of its different segments.

If the cost of an item of inventory is $50 and the current replacement cost is $57, the amount included in inventory according to the lower of cost or market is

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

Complete the following table using the perpetual FIFO method of inventory flow.

The following data were taken from the annual reports of Jong Inc., a manufacturer of fireworks, and Hobson Inc., a manufacturer of computers. (a) Determine the (1) inventory turnover and (2) number of day's sales in inventory for Jong and Hobson. Round your answer to two decimal places. (b) How would you expect these measures to compare between the companies? Why?

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using

Cost flow is in the reverse order in which costs were incurred when using

A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,700,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?

Beginning inventory, purchases and sales data for widgets are as follows: 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.

The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year using the average cost method?

While taking a physical inventory, a company counts their inventory as less than the actual amount on hand. How will this error affect the income statement?

List the internal control objectives illustrated by the following:

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

The inventory data for an item for November are: Using a perpetual system, what is the cost of the merchandise sold for November if the company uses FIFO?

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