Exam 6: Reporting and Analyzing Inventory

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

The physical inventory count determines the number of units on hand.

A low inventory turnover ratio could mean a company is at risk of experiencing inventory shortages.

When using the perpetual system, the average cost formula relies on a simple average calculation.

An error in the ending inventory of the current period will have a similar but inverse effect on profit of the next accounting period.

Which of the following statements regarding inventories is correct?

The inventory cost formula that results in the highest gross profit for June is

Which cost determination method smoothes the effects of price changes?

The selection of an appropriate inventory cost formula for a company is made by

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

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.

Which of the following statements regarding inventory cost determination methods is correct?

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

The cost formula a company chooses should correspond as closely as possible to the actual physical flow of goods.

To accurately determine inventory quantities, a company must

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 formula in a perpetual inventory system, what is the cost of ending inventory?

During a period of inflation, using the __________ cost formula will approximate a company's current cost of ending inventory.

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

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

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