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Exam 6: Inventories

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Question 71

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"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by the company.

A) True
B) False

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Question 72

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Three identical units of merchandise were purchased during May, as follows: Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

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Question 73

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The following lots of a Commodity P were available for sale during the year. Use this information to answer the questions that follow.​ Beginning inventory 5 units at $61 First purchase 15 units at $63 Second purchase 10 units at $74 Third purchase 10 units at $77 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

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

Match each description to the appropriate cost flow assumption (a-c). -Produces the highest gross profit when costs are decreasing A)FIFO B)LIFO C)Weighted average

Beginning inventory, purchases, and sales data for tennis rackets are as follows: Complete the inventory cost card assuming the business maintains a perpetual inventory system and determine the cost of goods sold and ending inventory using the weighted average cost method.​

Match each situation to its impact (a-c) on the current year's net income. a.Net income for the current year will be overstated.b.Net income for the current year will be understated.c.There will be no error effect on net income. -A consignor included merchandise in the hands of the consignee in ending inventory.

Hampton Co. took a physical count of its inventory on December 31. In addition, it had to decide whether or not the following items should be added to this count.(a)Inventory on hand had been sold earlier in the year but had been returned by customers for various warranty repairs.(b)Hampton Co. sent merchandise on a consignment basis on December 31 just prior to the physical count.(c)On December 22, Hampton Co. ordered merchandise on FOB destination terms. The merchandise was shipped by the supplier on December 30 but had not been received by December 31.(d)On December 27, Hampton Co. ordered merchandise on FOB shipping point terms. The merchandise was shipped on December 29 but had not been received by December 31.(e)Merchandise sold FOB shipping point on December 31 was picked up by the freight company just before closing on December 31.(f)Merchandise shipped to a customer FOB destination was picked up by the freight company on December 28 but had not arrived at its destination as of December 31.​ Answer "yes" or "no" to indicate which items should and should not be added to the December 31 inventory count.

All of the following are reasons to use an estimated method of costing inventory except

Which document establishes an initial record of the receipt of the inventory?​

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account: Calculate the cost of the ending inventory at June 30, using (a) the first-in, first-out (FIFO) method and (b) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory.

The units of an item available for sale during the year were as follows: There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

If inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is

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

The inventory method that assigns the most recent costs to cost of goods sold is

Match each situation to its impact (a-c) on the current year's net income. a.Net income for the current year will be overstated.b.Net income for the current year will be understated.c.There will be no error effect on net income. -Beginning inventory was understated.

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?

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory.

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

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.