Exam 6: Inventories

This information is available for Sheena's Photo Corporation for 2016 and 2017. Beginning inventory \ 200,000 \ 300,000 Ending inventory 300,000 365,000 Cost of goods sold 1,200,000 1,330,000 Sales revenue 1,600,000 1,900,000 Instructions Calculate inventory turnover days in inventory and gross profit rate for Sheena's Photo Corporation for 2016 and 2017. Comment on any trends.

Flite Company had beginning inventory on May 1 of $12000. During the month the company made purchases of $38000 but returned $2000 of goods because they were defective. At the end of the month the inventory on hand was valued at $16500. Calculate cost of goods available for sale and cost of goods sold for the month.

Liche Company reported net income of $54000 in 2016 and $80000 in 2017. However ending inventory was overstated by $6000 in 2016. Instructions Compute the correct net income for Liche Company for 2016 and 2017.

An error that overstates the ending inventory will also cause net income for the period to be overstated.

In applying the LIFO assumption in a perpetual inventory system the cost of the units most recently purchased prior to sale is allocated first to the units sold.

For each of the independent events listed below analyze the impact on the indicated items at the end of the current year by placing the appropriate code letter in the box under each item. Code: O = item is overstated U = item is understated NA = item is not affected

The specific identification method of inventory costing

In a period of rising prices the costs allocated to ending inventory may be understated in the

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

Henri Company's inventory records show the following data: Units Unit Cost Inventory, January 1 10,000 \ 9.20 Purchases: June 18 9,000 8.00 November 8 6,000 7.25 A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. Under the LIFO method cost of goods sold is

If a company uses the FIFO cost assumption the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

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

The cost of goods purchased during a period plus the beginning inventory is the amount of goods ________________ during the period.

Queen Company is in the electronics industry and the price it pays for inventory is decreasing. Instructions Indicate which inventory method will: a. provide the highest ending inventory. b. provide the highest cost of goods sold. c. result in the highest net income. d. result in the lowest income tax expense. e. produce the most stable earnings over several years.

The specific identification method of costing inventories is used when the

In a period of increasing prices which inventory flow assumption will result in the lowest amount of income tax expense?

Inventories are estimated

The cost flow method that often parallels the actual physical flow of merchandise is the

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

Pasquale has the following inventory information. July 1 Beginning Inventory 20 units at \ 19 \ 380 7 Purchases 70 units at \ 20 1,400 22 Purchases 10 units at \ 24 240 \2 ,020 A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the LIFO inventory method the amount allocated to cost of goods sold for July is