Exam 6: Reporting and Analyzing Inventory

Hogan Industries had the following inventory transactions occur during 2014: The company sold 102 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $600, what is the company's after-tax income using LIFO? (rounded to whole dollars)

If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.

The periodic and the perpetual inventory systems are two methods that companies use to account for inventories. Briefly describe the major features of each system and explain why a physical inventory is necessary under both systems.

At December 31, 2014 Mohling Company's inventory records indicated a balance of $602,000. Upon further investigation it was determined that this amount included the following: -$112,000 in inventory purchases made by Mohling shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd -$74,000 in goods sold by Mohling with terms FOB destination on December 27^th. The goods are not expected to reach their destination until January 6^th. -$6,000 of goods received on consignment from Dollywood Company What is Mohling's correct ending inventory balance at December 31, 2014?

Snug-As-A-Bug Blankets has the following inventory data: Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July?

Angie and Neal Fry are department managers in the housewares and shoe departments, respectively, for Calhouns, a large department store. Neal has observed Angie taking inventory from her own department home, apparently without paying for it. He hesitates confronting Angie because he is due to be promoted, and needs Angie's recommendation. He also does not want to notify the company management directly, because he doesn't want an ethics investigation on his record, believing that it will give him a "goody-goody" image. This week, Angie tried on several pairs of expensive running shoes in his department before finding a pair that suited her. She did not, however, buy them. That very pair was missing this morning. Calhouns recently replaced its old periodic inventory system with a perpetual inventory system using scanners and bar codes. In addition, the annual inventory is to be replaced by a monthly inventory conducted by an independent firm. On hearing the news of the changes, Neal relaxes. "The system will catch Angie now," he says to himself. Required: 1. Is Neal's attitude justified? Why or why not? 2. What, if any, action should Neal take now?

Goods in transit shipped FOB shipping point should be included in the buyer's ending inventory.

Grape Gratuities Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 25 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for July is

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants the most realistic cost of goods sold. Which inventory costing method should Ace consider using?

When the terms of sale are FOB ______________, ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller.

In periods of falling prices, FIFO will result in a larger net income than the LIFO method.

The accountant at Patton Company has determined that income before income taxes amounted to $11,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $600 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?

Inventory methods such as FIFO and LIFO deal more with flow of costs than with flow of goods.

Peach Pink Inc. has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 25 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

Under IFRS, companies can choose which inventory system?

FIFO and LIFO are the two most common cost flow assumptions made in costing inventories. The amounts assigned to the same inventory items on hand may be different under each cost flow assumption. If a company has no beginning inventory, explain the difference in ending inventory values under the FIFO and LIFO cost bases when the price of inventory items purchased during the period have been (1) increasing, (2) decreasing, and (3) remained constant.

Goods held on consignment should be included in the consignor's ending inventory.

Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?

An employee assigned to counting computer monitors in boxes should