Exam 6: Inventories

Speer's Hardware Store prepared the following analysis of cost of goods sold for the previous three years: Net income for the years 2013, 2014, and 2015 was €70,000, €60,000, and €65,000, respectively. Since net income was consistently declining, Mr. Speer hired a new accountant to investigate the cause(s) for the declines. The accountant determined the following: 1. Purchases of €20,000 were not recorded in 2013. 2. The 2013 December 31 inventory should have been €21,000. 3. The 2014 ending inventory included inventory costing €8,000 that was purchased FOB destination and in transit at year end. 4. The 2015 ending inventory did not include goods costing €4,000 that were shipped on December 29 to Sampson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year. Instructions Determine the correct net income for each year. (Show all computations.)

Unitech has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 75 units on hand. Using the average-cost method, the value of ending inventory is

Kershaw Bookstore had 1,000 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, 750 units were on hand at January 31. The cost of the inventory at January 31, under the FIFO method is:

The following information was available from the inventory records of Queen Company for July: What should be the inventory reported on Queen's July 31 statement of financial position using the average-cost inventory method (round per unit amounts to two decimal places)?

The 2014 financial statements of Vitturo Company reported beginning inventory of €973,000, ending inventory of €1,023,000, and cost of goods sold of €5,988,000 for the year. Vitturo's inventory turnover ratio for 2014 is

In periods of rising prices, the inventory method which results in the inventory value on the statement of financial position that is closest to current cost is the

Under the gross profit method, each of the following items are estimated except for the

Inventory is reported in the financial statements at

If companies have identical inventory costs but use different inventory flow assumptions when the price of goods have not been constant, then the

The following information was available from the inventory records of Queen Company for July: What should be the inventory reported on Queen's July 31 statement of financial position using the FIFO inventory method?

Eckert Company reported the following summarized annual data at the end of 2014: The income tax rate is 30%. The controller of the company is considering a switch from FIFO to average-cost. He has determined that on an average-cost basis, the ending inventory would have been $220,000. Instructions (a) Restate the summary information on an average-cost basis. (b) What effect, if any, would the proposed change have on Eckert'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 more inventory a company has in stock, the greater the company's profit.

The cost of goods available for sale is allocated to the cost of goods sold and the

The lower-of-cost-or-net realizable value basis is an example of the accounting concept of prudence.

Companies adopt different cost flow methods for each of the following reasons except

London Co. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sold. Instructions Compute the ending inventory at May 31 and cost of goods sold using the (1) FIFO and (2) LIFO methods. Prove the amount allocated to cost of goods sold under each method.

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 factor which determines whether goods in transit should be included in a physical count of inventory 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?

The moving-average cost flow assumption for a perpetual inventory system and the average-cost cost flow assumption for a periodic inventory system will allocate the same amounts to ending inventory and cost of goods sold.