Exam 6: Reporting and Analyzing Inventory

If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the unit cost assigned to the cost of goods sold will be the same under FIFO and average cost formulas.

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -Total cost of goods sold for the month of July is

The first-in, first-out (FIFO) inventory cost method results in an ending inventory valued at the most recent cost.

Use the following information for questions A company just starting business made the following four inventory purchases in June: On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system. -Using the average cost method, the cost of the ending inventory on June 30 is

Which of the following should not be included in an inventory count?

Inventory that originally cost $100 had been written down to its net realizable value (NRV) of $75.Subsequently, the NRV of the inventory recovered to equal its cost of $100.In this situation, the amount of the $25 ($100 - $75) prior write-down in value should be reversed.

The inventory turnover ratio is calculated by dividing cost of goods sold by

A company just starting a business purchased three inventory items at the following prices: March 2, $75; March 7, $80; and March 15, $90.If the company sold one unit for $115 on March 10 and one unit for $125 on March 20 and uses the average cost method in a perpetual inventory system, what is the cost of ending inventory?

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -If ABC Inc.used the average cost method instead of FIFO, gross profit from the July 8 sale would be

In a period of rising prices, which of the following inventory cost methods generally results in the lowest profit figure?

Management may be able to manipulate profit using

Two companies report the same cost of goods available for sale but each employs a different inventory cost formula.If the price of goods has increased during the period, then the company using

An inventory count should be done by the employees who keep track of the stock.

The inventory cost determination method that results in the inventory value on the statement of financial position that is closest to its actual cost is

Which cost determination method smoothes the effects of price changes?

Use the following information for the month of July for questions ABC Inc.uses the FIFO cost method in a perpetual inventory system. -The cost of goods sold for the July 8 sale was

Approximating the physical flow of inventory is not important when selecting an inventory cost formula.

Explain the effects on the financial statements of choosing each of the inventory cost determination methods.

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

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory.The effect of this error in the current period is