Exam 6: Inventories

If inventories are valued using the LIFO cost flow assumption, they should not be classified as a current asset on the balance sheet.

Which of the following statements is true regarding inventory cost flow assumptions?

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2018 are as follows: An end of the month (1/31/18) inventory showed that 160 units were on hand. How many units did the company sell during January, 2018?

Agler Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Agler Company developed the following information: The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period. Instructions Using the gross profit method, prepare an estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.

A company purchased inventory as follows: 150 units at $5 350 units at $6 The average unit cost for inventory is

Compute the lower-of-cost-or-net realizable value valuation for Gantner Company's total inventory based on the following:

In the first month of operations, Mordica Company made three purchases of merchandise in the following sequence: (1) 200 units at $6, (2) 300 units at $7, and (3) 400 units at $9. Assuming there are 300 units on hand, compute the cost of the ending inventory under (1) the FIFO method and (2) the LIFO method. Mordica uses a periodic inventory system.

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2018 are as follows: An end of the month (1/31/18) inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

Vance Company reported the following summarized annual data at the end of 2018: *Based on an ending FIFO inventory of $250,000. The income tax rate is 40%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $180,000. Instructions (a) Restate the summary information on a LIFO basis. (b) What effect, if any, would the proposed change have on Vance's income tax expense, net income, and cash flows? (c) If you were an owner of this business, what would your reaction be to this proposed change?

The following information is available for Yancey Company: Assume that Yancey uses a periodic inventory system and that there are 700 units left at the end of the month. Instructions Compute each of the following under the average-cost method: (a) Cost of ending inventory. (b) Cost of goods sold.

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items.

The specific identification method of inventory costing

TB Nelson Company prepares monthly financial statements and uses the gross profit method to estimate ending inventories. Historically, the company has had a 40% gross profit rate. During June, net sales amounted to $180,000; the beginning inventory on June 1 was $54,000; and the cost of goods purchased during June amounted to $90,000. The estimated cost of TB Nelson Company's inventory on June 30 is

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

Which one of the following inventory methods is often impractical to use?

The following information was available for Pete Company at December 31, 2018: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete's inventory turnover in 2018 was

Foley Company applied FIFO to its inventory and got the following results for its ending inventory. DVRs 140 units at a cost per unit of $59 DVD players 210 units at a cost per unit of $75 iPods 175 units at a cost per unit of $80 The cost of purchasing units at year-end was DVRs $71, DVD players $68, and iPods $78. Instructions Determine the amount of ending inventory at lower-of-cost-or-net realizable value.

The cost flow method that often parallels the actual physical flow of merchandise is the

Wellington Company reported net income of $60,000 in 2017 and $80,000 in 2018. However, ending inventory was overstated by $7,000 in 2017. Instructions Compute the correct net income for Wellington Company for 2017 and 2018.