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Exam 7: Inventories

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Question 101

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The units of an item available for sale during the year were as follows:? $\begin{array} { | l | l | l | } \hline \text { January } 11 & \text { Inventory } & 60 \text { units } @ \$ 145 \\\hline \text { February } 27 & \text { Purchase } & 90 \text { units } @ \$ 150 \\\hline \text { November } 21 & \text { Furchase } & 75 \text { units } @ \$ 154 \\\hline\end{array}$ 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.

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(a) (48 units
(b) ...

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Question 102

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Beginning inventory, purchases, and sales data for tennis rackets are as follows:? $\begin{array} { | r | r | l | r | r | r | r | } \hline & \text { Apr. } 3 & \text { Inventory } & & 12 \text { units } & @ & \$ 45 \\\hline &11 & \text { Purchase } & & 13 \text { units } & @ & \$ 47 \\\hline &14 & \text { Sale } & & 18 \text { units } & & \\\hline &21 & \text { Purchase } & & 9 \text { units } & @ & \$ 60 \\\hline &25 & \text { Sale } & & 10 \text { units } & & \\\hline\end{array}$ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

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Question 103

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What is the amount of cost of merchandise sold for the year according to the average cost method?

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

​Excess inventory results in all of the following except

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

During August, the first month of the fiscal year, sales totaled $875,000 and the cost of merchandise available for sale totaled $850,000. Estimate the cost of the merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.

Three identical units of merchandise were purchased during July, as follows:? $\begin{array} { | l | c | c | r | } \hline \text { Date } & \text { Product Basic H } & \text { Units } & { \text { Cost } } \\\hline \text { July } 3 & \text { Purchase } & 1 & \$ 35 \\\hline 10 & \text { Purchase } & 1 & 36 \\\hline 24 & \text { Purchase } & 1 & 37 \\\hline \text { Total } & & \mathbf { 3 } & \mathbf { \$ 1 0 8 } \\\hline & & & \\\hline & \text { Average cost per unit } & & \$ 36 \\\hline\end{array}$ Assume one unit sells on July 28 for $45.Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using the (a) first-in, first-out, (b) last-in, first-out, and (c) average cost flow methods.

Match each description to the appropriate document used for inventory control (a-c) . -Authorizes the purchase of inventory from an approved vendor

Match each description to the appropriate cost flow assumption (a-c) . -Widely used for tax purposes

The weighted average inventory cost flow method is the least used of the inventory costing methods.

If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is

For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max's inventory turnover for the year.

If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. $\begin{array} { | l | c | c | c | } \hline { \text { Item } } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \\\hline \text { Product C } & 420 & \$ 6 & \$ 5 \\\hline \text { Froduct D } & 370 & 12 & 14 \\\hline\end{array}$

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

FIFO is the inventory costing method that follows the physical flow of the goods.

The lower of cost or market is a method of inventory valuation.

One negative effect of carrying too much inventory is risk that customers will change their buying habits.

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.

Match each situation to its impact (a-c) on the current year's net income. -A consignor included merchandise in the hands of the consignee in ending inventory.