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Exam 6: Reporting and Analyzing Inventory

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Question 81

Multiple Choice

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A company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

A) $1,134.
B) $1,180.
C) $1,100.
D) $1,120.

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Question 82

Multiple Choice

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Inventory costing methods place primary reliance on assumptions about the flow of

A) good.
B) costs.
C) resale prices.
D) values.

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Question 83

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Shellan Kamp Company identifies the following items for possible inclusion in the physical inventory. Indicate whether each item should be included or excluded from the inventory taking. 1. Goods shipped on consignment by Shellan Kamp to another company. 2. Goods in transit from a supplier shipped FOB destination. 3. Goods shipped via common carrier to a customer with terms FOB shipping point. 4. Goods held on consignment from another company.

Under the periodic inventory system, both the sales amount and the cost of goods sold amount are recorded when each item of merchandise is sold.

When the market value of inventory is lower than its cost, the inventory is written down to its market value.

In a perpetual inventory system,

Carryable CDs has the following inventory data: A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Cost of goods sold under LIFO is

GAAP defines market for lower-of-cost-or market essentially as

When is a physical inventory usually taken?

(Ethics) Angie and Neal Fry are department managers in the housewares and shoe departments, respectively, for Calhouns, a large department store. Neal has observed Angie taking inventory from her own department home, apparently without paying for it. He hesitates confronting Angie because he is due to be promoted, and needs Angie's recommendation. He also does not want to notify the company management directly, because he doesn't want an ethics investigation on his record, believing that it will give him a "goody-goody" image. This week, Angie tried on several pairs of expensive running shoes in his department before finding a pair that suited her. She did not, however, buy them. That very pair was missing this morning. Calhouns recently replaced its old periodic inventory system with a perpetual inventory system using scanners and bar codes. In addition, the annual inventory is to be replaced by a monthly inventory conducted by an independent firm. On hearing the news of the changes, Neal relaxes. "The system will catch Angie now," he says to himself. Required: 1. Is Neal's attitude justified? Why or why not? 2. What, if any, action should Neal take now?

Snug-As-A-Bug Blankets has the following inventory data: Assuming that a perpetual inventory system is used, what is ending inventory (rounded) under the average cost method for July?

Delightful Discs 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 LIFO is

At December 31, 2014 Howell Company's inventory records indicated a balance of $858,000. Upon further investigation it was determined that this amount included the following: $\bullet$ $168,000 in inventory purchases made by Howell shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd $\bullet$ $111,000 in goods sold by Howell with terms FOB destination on December 27^th. The goods are not expected to reach their destination until January 6^th. $\bullet$ $9,000 of goods received on consignment from Westwood Company What is Howell's correct ending inventory balance at December 31, 2014?

Your former college roommate is opening a new retail store and asks you "Which inventory costing method should I use?" What is your response? Include a comparison of the tax effect, balance sheet effect, and income statement effect for FIFO versus LIFO.

Barnett Company had the following records: What is Barnett's inventory turnover for 2013? (rounded)

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

Sassy Saxophones has the following inventory data: Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis.

Accountants believe that the write down from cost to market should not be made in the period in which the price decline occurs.

Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods?

Condensed income statements for Swift Corporation are shown below for two years. Compute the corrected net income for 2013 and 2014 assuming that the inventory as of the end of 2013 was mistakenly understated by $7,000. 2013 $ __________ 2014 $__________