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Exam 6: Inventories

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Question 71

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Use the following information to calculate cost of goods sold under each of three methods: (a)FIFO, (b)LIFO,and (c)average-cost.Assume the periodic inventory system is used.(Show your work. )

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a.FIFO: $14,760 [(90 × $80)+ (...

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Question 72

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The term cost flow refers to the association of costs with their assumed flow in the operation of a business.

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Question 73

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Use this inventory information for the month of May to answer the following questions. Assuming that a perpetual inventory system is used. -What is cost of goods sold (rounded) under the average-cost method?

Which costing method assumes that the cost of the first items acquired should be assigned to the first items sold?

McCaffy Company uses a periodic inventory system.It sold 1,000 units of Product H.Its beginning inventory and purchases during the month were as follows: Compute the cost of the ending inventory under each of three methods: (a)average-cost, (b)LIFO,and (c)FIFO.(Show your work. )

How does the perpetual inventory system differ from the periodic inventory system in the determination of cost of goods sold?

Powell's inventory turnover is 4.8.What is Powell's day's inventory on hand?

Average inventory equals $200,000,and cost of goods sold equals $442,000.Days' inventory on hand equals

The LIFO method tends to create peaks and valleys in the business cycle.

Under the perpetual inventory system,cost of goods sold is not recorded until the end of the accounting period.

Inventory turnover is a measure expressed in terms of a percentage.

Freight charges associated with the purchase of inventory normally are not included in inventory cost.

Use this inventory information for the month of March to answer the following question. -Assume that a periodic inventory system is used. What is ending inventory under the LIFO method?

If cost of goods sold is understated by $6,000 for this year,what effect will this have on income before income taxes in the following year?

Assume that during the physical count of the inventory of a large corporation for this year,$450,000 of merchandise was counted twice.The error was not detected,and the financial statements were prepared.Identify the individual statements that would be affected and explain the effect the count error would have on each.(Omit income tax considerations. )

A company has goods available for sale of $500,000 at retail and $350,000 at cost.It also had sales of $420,000 for the period.What is the estimated cost of ending inventory,using the retail method?

Ending merchandise inventory for LIFO will be the same dollar amount under a periodic inventory system as under a perpetual inventory system.

In general,when prices are rising,use of the FIFO method will result in a lower tax liability than the other methods.

In which of the following cases would the gross profit method most likely be used?

Condensed income statements for Marlin Company are shown below for two years. Compute the corrected income before income taxes for 2013 and 2014,assuming that the inventory as of the end of 2013 was mistakenly understated by $26,000.