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Exam 6: Inventories and Cost of Sales

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Question 51

True/False

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

A) True
B) False

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Question 52

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Eastview Company uses a perpetual LIFO inventory system, and has the following purchases and sales: $\begin{array} { | l | l | } \hline \text { January 1 } & 150 \text { units were purchased at } \$ 9 \text { per unit. } \\\hline \text { January } 17 & 120 \text { units were sold. } \\\hline \text { January 20 } & 160 \text { units were purchased at } \$ 11 \text { per unit. } \\\hline \text { January 29 } & 150 \text { units were sold. } \\\hline\end{array}$ What is the value of ending inventory?

A) $2,670.
B) $2,750.
C) $380.
D) $2,730.
E) $440.

F) D) and E)
G) None of the above

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Question 53

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Starlight Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using the LIFO perpetual inventory method, what is the value of inventory after the October 4 sale?

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Perfection Company had cost of goods sold of $853,000, ending inventory of $70,500, and average inventory of $71,600. Its inventory turnover equals:

Costs included in the Merchandise Inventory account can include all of the following except:

Salmone Company reported the following purchases and sales for its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO. $\begin{array} { | r | l | l | l | } \hline \multicolumn{1}{|c|} { \text { Date } } & \text { Activities } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \\\hline \text { May 1 } & \text { Beginning Inventory } & 150 \text { units } @ \$ 10.00 & \\\hline 5 & \text { Purchase } & 220 \text { units } @ \$ 12.00 & \\\hline 10 & \text { Sales } & & 140 \text { units } @ \$ 20.00 \\\hline 15 & \text { Purchase } & 100 \text { units } @ \$ 13.00 & \\\hline 24 & \text { Sales } & & 90 \text { units } @ \$ 21.00 \\\hline\end{array}$

Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO. $\begin{array} { | r | l | l | l | } \hline \text { Date } & \text { Activities } & \text { Units Ac quired at Cost } & \text { Units Sold at Retail } \\\hline \text { May 1 } & \begin{array} { l } \text { Beginning } \\\text { Inventory }\end{array} & 150 \text { units } @ \$ 10.00 & \\\hline 5 & \text { Purchase } & 220 \text { units } @ \$ 12.00 & \\\hline 10 & \text { Sales } & & 140 \text { units } @ \$ 20.00 \\\hline 15 & \text { Purchase } & 100 \text { units } @ \$ 13.00 & \\\hline 24 & \text { Sales } & & 90 \text { units } @ \$ 21.00 \\\hline\end{array}$

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

A company's inventory records report the following: $\begin{array} { | l | l | l | } \hline \text { August 1 } & \text { Beginning balance } & 15 \text { units } @ \$ 12 \\\hline \text { August } 5 & \text { Purchase } & 10 \text { units } @ \$ 13 \\\hline \text { August } 12 & \text { Purchase } & 20 \text { units } @ \$ 14 \\\hline\end{array}$ On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?

Days' sales in inventory:

The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average.

A company reports the following information regarding its inventory. Beginning inventory: cost is $80,000; retail is $130,000 Net purchases: cost is $65,000; retail is $120,000 Sales at retail: $145,000 The year-end inventory shows $135,000 worth of merchandise available at retail prices. What is the cost of the ending inventory calculated using the retail inventory method?

Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals:

A company's inventory records report the following in November of the current year: $\begin{array} { | l | l | l | } \hline \text { Beginning } & \text { November 1 } & 5 \text { units } @ \$ 20 \\\hline \text { Purchase } & \text { November } 2 & 10 \text { units } @ \$ 22 \\\hline \text { Purchase } & \text { November 12 } & 6 \text { units } @ \$ 25 \\\hline\end{array}$ On November 8, it sold 12 units for $54 each. Using the LIFO perpetual inventory method, what was the amount recorded in the cost of goods sold account for the 12 units sold?

When costs to purchase inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?

Explain the reason a company might use gross profit inventory method for valuing inventory.

Accounting principles require that inventory be reported at the market value (cost)of replacing inventory when cost is lower than market value.

Ulrich had cost of goods sold of $6.7 million, ending inventory of $2.2 million, and average inventory of $1.9 million. Its days' sales in inventory equals:

Oxford Packing Company reported net sales in November of the current year of $1,000,000. At the beginning of November, the company reported beginning inventory of $368,000. Cost of goods purchased during November amounted to $217,500. The company reported ending inventory at the end of November of $226,750. The company's gross profit rate for November of the current year was: