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Exam 6: Reporting and Analyzing Inventory

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Question 101

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Computers has made the periodic inventory system more popular and easier to apply.

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Question 102

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The convergence issue that will be most difficult to resolve in the area of inventory accounting is:

A) FIFO.
B) LIFO.
C) ownership of goods.
D) costs to include in inventory.

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Question 103

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In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?

(Communication) Al Bodkin, a new employee of Crafter's Paradise, recorded $1,000 in consigned goods received as part of the firm's inventory. The goods were received one day after the end of the fiscal period, but Al reasoned that the goods should be included in inventory sooner because Crafter's paid the freight. The mistake was brought to his attention by the purchasing department who said the goods should not have been recorded as Crafter's inventory at all. Al told Sid Goza, the purchasing supervisor, that nobody needed to worry, because the mistake would cancel itself out the following month. In Al's opinion, there was no reason to get everyone excited over nothing, especially since it was monthly, and not annual, financial statements that were affected. Sid Goza has reported the problem to the accounting department. Required: You are Al's supervisor. Write a memo to Al explaining why the error should have been corrected.

IFRS defines market for lower-of-cost-or market as

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most?

Woodson Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Woodson Company uses the perpetual inventory system. Instructions (a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations) (b) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

Snug-As-A-Bug Blankets has the following inventory data: Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis for July?

Piper Pipes has the following inventory data: Assuming that a periodic inventory system is used, what is the cost of goods sold on a LIFO basis.

Use the following information for Boxter, Inc., Clifford Company, Danforth Industries, and Evans Services to answer the question "Using the LIFO adjustment, which company shows the greatest improvement in its current ratio from 2013 to 2014?"

Automobile Audio has the following inventory data: A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Ending inventory under FIFO is

Ace Company is a retailer operating in an industry that experiences inflation (rising prices) . Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using?

Wooderson Company sells many products. Gizmo is one of its popular items. Below is an analysis of the inventory purchases and sales of Gizmo for the month of March. Wooderson Company uses the periodic inventory system. Instructions (a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations) (b) Using the weighted-average method, calculate the amount assigned to the inventory on hand on March 31. (Show computations) (c) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)

The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost that is in excess of its market value.

Which of the following is an inventory costing method?

The following information was available for Bowyer Company at December 31, 2014: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Bowyer's days in inventory in 2014 was

Use the following information regarding Black Company and Red Company to answer the question "Which of the following is Red Company's "cost of goods sold" for 2014 (to the closest dollar) ?"

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Which of these would cause the inventory turnover ratio to increase the most?