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Exam 5: Reporting and Analyzing Inventories

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Question 41

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Regardless of the inventory costing system used,cost of goods available for sale must be allocated at the end of the period between

A) beginning inventory and net purchases during the period.
B) ending inventory and beginning inventory.
C) net purchases during the period and ending inventory.
D) ending inventory and cost of goods sold.
E) beginning inventory and cost of goods sold.

F) All of the above
G) B) and D)

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Question 42

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Explain why the lower of cost or market rule is used to value inventory.

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The concept of conservatism requires tha...

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Question 43

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All of the following statements related to goods on consignment are true except:

The choice of an inventory valuation method has little to no impact on gross profit and cost of sales.

Companies can and often do use different costing methods for financial reporting and tax reporting.An exception to this is the:

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge.What are the challenges Patrick refers to?

How do the consistency concept and the full disclosure principle affect inventory valuation?

Strods Company reported the following purchases and sales of its only product.Strods uses a periodic inventory system.Determine the cost assigned to ending inventory using LIFO.

In the retail inventory method of inventory valuation,the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

A company made the following purchases during the year: On December 31,there were 28 units in ending inventory.These 28 units consisted of 2 from the January 10 purchase,3 from the March 15 purchase,4 from the April 25 purchase,11 from the July 30 purchase,and 8 from the October 10 purchase.Using specific identification,calculate the cost of the ending inventory.

A merchandiser's ability to pay its short-term obligations depends on many factors including how quickly it sells its merchandise inventory.

A company's normal selling price for its product is $20 per unit.However,due to market competition,the selling price has fallen to $15 per unit.This company's current inventory consists of 200 units purchased at $16 per unit.Replacement cost has fallen to $13 per unit.Calculate the value of this company's inventory at the lower of cost or market.

Bedrock Company reported a December 31 ending inventory balance of $412,000.The following additional information is also available: -The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Bedrock was the consignor. -The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. Based on this information,the correct balance for ending inventory on December 31 is:

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold,and does a better job of matching current costs with revenues on the income statement.

The IRS requires that when LIFO is used for tax reporting,it must also be used for financial reporting.

A company's inventory records indicate the following data for the month of January: If the company uses the last-in,first-out perpetual inventory system,what would be the cost of the ending inventory?

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost,and also mimics the actual flow of goods for most businesses is:

When purchase costs regularly rise,the ________ method of inventory valuation yields the highest gross profit and net income.

Using the information given below for a company that uses a perpetual inventory system,calculate the ending inventory using weighted average. $\begin{array} { | l | l | l | } \hline & \text { Units } & \text { Unit Cost } \\\hline \text { Beginning inventory } & 100 & \$ 10 \\\hline \text { Tan. 5 purchased } & 40 & 12 \\\hline \text { Tan. 10 sold } & 60 & - \\\hline \text { Tan. 15 purchased } & 70 & 13 \\\hline \text { Tan. 25 sold } & 50 & - \\\hline\end{array}$

The ________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.