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Exam 6: Inventories

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Question 31

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Storme Shutters has the following inventory information. $\begin{array} { r l r } \text { Nov. } 1 & \text { Inventory } & 30 \text { units } @\$ 8.00 \\8 & \text { Purchase } & 120 \text { units }@\$ 8.30 \\17 & \text { Purchase } & 60 \text { units } @ \$ 8.70 \\25 & \text { Purchase } & 90 \text { units }@\$ 8.80\end{array}$ A physical count of merchandise inventory on November 30 reveals that there are 80 units on hand. Assume a periodic inventory system is used. Cost of goods sold (rounded to the nearest dollar) under the average-cost method is

A) $1758.
B) $1870.
C) $1859.
D) $1812.

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Question 32

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The lower-of-cost-or-market basis of accounting for inventories should be applied when the ______________ cost of the goods is lower than its cost.

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Question 33

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Which costing method cannot be used to determine the cost of inventory items before lower-of-cost-or-market is applied?

Jill Tango is studying for the next accounting mid-term examination. What should Jill know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of "market" in the lower-of-cost-or-market method?

Pasquale has the following inventory information. $\begin{array}{rllr}\text { July } 1 & \text { Beginning Inventory } & 20 \text { units at } \$ 19 & \$ 380 \\7 & \text { Purchases } & 70 \text { units at } \$ 20 & 1,400 \\22 & \text { Purchases } & 10 \text { units at } \$ 24 & 240\\& & &\$2,020\end{array}$ A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the FIFO inventory method the amount allocated to cost of goods sold for July is

Inventory items on an assembly line in various stages of production are classified as

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

Henri Company's inventory records show the following data: $\begin{array} { l r r } & \underline { \text { Units } } & \underline { \text { Unit Cost } } \\\text { Inventory, January 1 } & 10,000 & \$ 9.20 \\\text { Purchases: June 18 } & 9,000 & 8.00 \\\text { November 8 } & 6,000 & 7.25\end{array}$ A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. If the company uses FIFO what is the gross profit for the period?

In a period of inflation the cost flow method that results in the lowest income taxes is the

A company may use more than one inventory costing method concurrently.

Henri Company's inventory records show the following data: $\begin{array} { l r r } & \underline { \text { Units } } & \underline { \text { Unit Cost } } \\\text { Inventory, January 1 } & 10,000 & \$ 9.20 \\\text { Purchases: June 18 } & 9,000 & 8.00 \\\text { November 8 } & 6,000 & 7.25\end{array}$ A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. The weighted-average cost per unit is

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

Oscar Industries has the following inventory information. $\begin{array}{rll}\text { July } 1 & \text { Beginning Inventory } & 40 \text { units at } \$ 110 \\5 & \text { Purchases } & 240 \text { units at } \$ 112 \\14 & \text { Sale } & 160 \text { units } \\21 & \text { Purchases } & 120 \text { units at } \$ 115 \\30 & \text { Sale } & 150 \text { units }\end{array}$ Assuming that a periodic inventory system is used what is the amount allocated to ending inventory on a FIFO basis?

Under IFRS companies can choose which inventory system? $\begin{array} { l l l } & \underline{ \text { LIFO }} & \underline{ \text { FIFO }} \\\end{array}$ A) $\begin{array} { l l l } &\text { Yes } & &\text { No } \\\end{array}$ B) $\begin{array} { l l l } &\text { Yes } && \text { Yes } \\\end{array}$ C) $\begin{array} { l l l }& \text { No } && \text { Yes } \\\end{array}$ D) $\begin{array} { l l l } &\text { No } && \text { No }\end{array}$

Shannon's Department Store prepares monthly financial statements but only takes a physical count of merchandise inventory at the end of the year. The following information has been developed for the month of July: $\begin{array} { l r r } & \text { At Cost } & \text { At Retail } \\\text { Beginning inventory } & \$ 36,000 & \$ 50,000 \\\text { Merchandise purchases }& 99,000 & 150,000\end{array}$ The net sales for July amounted to $150000. Instructions Use the retail inventory method to estimate the ending inventory at cost for July. Show all computations to support your answer.

Which one of the following inventory methods is often impractical to use?

Which of the following statements is true regarding inventory cost flow assumptions?

In the first month of operations Mordica Company made three purchases of merchandise in the following sequence: (1) 200 units at $6 (2) 300 units at $7 and (3) 400 units at $9. Assuming there are 300 units on hand compute the cost of the ending inventory under (1) the FIFO method and (2) the LIFO method. Mordica uses a periodic inventory system.

Nicholas Industries had the following inventory transactions occur during 2014: $\begin{array} { l l c c } && \text { Units } & \text { Cost/unit } \\2 / 1 / 16 & \text { Purchase } & 54 & \$ 45 \\3 / 14 / 16 & \text { Purchase } & 93 & \$ 47 \\5 / 1 / 16 & \text { Purchase } & 66 & \$ 49\end{array}$ The company sold 140 units at $65 each and has a tax rate of 30%. Assuming that a periodic inventory system is used what is the company's gross profit using LIFO? (rounded to whole dollars)

In periods of inflation phantom or paper profits may be reported as a result of using the