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Exam 6: Inventories

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Question 61

True/False

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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.

A) True
B) False

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Question 62

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During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory.

A) average method
B) LIFO method
C) FIFO method
D) can not tell without more information

E) B) and D)
F) A) and D)

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Question 63

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Beginning inventory, purchases and sales data for hammers are as follows: Assuming the business maintains a perpetual inventory system, complete the inventory cards and calculate the cost of merchandise sold and ending inventory under the following assumptions: a. First-in, first-out b. Last-in, first-out 11ed7796_115f_20e9_8231_b16283e4a9ec_TB2083_00

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. $\begin{array}{|l|l|l|l|}\hline \text { Date } & \text { Product Z } & \text { Units } & \text { Cost } \\\hline \text { May 3 } & \text { Purchase } & 5 & \$ 20 \\\hline \text { May 10 } & \text { Sale } & 3 & \\\hline \text { May 17 } & \text { Purchase } & 10 & \$ 24 \\\hline \text { May 20 } & \text { Sale } & 6 & \\\hline \text { May 23 } & \text { Sale } & 3 & \\\hline \text { May 30 } & \text { Purchase } & 10 & \$ 30 \\\hline\end{array}$ Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.

The selection of an inventory costing method has no significant impact on the financial statements.

Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error?

Inventory turnover measures the length of time is takes to acquire, sell and replace the inventory.

The inventory data for an item for November are: $\begin{array}{rll}\text { Nov } 1 & \text { Inventory } & 20 \text { units at } \$ 19 \\4 & \text { Sold } & 10 \text { units } \\10 & \text { Purchased } & 30 \text { units at } \$ 20 \\17 & \text { Sold } & 20 \text { units } \\30 & \text { Purchased } & 10 \text { units at } \$ 21\end{array}$ Using a perpetual system, what is the cost of the merchandise sold for November if the company uses FIFO?

Beginning inventory, purchases and sales data for widgets are as follows: Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

The following lots of a particular commodity were available for sale during the year: $\begin{array}{ll}\text { Beginning inventory } & 10 \text { units at } \$ 60 \\\text { First purchase } & 25 \text { units at } \$ 65 \\\text { Second purchase } & 30 \text { units at } \$ 68 \\\text { Third purchase } & 15 \text { units at } \$ 75\end{array}$ 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 the inventory at the end of the year using the LIFO method?

The following lots of a particular commodity were available for sale during the year: $\begin{array}{lc}\text { Beginning invent ory } & 5 \text { units at } \$ 61 \\\text { First purchase } & 15 \text { units at } \$ 63 \\\text { Second purchase } & 10 \text { units at } \$ 74 \\\text { Third purchase } & 10 \text { units at } \$ 77\end{array}$ The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of good sold for the year according to the average cost method?

If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated.

Stevens Company started the year with an inventory cost of $145,000. During the month of January they purchased inventory that cost of $53,000. January sales totaled $140,000. Estimated gross profit is 35%. The estimated ending inventory as of January 31 is

Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the merchandise sold.

List the internal control objectives illustrated by the following:

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: $\begin{array}{rll}\text { Sep. } 1 & \text { Inventory } & 20 \text { units at } \$ 20 \\4 & \text { Sold } & 10 \text { units } \\10 & \text { Purchased } & 30 \text { units at } \$ 25 \\17 & \text { Sold } & 20 \text { units } \\30 & \text { Purchased } & 10 \text { units at } \$ 30\end{array}$ If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is

Which of the following is not an example for safeguarding inventory?

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

If a company uses the periodic inventory system to cost its inventory, the gross profit method is a method that can be used to check on theft when the actual inventory is taken by the company.

The following units of an inventory item were available for sale during the year: $\begin{array}{ll}\text { Beginning inventory } & 10 \text { units at } \$ 55 \\\text { First purchase } & 25 \text { units at } \$ 60 \\\text { Second purchase } & 30 \text { units at } \$ 65 \\\text { Third purchase } & 15 \text { units at } \$ 70\end{array}$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using average cost is: