Exam 7: Inventory

In order to prevent companies from selecting inventory costing methods just to avoid tax, the Canada Revenue Agency:

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

The use of the FIFO cost flow assumption:

Fundy Corp.has the following information about their inventory at year-end: Item Cost NRV \#1 \ 12,000 \ 12,500 \#2 21,250 19,750 \#3 18,600 18,500 If Fundy values their inventory at the lower of cost and net realizable value on an individual basis, what would be loss on inventory write down for the current year?

A company that makes the following journal entry at the time of sale is using which of the following inventory systems? Dr. Cost of sales Cr. Inventory

Jones Pharmaceuticals is reviewing the value of one of its more expensive drugs.The drug has been selling for $32, but a competitor has recently introduced a new product that provides the same benefits with fewer side effects.Therefore, the drug can only be sold for $12 per unit.Its unit purchase cost was $22.The current replacement cost is $10.If inventory is reported at lower of cost or net realizable value, what amount should be reported for the inventory of 30,000 units?

All of the following are types of inventory except?

In October 2013, Harvest Moon Produce entered into a contract with Boblaws Distribution to sell them 100,000 cases of oranges during the coming year.Harvest Moon grows their oranges on approximately 100 acres of prime land for orange trees.At the time of the contract, the fair value of oranges was $25 per case.The weather had been unusually warm and Harvest Moon expects to harvest approximately 130,000 cases.The additional 30,000 cases will have a selling cost of $2 per case. Unfortunately, by the end of the year, the excess supply of oranges has driven the market price down to $20 per case.In their December 31 financial statements, Harvest Moon should value their agricultural inventory at:

During a period of rising prices, which of the following cost flow assumptions will result in the highest ending inventory?

Loblaw Companies Limited operates several grocery chains under the Loblaws and other banners.Recently, they have been expanding the amount of household goods, such as dishes, home décor items and furniture that they carry in order to meet the increasing competitive threat from Wal-Mart, who carries grocery items in addition to their broad product line.How would you expect this shift in Loblaw's product line to have affected their inventory turnover? Why?

Axelrods Inc.uses a perpetual inventory system.In Dec 2013, the accountant neglected to record a purchase of merchandise on account at year end.This merchandise was also omitted from the year-end physical count.How will this error affect assets, liabilities, and shareholders' equity at year end and net income for the year? Assets Liabilities Shareholders' Equity Net Income A. No effect Understated Overstated Overstated. B. No effect Overstated Understated Understated. C. Understated Understated No effect No effect. D. Understated No effect Understated Understated

After the financial statements were prepared for 2012, Wickham Ltd.discovered that an error had been made during the year-end inventory count and one room containing $40,000 worth of goods, at cost, had been missed.A review of the accounting records showed that all purchases had been recorded.The company's tax rate is 40%.If the error is not corrected, what is the effect of this error on 2013 net income?

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 periodic inventory system, calculate the following: A) Ending inventory and cost of goods sold using average costing. B) Ending inventory and cost of goods sold using FIFO costing.

During a period of rising prices, which of the following cost flow assumptions will result in the highest cost of goods sold?

If a company is using a perpetual inventory system, which of the following entries is the correct journal entry to record the purchase of $10,000 of merchandise on account? A. Dr. Inventory $\quad 10,000$ $\quad$ Cr. Accounts payable $\quad 10,000$ B. Dr. Inventory $\quad 10,000$ $\quad$ Cr. Purchases $\quad 10,000$ C. Dr. Purchases $\quad 10,000$ $\quad$ Cr. Inventory $\quad$ 10,000 D. Dr. Purchases $\quad 10,000$ $\quad$ Cr. Accounts payable $\quad 10,000$

Which cost-based inventory valuation system is more useful to a user trying to predict future profitability?

Harvest Moon Produce has several acres of farmland on which they grow asparagus.Asparagus takes five or more years to produce its first crop, and afterwards produces every two years.Harvest Moon grows the crop in rotation so they will have product every year.The costs that Harvest Moon undertakes to maintain the non-producing acreage in a given year should be charged to:

For income tax purposes, if the NRV of inventory at year end is lower than cost, the company is permitted:

The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favour of understating assets and income is known as:

Find the missing values in each of the following independent scenarios: 1 2 3 4 Beginning inventory \ 12,500 \ 225,000 \ 187,500 Purchases 232,000 75,000 762,500 Ending inventory 11,750 6,400 212,500 Cost of goods sold 75,800 940,000 757,500 Sales 112,000 975,000 Gross margin 142,250 128,000