Exam 7: Inventory

Mingan Company had the following activity for the first quarter of the year. They sell the product for $8.00 per unit and use a periodic inventory system.Required: A) If management were paid a bonus based on net income, which cost flow assumption would they prefer? What would the gross margin and ending inventory be? B) If Mingan wanted to minimize income taxes, which cost flow assumption would they prefer? What would the gross margin and ending inventory be?

What is the correct equation to calculate the cost of sales in a periodic inventory system?

During a heavy snowstorm on February 15, 2013, the roof collapsed on Fabulous Freddie's Furniture Showroom.The inventory in the showroom was damaged, as were the inventory records that were stored there.From records kept at the bookkeeper's office they have obtained the following information: Ending inventory December 31,2012: \ 75,000 Purchases January 1 to February 14: \ 212,500 Sales January 1 to February 14: \ 335,800 Gross margin in 2012; 32\% Required: Estimate how much inventory was damaged in the collapse. Explain any factors that might change the amount of the estimate.

When evaluating the performance of a service company, financial analysts would likely use all of the following ratios except:

In which of the following situations would the car be classified as inventory?

Huron Company had the following activity for the month of October: Units Purchased Unit Cost Total Costs Units Sold Opening Inventory: 8,000 \ 60.00 \ 480,000 October 3 7,000 \ 62.00 \ 434,000 October 10 12,000 October 15 10,000 \ 60.00 \ 600,000 October 22 7,000 October 28 5,000 \ 62.50 \ 312,500 October 31 7,000 If Huron Company uses a perpetual inventory system, calculate the ending inventory and cost of goods sold using FIFO costing.

Which of the following businesses would you expect to have the highest inventory turnover ratio?

Which cost-based inventory valuation system is most useful to a user trying to predict future cash flows?

For each of the following economic events prepare the necessary journal entries.If no entry is required, explain briefly.Assume a periodic inventory system. A) Opening inventory is recounted and confirmed to be $8,500.B) Inventory costing $14,000 is purchased on credit. C) Inventory worth $2,000 is damaged in the warehouse and written off. D) Inventory costing $16,000 is sold during the month for $22,000.$4,000 was received in cash and the balance is on account. E) Paid the amount owing from this month's purchases of inventory. F) A month end count reveals 1,000 units on hand.The cost of these units is $4,000 and the net realizable value is estimated to be $4,700

The accounting firm of Lassiter Black LLC.is preparing their year-end financial reports.The firm has incurred the following costs relating to work, which is not yet completed: Salaries \ 2,700 Travel expenses \ 650 Printing and supplies \ 350 Under IFRS, these costs should be charged to:

Which cost flow assumption assumes that the most recently purchased goods are still in inventory?

Using the FIFO cost inventory method what would be the cost of goods sold for July 2013?

A company values its inventory at lower of cost and net realizable value (NRV).It paid $250 for, and still has on hand, 10 units that it expects to sell for $400 less selling costs of $40.Which of the following statements is true related to these goods in this period?

When accounting for inventory, the Canada Revenue Agency requires the use of which of the following inventory cost flow method?

Using the average cost inventory method, what would be the inventory valuation at July 31, 2013 (rounded to the nearest dollar)?

Company A's line of credit at the bank is based on the dollar amount of inventory on hand.Each month the bank adjusts the line of credit based on the inventory amount provided by the company.If prices are rising which cost flow assumption would management most likely prefer?

Ontario Inc had the following data for 2012 and 2013: Opening inventory \ 250,250 \ 275,000 Purchases \ 1,675,000 \ 1,837,000 Ending inventory, cost \ 275,000 \ 302,500 Sales \ 2,825,000 \ 3,074,200 Required: A) Calculate the gross margin and gross margin percentage for each year. B) If the 2012 ending inventory had a replacement cost of $262,500 and Ontario used replacement cost as their definition of market when applying the lower of cost or market, what is the effect on the gross margin and gross margin percentage for 2012 and 2013? C) What accounting principle is the lower of cost and market based on? What is its effect in this case? D) Based on your findings in parts A and B, how might management use the lower of cost or market to manipulate earnings?

Using the FIFO cost flow assumption, what would be the cost of goods sold for July 2013?

If a company writes down inventory using the lower of cost and net realizable value rule, which of the following statements is true?

You are the accountant for a large grocery store that uses a periodic inventory system.In a recent meeting, the owner of the store mentioned to you that he had heard that a perpetual inventory system might have some managerial advantages.He asked you to prepare a memo explaining the differences between periodic and perpetual inventory systems, how the change would alter the work that must be done and what advantages a perpetual system might bring. Required: Prepare the memo requested by your client.