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Exam 6: Inventories

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Question 31

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During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be

A) assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000
B) assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement
C) assets, retained earnings, and net income all overstated by $70,000
D) assets and retained earnings overstated by $70,000; and net income understated by $70,000

E) A) and D)
F) A) and C)

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Question 32

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For the year ended December 31, Depot Max's cost of goods sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

A) 8.7
B) 7.8
C) 8.3
D) 44.0

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

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Question 33

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The following units of an inventory item were available for sale during the year. Use this information to answer the following questions.Beginning inventory 10 units at $55 First purchase 25 units at $60 Second purchase 30 units at $65 Third purchase 15 units at $70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold.​ -The ending inventory cost using FIFO is

Match each description to the appropriate document used for inventory control (a-c). -last document in the chain, use to compare all three for accuracy A)Receiving report B)Vendor's invoice C)Purchase order

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

Match each description to the appropriate cost flow assumption (a-c). -Widely used for tax purposes A)FIFO B)LIFO C)Weighted average

Three identical units of merchandise were purchased during July, as follows: Assume one unit sells on July 28 for $45.Determine the gross profit, cost of goods sold, and ending inventory on July 31 using (a) first-in, first-out, (b) last-in, first-out, and (c) average cost flow methods.

The following units of an inventory item were available for sale during the year. Use this information to answer the following questions.Beginning inventory 10 units at $55 First purchase 25 units at $60 Second purchase 30 units at $65 Third purchase 15 units at $70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold.​ -The ending inventory cost using LIFO is

Match each description to the appropriate cost flow assumption (a-d). -Cost flow matches the unit sold to the unit purchased. A)Weighted average B)First-in, first-out (FIFO)c.Last-in, first-out (LIFO)d.Specific identification

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

If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Goods Sold (COGS) , an equivalent equation can be written as

Basic inventory data for April 30 are presented below for a business that employs the lower-of-cost-or-market basis of inventory valuation to each category. What is the amount of reduction in the inventory at April 30 attributable to market decline?

The method of estimating inventory that uses records of the selling prices of the merchandise is called

Assume that three identical units of merchandise were purchased during October, as follows: -One unit is sold on October 31 for $28. Using the table provided, what is the cost of goods sold under the LIFO method?

If inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

Damaged merchandise that can be sold only at prices below cost should be valued at

Addison, Inc. uses a perpetual inventory system. Below is information about one inventory item for the month of September. -Use the information in the table to answer this question. If Addison uses FIFO, the September 17 entry for cost of goods sold would be:

Based on the following data, calculate the estimated cost of the inventory on March 31 using the retail method.

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

The beginning inventory and purchases of an item for the period were as follows: The company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine the cost of the 15 units in the inventory by each of the following methods, presenting details of your computations: (a) first-in, first-out; (b) last-in, first-out; (c) average cost. Do not round your intermediate calculations. Round your final answer to two decimal places.