Exam 5: Accounting for Inventories

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?

Given the following information, determine the cost of goods sold for December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

Goods in transit are automatically included in a company's inventory account.

The FIFO inventory method assumes that costs for the most recently purchased items are the first to be charged to the cost of goods sold.

Neither GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.

A company's ability to pay its short-term obligations depends on many factors including how quickly it is able to sell its merchandise inventory.

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

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

The full disclosure principle:

How do the consistency concept and the full disclosure principle affect inventory valuation?

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

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

The understatement of the ending inventory balance causes:

Given the following information, determine the cost of goods sold at December 31 using the LIFO periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first 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 using the gross profit method is:

Incidental costs most commonly added to the costs of inventory include import duties, freight, storage, and insurance.

Goods on consignment:

Using the retail inventory method, if the cost to retail ratio is 60% and ending inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.

Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.