Exam 10: Short-Term Operating Assets: Inventory

Yankee Company uses the net method of recording purchase discounts on inventory and the perpetual inventory system. Yankee Company records a payment within the discount period. Which journal entry is prepared?

Following U.S. GAAP, required inventory disclosures in financial statements do not include ________.

The Butters Company uses the FIFO perpetual inventory system. The company has the following data available for the month of January: Date Transaction Units Unit Cost Jan. 1 Beginning inventory 100 \ 100 Jan. 9 Purchase 300 \ 140 Jan. 10 Sale 200 Jan. 15 Purchase 400 \ 160 Jan. 18 Sale 300 Jan. 24 Purchase 100 \ 200 Jan. 30 Sale 10 The selling price per unit is $1,000. Selling and administrative expenses for the month total $100,000. Interest expense for the month is $10,000. The tax rate is 30%. Required: Prepare the income statement for the month ending January 31, 2019 using a multiple-step format.

Cohen Company follows U.S. GAAP and uses the lower-of-cost-or-market rule for inventory. At December 31, 2018, the following data is available: Cost under LIFO \ 420 per unit Current Replacement Cost \ 365 per unit Expected Selling Price \ 400 per unit Estimated Disposal Costs \ 50 per unit Normal Profit 25\% of selling price Quantity of Ending Inventory 100,000 units Cohen Company's balance sheet at December 31, 2018 reports the following: Inventory at cost \ 42,000,000 Less: Allowance to reduce inventory to market 5,500,000 Net \ 36,500,000 Required: Determine the correct balance for inventory at December 31, 2018.

The Wysocki Company has undertaken a physical count of inventory on hand on December 31, 2015. The cost of the inventory on hand is $445,993. Additional information follows: 1. Wysocki Company received goods costing $32,000 on January 2, 2019. The goods were shipped f.o.b. shipping point, and left the seller's business on December 30, 2018. 2. Wysocki Company received goods costing $40,000 on January 3, 2019. The goods were shipped f.o.b. destination, and left the seller's business on December 30, 2018. 3. Wysocki Company sold goods costing $20,000 on December 29, 2018. The goods were picked up by the common carrier on December 29 and shipped f.o.b. destination. The goods arrived on January 2, 2019. The retail price of the goods was $30,000. 4. Wysocki Company sold goods costing $30,000 on December 31, 2018. The goods were picked up by the common carrier on December 31 and shipped f.o.b. shipping point. The goods were not included in Wysocki's physical count at December 31, 2018. The goods arrived on January 4, 2019. The retail price of the goods was $60,000. Wysocki paid the shipping costs of $433 on December 31. 5. Wysocki Company was the consignee for some goods from Walmart. The goods cost Walmart $100,000 and had a retail price of $300,000. These goods were included in Wysocki's physical count on December 31, 2018 at the retail price. 6. Wysocki Company had some goods on consignment at Walmart. The goods cost $50,000 and had a retail price of $100,000. These goods were not included in Wysocki's physical count at December 31, 2018 because the goods were not on the company's premises. 7. Wysocki Company sold goods costing $22,000 on December 31, 2018. The goods were not picked up by the common carrier until January 2, 2019. The retail price of the goods was $42,000; the wholesale price was $33,000. The goods were included in the physical count at December 31, 2018. The terms of the sale were f.o.b. shipping point. Required: 1. For each item listed above, indicate the amount and sign of the adjustment to the inventory balance at December 31, 2018. If no adjustment is required, for an item, enter 0. 2. Determine the correct amount of inventory for Wysocki Company at December 31, 2018.

When following U.S. GAAP, firms can use two methods to write down inventory to market, if needed. Required: 1. What are the two methods called? 2. If there is a loss, describe the journal entry for both methods. 3. If there is a significant loss, which method is preferred? Why is this the case?

The Exclusive Company uses the perpetual inventory system. The Exclusive Company has the following data available for the month of January: Date Transaction Units Unit Cost Jan. 1 Beginning inventory 400 \ 1.00 Jan .9 Purchase 300 \ 1.10 Jan. 10 Sale 400 Jan. 15 Purchase 400 \ 1.16 Jan. 18 Sale 300 Jan .24 Purchase 400 \ 1.26 What is the cost of ending inventory on January 31 using LIFO?

Andra Company uses the dollar-value LIFO retail inventory method for inventory costing. Andra Company has beginning inventory with a cost of $10,000 and a retail value of $40,000. During the year, the company purchases goods with a cost basis of $80,000 and a retail basis of $100,000. It has net markups of $10,000 and net markdowns of $5,000. Sales are $50,000 at retail. The price index for the current year is 1.04. Andra Company adopted the dollar-value LIFO method at the end of the prior year, which is the base year with a price index of 1.00. Required: What is the cost of the ending inventory using the dollar-value LIFO retail inventory method? Round all ratios to four decimal places. Round all numbers to two decimal places.

The gross profit method is often used to estimate the cost of ending inventory. The gross profit method should not be used to ________.

A company using LIFO for tax purposes ________.

Excalibur Company uses the perpetual inventory method. Excalibur Company has the following data available for the month of January: Date Transaction Units Unit Cost Jan. 1 Beginning inventory 200 \ 1.00 Jan .9 Purchase 300 \ 1.10 Jan. 10 Sale 400 Jan. 15 Purchase 400 \ 1.16 Jan. 18 Sale 300 Jan .24 Purchase 100 \ 1.26 What is the Cost of Goods Sold for the month of January using LIFO?

When goods are shipped f.o.b. shipping point, title passes when the goods reach the buyer's dock.

What is a LIFO liquidation? In a period of rising costs, why is a LIFO liquidation feared?

Inventory costs do not include ________.

A fire destroyed the inventory of Zabo Company. The following information is available: Beginning inventory \ 30,000 Purchases \ 140,000 Net Sales Revenue \ 200,000 Gross Profit Percentage 50\% Required: 1. Prepare a schedule to compute the amount of inventory lost in the fire using the gross profit method. 2. Prepare the required journal entry after the fire.

The first step in applying the gross profit method of determining inventory is to take a physical count of the goods.

LIFO Reserve = FIFO Inventory Balance - LIFO Inventory Balance.

Walker Company provides the following information: Beginning Inventory \ 119,000 Purchases 510,000 Freight-In 24,000 Freight-Out 19,000 Purchase Discounts 5,200 Purchase Returns 8,000 Ending Inventory 130,000 What is the cost of goods available for sale?

A large company uses a perpetual inventory system and a sophisticated computerized system to account for its inventory over time. At the end of the accounting period, the company performs a physical count of the inventory on hand and hires hundreds of workers to carry out this task. Required: 1. Why does the company perform a physical count of inventory? 2. After the physical count of inventory is completed, describe the required journal entry and provide an example.

The following information is available for the past month for a retail store: Sales \ 87,000 Markups \ 9,000 Markdowns \ 9,000 Purchases (at cost) \ 38,800 Purchases (at retail) \ 107,000 Beginning inventory (at cost) \ 30,000 Beginning inventory (at retail) \ 48,186 What is the ending inventory at cost using the conventional retail method? (Round cost-to-retail ratios to four decimal places.)