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Exam 6: Inventories

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Question 81

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If Addison uses LIFO, the September 30 inventory balance is

A) $800
B) $650
C) $750
D) $700

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

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Question 82

Multiple Choice

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Which of the following measures the relationship between cost of goods sold and the amount of inventory carried during the period?

A) inventory turnover
B) fixed asset turnover
C) retail method of inventory costing
D) gross profit method of inventory costing

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

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Question 83

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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 FIFO is

When using a perpetual inventory system, the journal entry to record the cost of goods sold is:

If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?

When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.

The units of Manganese Plus available for sale during the year were as follows: ​ There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.

The units of an item available for sale during the year were as follows: ​ There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method. Show your work.

If the estimated rate of gross profit is 30%, what is the estimated cost of the inventory on September 30, based on the following data? $\begin{array} { l l r } \text { Sep. } 1 & \text { Inventory (at cost) } & \$ 125,000 \\\text { Sep. 1-30 } & \text { Purchases, net (at cost) } & 300,000 \\\text { Sep. 1-30 } & \text { Sales } & 150,000\end{array}$

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

Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. ​ May 1 Purchased 500 units @ $25.00 each 4 Purchased 300 units @ $24.00 each 6 Sold 400 units @ $38.00 each 8 Purchased 700 units @ $23.00 each 13 Sold 450 units @ $37.50 each 20 Purchased 250 units @ $25.25 each 22 Sold 275 units @ $36.00 each 27 Sold 300 units @ $37.00 each 28 Purchased 550 units @ $26.00 each 30 Sold 100 units @ $39.00 each ​ Calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the following inventory methods: 1. FIFO perpetual 2. FIFO periodic 3. LIFO perpetual 4. LIFO periodic 5. Average cost periodic (round average to nearest cent)

The following lots of a Commodity P were available for sale during the year. Use this information to answer the questions that follow. ​ ​ The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. -What is the year-end inventory balance using the FIFO method? Use the information provided in the table to answer this question

If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of goods sold?

Taking a physical count of inventory

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

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is

A perpetual inventory system is an effective means of control over inventory.

The inventory data for an item for November are: $\begin{array} { r l l } \text { Nov. } 1 & \text { Inventory } & 20 \text { units at } \$ 19 \\4 & \text { Sold } & 10 \text { units } \\10 & \text { Purchased } & 30 \text { units at } \$ 20 \\17 & \text { Sold } & 20 \text { units } \\30 & \text { Purchased } & 10 \text { units at } \$ 21\end{array}$ Using a perpetual system, what is the cost of the goods sold for November if the company uses FIFO?