Exam 8: Valuation of Inventories: a Cost-Basis Approach

Tate Company adopted the dollar-value LIFO method on January 1, 2007, at which time its inventory consisted of 6,000 units of Item A @ $5.00 each and 3,000 units of Item B @ $16.00 each.The inventory at December 31, 2007 consisted of 12,000 units of Item A and 7,000 units of Item B.The most recent actual purchases related to these items were as follows: Quantity Items Purchase Date Purchased Cost Per Unit 12/7/07 2,000 \ 6.00 12/11/07 10,000 5.75 12/15/07 10,000 17.00 Using the double-extension method, what is the price index for 2007 that should be computed by Tate Company?

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method?

Carr Co.adopted the dollar-value LIFO inventory method on December 31, 2007.Carr's entire inventory constitutes a single pool.On December 31, 2007, the inventory was $320,000 under the dollar-value LIFO method.Inventory data for 2008 are as follows: 12/31/08 inventory at year-end prices $440,000 Relevant price index at year end (base year 2007) 110 Using dollar value LIFO, Carr's inventory at December 31, 2008 is

When using the periodic inventory system, which of the following generally would not be separately accounted for in the computation of cost of goods sold?

If the beginning inventory for 2006 is overstated, the effects of this error on cost of goods sold for 2006, net income for 2006, and assets at December 31, 2007, respectively, are

Dollar-value LIFO techniques help protect LIFO layers from erosion.

Earl Co.was formed on January 2, 2007, to sell a single product.Over a two-year period, Earl's acquisition costs have increased steadily.Physical quantities held in inventory were equal to three months' sales at December 31, 2007, and zero at December 31, 2008.Assuming the periodic inventory system, the inventory cost method which reports the highest amount of each of the following is Inventory Cost of Sales December 31, 2007 2008 a. LIFO FIFO b. LIFO LIFO c. FIFO FIFO d. FIFO LIFO

The use of a Discounts Lost account implies that the recorded cost of a purchased inventory item is its

Use the following information for questions Dolan Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2005.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: Inventory at Current Date Current Prices Price Index December 31, 2006 \ 256,800 107 December 31, 2007 290,000 125 December 31,2008 325,000 130 -What is the cost of the ending inventory at December 31, 2007 under dollar-value LIFO?

On June 15, 2007, Tolon Corporation accepted delivery of merchandise which it pur-chased on account.As of June 30, Tolon had not recorded the transaction or included the merchandise in its inventory.The effect of this on its balance sheet for June 30, 2007 would be

Noll Co.had 450 units of product A on hand at January 1, 2007, costing $42 each.Purchases of product A during January were as follows: Date Units Unit Cost Jan. 10 600 \ 44 18 750 46 28 300 48 A physical count on January 31, 2007 shows 600 units of product A on hand.The cost of the inventory at January 31, 2007 under the LIFO method is

When using a perpetual inventory system, freight charges on goods purchased are debited to Freight-In.

Green Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes.The balance in the LIFO Reserve account at the end of 2007 was $80,000.The balance in the same account at the end of 2008 is $120,000.Green's Cost of Goods Sold account has a balance of $600,000 from sales transactions recorded during the year.What amount should Green report as Cost of Goods Sold in the 2008 income statement?

A manufacturing concern would report the cost of units only partially processed as inventory in the balance sheet.

Use the following information for AJ Company had January 1 inventory of $100,000 when it adopted dollar-value LIFO.During the year, purchases were $600,000 and sales were $1,000,000.December 31 inventory at year-end prices was $143,360, and the price index was 112. -What is AJ Company's gross profit?

Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost?

Use the following information for questions During 2007 Foley Corporation transferred inventory to Kline Corporation and agreed to repurchase the merchandise early in 2008.Kline then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Foley.In 2008 when Foley repurchased the inventory, Kline used the proceeds to repay its bank loan. -On whose books should the cost of the inventory appear at the December 31, 2007 balance sheet date?

Which of the following is not considered an advantage of LIFO when prices are rising?