FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Inventories and Cost of Sales

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $145,000, then estimated ending inventory at cost is $207,143.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

All of the following statements regarding U.S. GAAP and IFRS are true except:

A) Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory.
B) Both U.S. GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded.
C) Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost.
D) For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company owns and holds for sale.
E) With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.

F) A) and B)
G) A) and C)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $80,000 Net purchases: $78,000 The company's gross margin ratio is 25%. -Using the gross profit method, the cost of goods sold would be:

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee. The consignee sells goods for the owner.

Raleigh Co. has the following products in its ending inventory. Compute the lower of cost or market total for inventory applied separately to each product. $\begin{array} { | l | l | l | l | } \hline \text { Praduct } & \text { Quantity } & \text { Cast per unit } & \text { Market per unit } \\\hline \text { Jelly } & 150 & \$ 2.00 & 2.15 \\\hline \text { Jam } & 370 & \$ 2.65 & 2.50 \\\hline \text { Marmal ade } & 260 & \$ 3.10 & 3.05 \\\hline\end{array}$

Merchandise inventory includes:

Physical counts of inventory:

Jammer Company uses a weighted average perpetual inventory system and reports the following: $\begin{array} { | l l | l | l | } \hline \text { August } & 2 & \text { Purchase } & 10 \text { units at } \$ 12 \text { per unit. } \\\hline \text { August } & 18 & \text { Purchase } & 15 \text { units at } \$ 15 \text { per unit. } \\\hline \text { August } & 29 & \text { Sale } & 20 \text { units. } \\\hline \text { August } & 31 & \text { Purchase } & 14 \text { units at } \$ 16 \text { per unit. } \\\hline\end{array}$ What is the per-unit value of ending inventory on August 31?

Some companies use the ________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

A company had the following purchases and sales during its first year of operations: $\begin{array} { | l | l | l | } \hline & \text { Purchases } & \text { Sal es } \\\hline \text { January. } & 10 \text { units at } \$ 120 & 6 \text { units } \\\hline \text { February. } & 20 \text { units at } \$ 125 & 5 \text { units } \\\hline \text { May. } & 15 \text { units at \$130 } & 9 \text { units } \\\hline \text { September: } & 12 \text { units at \$135 } & 8 \text { units } \\\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \\\hline\end{array}$ On December 31, there were 26 units remaining in ending inventory. Using the Periodic LIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accounting principles require that inventory be reported at the market value (cost) of replacing inventory when market value is lower than cost.

Monarch Company uses a weighted-average perpetual inventory system, and has the following purchases and sales: $\begin{array} { | l | l | } \hline \text { January 1 } & 20 \text { units were purchased at \$10 per unit. } \\\hline \text { January 12 } & 12 \text { units were sold. } \\\hline \text { January 20 } & 18 \text { units were purchased at \$11 per unit. } \\\hline\end{array}$ - What is the value of ending inventory? (Round average cost per unit to 2 decimal places, and final answer to the nearest dollar.)

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Since an error in the period-end inventory causes an offsetting error in the next period:

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.

Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $100,000 in sales during the second quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:

On December 31 of the current year, Plunkett Company reported an ending inventory balance of $215,000. The following additional information is also available: • ^{Plunkett sold and shipped goods costing $38,000 to Savannah Enterprises on December 28 with} shipping terms of FOB shipping point. The goods were not included in the ending inventory amount of $215,000. • ^{Plunkett purchased goods costing $44,000 on December 29. The goods were shipped FOB} destination and were received by Plunkett on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in the ending inventory balance of $215,000. • ^{Plunkett's ending inventory balance of $215,000 included $15,000 of goods being held on} consignment from Carole Company. (Plunkett Company is the consignee.) • ^{Plunkett's ending inventory balance of $215,000 did not include goods costing $95,000 that were} shipped to Plunkett on December 27 with shipping terms of FOB destination and were still in transit at year-end. Based on the above information, the amount that Plunkett should report in ending inventory on December 31 is:

Hasham purchases inventory from overseas and incurs the following costs: the merchandise cost is $80,000, credit terms 1/10, n/30, applicable only to the $80,000; FOB shipping point freight charges are $2,500; insurance during transit is $300; and import duties are $1,500. Hasham paid within the discount period. Compute the cost that should be assigned to the inventory.

A company's inventory records report the following: $\begin{array} { | l | l | l | } \hline \text { August 1 } & \text { Begining balance } & 15 \text { units @ \$12 } \\\hline \text { August 5 } & \text { Purchase } & 10 \text { units @ \$13 } \\\hline \text { August 12 } & \text { Purchase } & 20 \text { units @ \$14 } \\\hline\end{array}$ On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?