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Exam 6: Inventories

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Question 51

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The following units of an inventory item were available for sale during the year: The firm uses the periodic inventory system. During the year, 60 units of the item were sold. -The value of ending inventory using LIFO is

A) $1,250
B) $1,350
C) $1,375
D) $1,150

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

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Question 52

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

A) FIFO
B) LIFO
C) average
D) specific identification

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

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Question 53

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

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

During times of rising prices,which of the following is not an accurate statement?

Beginning inventory,purchases,and sales data for hammers are as follows: $\begin{array}{|c|c|l|c|c|r|}\hline & \text { Mar. } 3 & \text { Inventory } & 12 \text { units } & @ & \$ 15 \\\hline & 11 & \text { Purchase } & 13 \text { units } & @ & \$ 17 \\\hline & 14 & \text { Sale } & 18 \text { units } & & \\\hline & 21 & \text { Purchase } & 9 \text { units } & @ & \$ 20 \\\hline & 25 & \text { Sale } & 10 \text { units } & &\\\hline\end{array}$ Assuming the business maintains a perpetual inventory system,complete the inventory cards and calculate the cost of merchandise sold and ending inventory under the following assumptions: a First-in,first-out $\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Cost of Merchandise }\\\text { Purchases } \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Sold }\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Inventory }\\\begin{array}{|r|l|l|l|l|l|l|l|l|l|}\hline & & \text { Unit } & \text { Total } & & \text { Unit } \\\text { Date } & \text { Qty. } & \text { Cost } & \text { Cost } & \text { Qty. } & \text { Cost } & \text { Cost } & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} \\\hline \text { Mar. 3 } & & & & & & & & & \\\hline 11 & & & & & & & & & \\\hline 14 & & & & & & & & & \\\hline 21 & & & & & & & & & \\\hline 25 & & & & & & & & & \\\hline\end{array}\end{array}$ b Last-in,first-out $\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Cost of Merchandise }\\\text { Purchases } \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { Sold }\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Inventory }\\\begin{array}{|r|l|l|l|l|l|l|l|l|l|}\hline & & \text { Unit } & \text { Total } & & \text { Unit } \\\text { Date } & \text { Qty. } & \text { Cost } & \text { Cost } & \text { Qty. } & \text { Cost } & \text { Cost } & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} \\\hline \text { Mar. 3 } & & & & & & & & & \\\hline 11 & & & & & & & & & \\\hline 14 & & & & & & & & & \\\hline 21 & & & & & & & & & \\\hline 25 & & & & & & & & & \\\hline\end{array}\end{array}$

When merchandise inventory is shown on the balance sheet,both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

Stevens Company started the year with an inventory cost of $145,000.During the month of January,Stevens purchased inventory that cost $53,000.January sales totaled $140,000.Estimated gross profit is 35%.The estimated ending inventory as of January 31 is

If the revenues are correctly reported and the gross profit of a company is understated,what is the effect on stockholders' equity?

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

While taking a physical inventory,a company counts its inventory as less than the actual amount on hand.How will this error affect the income statement?

Use the information below to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. $\begin{array}{|c|l|c|c|}\hline \text { Date } & {\text { Blankets }} & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \\\hline 10 & \text { Sale } & 3 & \\\hline 17 & \text { Purchase } & 10 & \$ 24 \\\hline 20 & \text { Sale } & 6 & \\\hline 23 & \text { Sale } & 3 & \\\hline 30 & \text { Purchase } & 10 & \$ 30 \\\hline\end{array}$ -Assuming that the company uses the perpetual inventory system,determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.

The inventory costing method that reports the earliest costs in ending inventory is

If a company values inventory at the lower of cost or market,which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole.

Assume that three identical units of merchandise were purchased during October,as follows: $\begin{array}{|l|r|l|c|c|}\hline & & & \text { Units } & \text { Cost } \\\hline \text { October } & 5 & \text { Purchase } & 1 & \$ 5 \\\hline & 12 & \text { Purchase } & 1 & 13 \\\hline & 28 & \text { Purchase } & \underline{1} & 15 \\\hline \text { Total } & & & \underline{3} & \$ 33 \\\hline\end{array}$ Assume one unit is sold on October 31 for $28.Determine cost of merchandise sold,gross profit,and ending inventory under the LIFO method.

The units of an item available for sale during the year were as follows: $\begin{array}{llll}\text { Jan. } & 1 & \text { Inventory } & \quad\quad & 10 \text { units at } \$ 25 \\\text { Apr. } & 4 & \text { Purchase } &\quad\quad & 15 \text { units at } \$ 24 \\\text { May. } & 20 & \text { Purchase } &\quad\quad & 20 \text { units at } \$ 28 \\\text { Oct. } & 30 & \text { Purchase } & \quad\quad &18 \text { units at } \$ 30\end{array}$ There are 19 units of the item in the physical inventory at December 31.The periodic inventory system is used.Determine the ending inventory cost using LIFO.

The weighted average inventory cost flow method is the least used of the inventory costing methods.

The number of days' sales in inventory measures

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

It's not unusual for large companies to use different inventory costing methods for different segments of its inventory.