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Exam 5: Reporting and Analyzing Inventories

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Question 61

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The consistency concept allows a company to use different accounting methods from period to period in order to maximize profits.

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Question 62

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Eastview Company uses a perpetual LIFO inventory system,and has the following purchases and sales: What is the value of ending inventory?

A) $2,730.
B) $2,750.
C) $2,670.
D) $440.
E) $380.

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Question 63

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The Community Store reported the following amounts on their financial statements for Year 1,Year 2,and Year 3: It was discovered early in Year 4 that the ending inventory on December 31,Year 1 was overstated by $6,000,and the ending inventory on December 31,Year 2 was understated by $2,500.The ending inventory on December 31,Year 3 was correct.Ignoring income taxes determine the correct amounts of cost of goods sold,net income,total current assets,and equity for each of the years Year 1,Year 2,and Year 3.

An inventory error is sometimes said to be self-correcting because it yields an offsetting error in the next period.

Regardless of what inventory method or system is used,cost of goods available for sale must be allocated between ________ and ________.

Monarch Company uses a weighted-average perpetual inventory system,and has the following purchases and sales: What is the value of ending inventory? (Round average cost per unit to 2 decimal places.)

Explain the reason a company might use the retail inventory method for valuing inventory.

Jammer Company uses a perpetual weighted average inventory system and reports the following: What is the per-unit value of ending inventory on August 31?

Determining the unit costs assigned to inventory items is one of the most important decisions in accounting for inventory.

When units are purchased at different costs over time,determining the cost per unit assigned to inventory items is simple.

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio,we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

A company made the following merchandise purchases and sales during the month of May: $\begin{array} { | l | l | l | l | } \hline \text { May 1 } & \text { Purchased } & 380 \text { units at } & \$ 15 \text { each } \\\hline \text { May 5 } & \text { Purchased } & 270 \text { units at } & \$ 17 \text { each } \\\hline \text { May 10 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \\\hline \text { May 20 } & \text { Purchased } & 300 \text { units at } & \$ 22 \text { each } \\\hline \text { May 25 } & \text { Sold } & 400 \text { units at } & \$ 50 \text { each } \\\hline\end{array}$ There was no beginning inventory.If the company uses the periodic FIFO inventory method,what would be the cost of the ending inventory?

When purchase costs regularly rise,the ________ method of inventory valuation yields the lowest gross profit and net income,providing a tax advantage.

On January 31,a company needed to estimate its ending inventory to prepare its monthly financial statements.The following information is currently available: Inventory as of January 1: $120,500 Net sales for January: $400,000 Net purchases for January: $270,500 This company typically achieves a gross profit ratio of 15%.Ending Inventory under the gross profit method would be:

Goods that are in transit and were shipped FOB destination should be included in the inventory records of the ________.

A company had inventory on November 1 of 5 units at a cost of $20 each.On November 2,they purchased 10 units at $22 each.On November 6 they purchased 6 units at $25 each.On November 8,8 units were sold for $55 each.Using the LIFO perpetual inventory method,what was the value of the inventory on November 8 after the sale?

Use the following information for Davis Company to compute inventory turnover for Year 2.

Strods Company reported the following purchases and sales for its only product.Strods uses a periodic inventory system.Determine the cost assigned to cost of goods sold using LIFO.

An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs.

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.