Exam 6: Inventories

The more inventory a company has in stock, the greater the company's profit.

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Kershaw Bookstore had 800 units on hand at January 1, costing €18 each. Purchases and sales during the month of January were as follows: Kershaw does not maintain perpetual inventory records. According to a physical count, 600 units were on hand at January 31. The cost of the inventory at January 31, under the LIFO method is:

At December 31, 2014, Daewoo Inc. reported total assets of W402,590,000, and net income of W100,670,000 for the current year. Daewoo determined that inventory was overstated by W3,200,000 at the beginning of 2015 (this was not corrected). What is Daewoo's corrected amount for total assets for 2014?

Under the retail inventory method, the estimated cost of ending inventory is computed by multiplying the cost-to-retail ratio by

For the current month, the beginning inventory of Elipresse Inc. consisted of 3 units that cost CHF5,500 each. During the month, the company made two purchases: 4 units at CHF5,800 each and 1 units at CHF5,750. Elipresse sold 5 units during the month. If Elipresse uses specific identification and wishes to maximize net income, the units costs allocated to cost of goods sold will be:

The accounting concept of prudence dictates that the accounting principle used should be the one least likely to overstate assets and income.

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

Errors occasionally occur when physically counting inventory items on hand. Identify the financial statement effects of an overstatement of the ending inventory in the current period. If the error is not corrected, how does it affect the financial statements for the following year?

Accountants believe that the write down from cost to net realizable value should not be made in the period in which the price decline occurs.

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January 2014 are as follows: An end of the month (1/31/14) inventory showed that 120 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

The following information was available from the inventory records of Queen Company for July: What is Queen's cost of goods available for sale?

Bueno Company's purchase and sales transactions for the month of July were as follows: The company sold 8,000 units on July 22. Assuming that the Bueno keeps perpetual inventory records, July's cost of goods sold on a FIFO basis is

In a period of rising prices, the statement of financial position will report a higher inventory amount if FIFO, rather than average-costing, is the cost flow assumption used.

At year-end, Dana Corporation has 3,000 units of Lolland, 3,000 units of Falster, and 4,500 units of Jultand in its ending inventory. Specific data with respect to each product follows: What amount will Dana report for ending inventory using lower-of-cost-or-net realizable value?

Inventory is reported in the financial statements at

Your former college roommate is opening a new retail store and asks you "Which inventory costing method should I use?" What is your response? Include a comparison of the tax effect, statement of financial position effect, and income statement effect for FIFO versus average-cost.

Shandy Shutters has the following inventory information. A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Assume a periodic inventory system is used. Cost of goods sold under the average-cost method is

Inventory items on an assembly line in various stages of production are classified as