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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

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Question 31

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A company using the periodic inventory system correctly recorded a purchase of merchandise, but the merchandise was not included in the physical inventory count at the end of the accounting period. The error caused which of the following?

A) An understatement of both net income and inventory.
B) An overstatement of inventory, purchases, and accounts payable.
C) An understatement of inventory, purchases, and accounts payable.
D) An overstatement of net income and inventory.

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Question 32

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The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

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Question 33

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Manufactured goods transferred out of work in process are reported as finished goods on the balance sheet.

QV-TV, Inc. provided the following items in its notes to the financial statements for the year-end 2016: Cost of goods sold was $22 billion under FIFO costing and the inventory value under FIFO costing was $2.1 billion. The LIFO Reserve for year-end 2015 was $0.6 billion and at year-end 2016 it had increased to $0.8 billion. What is the LIFO inventory value at year-end 2016?

In a period of increasing costs, the LIFO Reserve would be deducted from the ending inventory under LIFO costing to convert it to ending inventory under FIFO costing.

Redford Company hired a new store manager in October 2015, who determined the ending inventory on December 31, 2015, to be $50,000. In March, 2016, the company discovered that the December 31, 2015 ending inventory should have been $58,000. The December 31, 2016, inventory was correct. Ignore income taxes. Required: Complete the following table to show the effects of the inventory error on the four amounts listed. Give the amount of the discrepancy and indicate whether it was overstated (O), understated (U), or had no effect (N).

Under the LIFO cost flow assumption during a period of rising costs, which of the following is false?

Inventory inspection costs are reported as operating expenses on the income statement.

Inventory turnover is calculated as cost of goods sold divided by average inventory.

A company reported the following information for its most recent year of operation: purchases, $100,000; beginning inventory, $20,000; and cost of goods sold, $110,000. How much was the company's ending inventory?

On December 15, 2016, Transport Company accepted delivery of merchandise that it purchased on credit. As of December 31, 2016, the company had neither recorded the transaction nor included the merchandise in its ending inventory amount because the seller's invoice had not been received. The effect of this omission on its balance sheet at December 31, 2016, (end of the accounting period) was that

Prepare the journal entries for the transactions listed below under each: Periodic inventory system and Perpetual inventory system. A.Purchased merchandise for cash, $1,000. B.Sold merchandise for $600 cash that had cost $480 (cost is 80% of the sales price). C.Accepted a sales return from a customer: sales price $30.A cash refund was given to the customer.The goods were returned to regular inventory. D.Returned goods to the vendor because they did not meet our specification; $50 cash refund was received.

If two companies each use different inventory accounting methods, the companies can be made comparable from information reported in the financial statements by

Lauer Corporation uses the periodic inventory system and has provided the following information about one of its laptop computers: During the year, Lauer sold 750 laptop computers. What was cost of goods sold using the FIFO cost flow assumption?

Barrington Company must write down its inventory from its cost of $260,000 to its net realizable value of $248,000 at December 31, 2016. The inventory will all be sold in the year 2017. Which of the following provides a correct effect of the write-down?

Boulder, Inc. is computing its inventory at December 31, 2016. The following information relates to the five major inventory items regularly stocked for resale: Required: Using the lower of cost or market rule (LCM or net realizable value), compute the total valuation for each inventory item at December 31, 2016, and the total inventory valuation.

Coulter Company uses the LIFO inventory method under the periodic inventory system. The following data were available for the month of January, 2016: Required: Compute the following: 1. Beginning inventory 2. Ending inventory 3. Cost of goods available for sale 4. Cost of goods sold 5. Gross profit

RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was ending inventory using the LIFO cost flow assumption under a periodic inventory system?

Coleman Company has provided the following information: beginning inventory, $100,000; cost of goods sold, $450,000; and ending inventory, $80,000. How much were Coleman's inventory purchases?

A $25,000 overstatement of the 2016 ending inventory was discovered after the financial statements for 2016 were prepared. Which of the following describes the effect of the inventory error on the 2016 financial statements?