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Exam 6: Inventories

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Question 31

True/False

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Generally, the lower the number of days' sales in inventory, the better.

A) True
B) False

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Question 32

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Ending inventory is made up of the oldest purchases when a company uses

A) first-in, first-out
B) last-in, first-out
C) average cost
D) retail method

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. $\begin{array} { l l } \text { Beginning inventory } & 10 \text { units at } \$ 55 \\\text { First purchase } & 25 \text { units at } \$ 60 \\\text { Second purchase } & 30 \text { units at } \$ 65 \\\text { Third purchase } & 15 \text { units at } \$ 70\end{array}$ 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.

During the taking of its physical inventory on December 31, Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000. Indicate the balance sheet effects of the error on inventory, current assets, total assets, and stockholders' equity. Also indicate the income statement effects of the error on cost of goods sold, gross profit, and net income.

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. -Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the average cost periodic inventory method. Round the average to the nearest cent.

Match each description to the appropriate document used for inventory control.

Inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

Beginning inventory, purchases, and sales for an inventory item are as follows: ​ Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the goods sold for the September 30 sale and (b) the inventory on September 30.

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 the weighted average cost method, what is the inventory balance at the end of September?

Complete the chart, indicating whether LIFO or FIFO would give the highest and lowest amounts for each item, assuming a period of increasing costs.

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

Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the goods sold.

Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The markup is 100% of cost. Determine the ending inventory at its estimated cost.

What is the amount of cost of goods sold for the year according to the FIFO method?

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account: ​

Which of the following is used to analyze the efficiency and effectiveness of inventory management?

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.

Assume that three identical units of merchandise were purchased during October, as follows: $\begin{array} { | l | c | l | c | c | } \hline & & & \text { Units } & \text { Cost } \\\hline \text { October } & 5 & \text { Purchase } & 1 & \$ 5 \\\hline & 12 & \text { Purchase } & 1 & 13 \\\hline & 28 & \text { Purchase } & \underline { 1 } & \underline { 15 } \\\hline \text { Total } & & & 3 & \$ 33 \\\hline\end{array}$ -One unit is sold on October 31 for $28. Using the table provided, determine cost of goods sold under the average cost method.

Beginning inventory, purchases, and sales for an inventory item are as follows: ​ $\begin{array}{|l|l|}\hline \text { Beginning inventory } & 150 \text { units } @ \$ 755 \\\hline \text { Sale } & 120 \text { units } \\\hline \text { First purchase } & 400 \text { units } @ \$ 785 \\\hline \text { Sale } & 200 \text { units } \\\hline \text { Second purchase } & 300 \text { units }(\$ 805 \\\hline \text { Sale } & 290 \text { units } \\\hline\end{array}$ ​ The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO?