Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Which of the following is correct?

During a period of inflation, using the cost formula will approximate a company's current cost of ending inventory.

For each independent situation given below, determine the effect on pretax profit for each. Enter "+" to indicate pretax profit is overstated, "-" to indicate pretax profit is understated, or "NA" to indicate that pretax profit is not affected.

Supply the missing dollar amounts for the 2012 income statement of RDS Company by writing your answer in the table provided for you for each of the following independent cases. Show your computations below the table.

Sue Company reported profit in 20A of $27,000 and in 20B of $32,000. Later it was discovered that the ending inventory for 20A was understated by $15,000. Disregard income taxes. The correct amounts of profit for 20A and 20B were which of the following?

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Inventory that originally cost $20,000 was written down to its net realizable value of $18,500 in the last accounting period. At the end of the current accounting period, the net realizable value is determined to be $23,000. At what amount should the inventory be reported on the current period's statement of financial position?

When the average cost formula is applied in a periodic inventory system, the sale of goods during the year will change the unit cost used for calculating ending inventory.

The method of inventory cost determination that best matches cost and revenues is FIFO.

Which of the following is true under the perpetual inventory system?

Purchases, returns and allowances should be added to the cost of purchases on the income statement, assuming the periodic inventory system is used.

In 20B, Landings Inc. provided the following information in their financial statements: Cost of goods sold under FIFO costing is $22.2 billion and their inventory value under FIFO is $1.3 billion at the end of 20B and $1.2 billion at the end of 20A. What would their inventory turnover ratio be under the FIFO cost flow method?

Which cost determination method smoothes the effects of price changes?

Morrison Corporation, which uses a perpetual inventory system, recorded the following inventory transactions during the last two months of 2013. Requirements: (a) Using the FIFO cost formula, calculate the amount of cost of goods sold for the two months of November and December. (Show calculations) (b) Using the average cost formula, calculate the amount of ending inventory at December 31. (Show calculations)

Give the journal entries for the transactions listed below under each of the two inventory systems. A. Purchase merchandise for cash, $1,000 B. Sold merchandise for $600 cash that had a cost of $480 (cost is 80% of the sales price) C. Accepted a sales return from a customer: Sales price $30. A cash refund was given to the custome The goods were returned to regular inventory D. Returned goods to the vendor because they did not meet our specification; $50 cash refund was received.

When a company uses the periodic inventory system in accounting for its merchandise inventory, which of the following is true?

The higher the inventory turnover ratio, the higher the average days it takes to sell inventory.

The lower of cost and net realizable value basis of valuing inventories is a departure from the

Which one of the following statements concerning the periodic and perpetual inventory systems is true?

During the audit of Virginia Company's 20B financial statements, the auditors discovered that the 20A ending inventory had been overstated by $10,000 and that the 20B ending inventory had been overstated by $8,000. Before the effect of these errors, 20B pretax profit had been computed as $100,000. What should be reported as the correct 20B profit before taxes?