FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Reporting and Analyzing Inventories

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

A company had inventory of 5 units at a cost of $20 each on November 1.On November 2,they purchased 10 units at $22 each.On November 6 they purchased 6 units at $25 each.On November 8,they sold 18 units for $54 each.Using the LIFO perpetual inventory method,what was the cost of the 18 units sold?

A) $395
B) $410
C) $450
D) $510
E) $520

F) A) and E)
G) B) and E)

Correct Answer

verified

Show Answer

Question 52

True/False

Review LaterAdd Note

Review Later

In applying the lower of cost or market method to inventory valuation,market is defined as the current replacement cost.

A) True
B) False

Correct Answer

verified

Show Answer

Question 53

True/False

Review LaterAdd Note

The assignment of costs to the cost of goods sold and to inventory under the FIFO is the same for both the perpetual and periodic inventory systems.

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Merchandise inventory includes:

Using the retail inventory method,if the cost to retail ratio is 60% and ending inventory at retail is $45,000,then estimated ending inventory at cost is $27,000.

The understatement of the ending inventory balance causes:

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Identify the items that are included in merchandise inventory.(In your answer address the special situations of goods in transit,consigned goods and damaged goods.)

In a period of rising prices,FIFO usually gives a lower taxable income,which leads to an advantage when it comes to paying income tax.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

When LIFO is used with the periodic inventory system,cost of goods sold is assigned costs from the most recent purchases at the point of each sale,rather than from the most recent purchases for the period.

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive,customer-made inventory.

Damaged and obsolete goods:

A company that uses a perpetual inventory system made the following cash purchases and sales.There was no beginning inventory. $\begin{array} { | l | l | } \hline \text { January 1: } & \text { Purchased } 100 \text { units at \$10per unit } \\\hline \text { February 5: } & \text { Purchased 60 units at \$12per unit } \\\hline \text { March 16: } & \text { Sold40 Units for \$16per unit } \\\hline\end{array}$ Prepare the general journal entries to record the March 16 sale using the LIFO inventory valuation method.

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: $\begin{array}{|l|r|r|}\hline & \text { At Cost } & { \text { At Retail } } \\\hline \text { Beginning-of-period inventory } & \$ 148,600 & \$ 245,200 \\\hline \text { Net purchases } & 677,400 & 1,229,800 \\\hline \text { Sales } & & 1,200,000 \\\hline\end{array}$ (a) What is the cost-to-retail ratio using the retail method? (b) What is the estimated cost of the ending inventory?

There is no simple rule for inventory turnover,except that a high ratio is preferable provided inventory is adequate to meet demand.

A company's cost of inventory was $317,500.Due to phenomenal demand for this product,the market value of its inventory increased to $323,000.According to the consistency principle,this company should write up the value of its inventory.

The inventory turnover ratio is calculated as:

A company's store was destroyed by a fire on February 10 of this year.The only information for the current period that could be salvaged included the following: Beginning inventory,January 1: $34,000 Purchases to date: $118,000 Sales to date: $140,000 Historically,the company's gross profit ratio has been 30%.Estimate the value of the destroyed inventory using the gross profit method.