Exam 5: Inventories and Cost of Goods Sold

Chen's Department Store Chen's Department Store is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: -Refer to the account information for Chen's Department Store. Determine Chen's gross profit.

The Ramien Store held inventory items at the end of 2014.Which items should Ramien include as part of its total inventory cost?

Under LIFO, the units in the ending inventory represent the most recent purchases).

The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.

Eversoll Inc.uses the periodic inventory system. If Eversoll uses the LIFO inventory method, the cost of goods sold for June would be

A company using the periodic inventory system must total the selling prices of the units on hand at the end of the period to value the ending inventory.

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?

Which one of the following is not a contra account?

The three distinct types of cost to a manufacturer are direct materials, direct labor, and manufacturing overhead.

Ending inventory valued under the FIFO method will be the same regardless of whether the periodic system or the perpetual system is used.

Xu Corp.started business at the beginning of 2015.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2015 under this method, prices must be

Credit terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of the date of the invoice.

Purchase returns and allowances is subtracted from cost of goods sold to determine net purchases.

The journal entry to write down inventory to its market value results in a loss on the income statement.

Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income?

Park, Inc.purchased merchandise from Jay Zee Music Company on June 5, 2015.The goods were shipped the same day.The merchandise's selling price was $15,000.The credit terms were 1/10, n/30.The shipping terms were FOB shipping point.Park received the merchandise on June 10, 2015.Park paid the amount due on June 13, 2015. Who is responsible for payment of the transportation costs on the merchandise sold by Jay Zee Music to Park?

With the periodic inventory system, the inventory account is updated after each sale or purchase.

It important that the proper amount be assigned to inventory because the amount assigned to inventory will affect the amount eventually recorded as net sales.

If ending inventory is understated, then cost of goods sold is overstated.

Whether LIFO costing is applied at the time each sale is made or only at the end of the period, both the periodic and perpetual systems will yield the same ending inventory under LIFO.