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Exam 5: Inventories and Cost of Sales

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Question 51

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Health Defense sells first aid kits and uses the periodic inventory system to account for its merchandise.The beginning balance of the inventory and its transactions during January were as follows: January 1: Beginning balance of 18 units at $13 each January 12: Purchased 30 units at $14 each January 19: Sold 24 units at a selling price of $30 each January 20: Purchased 24 units at $17 each January 27: Sold 27 units at a selling price of $30 each If the ending inventory is reported at $357,what inventory method was used?

A) LIFO.
B) FIFO.
C) Weighted average.
D) Specific identification.
E) Retail inventory method.

F) A) and E)
G) C) and E)

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Question 52

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Consignment goods are:

A) Goods shipped by the owner to the consignee who sells the goods for the owner.
B) Reported in the consignee's books as inventory.
C) Goods shipped to the consignor who sells the goods for the owner.
D) Not reported in the consignor's inventory since they do not have possession of the inventory.
E) Always paid for by the consignee when they take possession.

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

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Question 53

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Big Box Store has operated with a 30% average gross profit ratio for a number of years.It had $100,000 in sales during the second quarter of this year.If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter,its estimated ending inventory by the gross profit method is:

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

Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000,credit terms 2/10,n/30 that apply only to the $50,000; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000.Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions.Compute the cost that should be assigned to the inventory.

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 uses the periodic inventory system and had the following activity during the current monthly period. Using the weighted-average inventory method,the company's ending inventory would be:

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?

Generally accepted accounting principles require that the inventory of a company be reported at:

Calculate the ending inventory using FIFO for a company that uses a perpetual inventory system,using the information given below.

A company had the following purchases and sales during its first year of operations: On December 31,there were 26 units remaining in ending inventory. -Using the perpetual FIFO inventory costing method.What is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

Buffalo 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 did not include goods costing $48,000 that were purchased by Buffalo on December 28 and shipped FOB destination on that date.Buffalo did not receive the goods until January 2 of the following year. -The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000.The net realizable value of the damaged goods was $10,000. Based on this information,the correct balance for ending inventory on December 31 is:

The ________ method of assigning costs to inventory and cost of goods sold requires that we divide the cost of goods available for sale by the units of inventory available at the time of each sale.

The Community Store reported the following amounts on their financial statements for Year 1,Year 2,and Year 3: It was discovered early in Year 4 that the ending inventory on December 31,Year 1 was overstated by $6,000,and the ending inventory on December 31,Year 2 was understated by $2,500.The ending inventory on December 31,Year 3 was correct.Ignoring income taxes determine the correct amounts of cost of goods sold,net income,total current assets,and equity for each of the years Year 1,Year 2,and Year 3.

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

A company sells garden hoses and uses the perpetual inventory system to account for its merchandise.The beginning balance of the inventory and its transactions during September were as follows: September 1: Beginning balance of 18 units at $13 each September 12: Purchased 30 units at $14 each September 19: Sold 24 units at $30 selling price each September 20: Purchased 24 units at $17 each September 27: Sold 27 units at $30 selling price each If the ending inventory is reported at $276,what inventory method was used?

The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.

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

The company's inventory manager receives compensation that includes a bonus based on gross profit.You discover that the inventory manager has knowingly overstated ending inventory by $2 million.What effect does this error have on the financial statements of the company and specifically gross profit? Why would the manager knowingly overstate ending inventory? Would this be considered an ethics violation?

Goods on consignment are goods shipped by their owner,called the consignor,to another party called the consignee.The consignee sells goods for the owner.