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Exam 7: Inventories

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Question 61

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Match each situation to its impact (a-c) on the current year's net income. -Merchandise held on consignment was included in the count of ending inventory.

A) Net income for the current year will be overstated.
B) Net income for the current year will be understated.
C) There will be no error effect on net income.

D) All of the above
E) A) and B)

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Question 62

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Direct disposal costs do not include special advertising or sales commissions.

A) True
B) False

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Question 63

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The units of an item available for sale during the year were as follows:​ There are 48 units of the item in the physical inventory at December 31.The periodic inventory system is used.Determine the inventory cost by (a)the first-in,first-out method, (b)the last-in,first-out method,and (c)the average cost method.Show your work.

The following data were taken from Castle,Inc.Determine the inventory turnover ratio and the days' sales in inventory for Castle Inc.Round to two decimal places.

Excess inventory results in all of the following except

​ Match each description to the appropriate cost flow assumption (a-c) . -Produces results that are similar to the specific identification method

Under the _____ inventory method,accounting records maintain a continuously updated inventory value.

During times of rising prices,which of the following is not an accurate statement?

Matching Match each description to the appropriate document used for inventory control (a-c) . -Establishes an initial record of the receipt of inventory

Assume that three identical units of merchandise were purchased during October,as follows:​​ Assume one unit is sold on October 31 for $28.Determine cost of merchandise sold,gross profit,and ending inventory under the average cost method.

If the revenues are correctly reported and the gross profit of a company is understated,what is the effect on owner's equity?

Match each description to the appropriate inventory system (a or b) .​ -Average cost is rarely used with this system.

When merchandise inventory is shown on the balance sheet,both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

List three different security measures taken to safeguard inventory.

Safeguarding inventory from damage or theft is a primary objective for the control of inventory.If you were running a clothing store,name three specific controls you would implement to guard inventory from theft.

If a company mistakenly counts less items during a physical inventory than actually exist,how will the error affect the cost of merchandise sold?

Use the information below to answer the following questions. ​ The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. -What is the amount of inventory at the end of the year rounded to the nearest dollar using the average cost method?

All of the following are reasons to use an estimated method of costing inventory except​

List the internal control objectives illustrated by the following:

When merchandise sold is assumed to be in the order in which the purchases were made,the company is using