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 FIFO? (rounded to whole dollars)

The two inventory costing systems used are the ______________ and ______________.

Many companies use just-in-time inventory methods. Which of the following is not an advantage of this method?

The inventory turnover is calculated as cost of goods sold divided by ending inventory.

Olympus Climbers Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 32 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

Al Bodkin, a new employee of Crafter's Paradise, recorded $1,000 in consigned goods received as part of the firm's inventory. The goods were received one day after the end of the fiscal period, but Al reasoned that the goods should be included in inventory sooner because Crafter's paid the freight. The mistake was brought to his attention by the purchasing department who said the goods should not have been recorded as Crafter's inventory at all. Al told Sid Goza, the purchasing supervisor, that nobody needed to worry, because the mistake would cancel itself out the following month. In Al's opinion, there was no reason to get everyone excited over nothing, especially since it was monthly, and not annual, financial statements that were affected. Sid Goza has reported the problem to the accounting department. Required: You are Al's supervisor. Write a memo to Al explaining why the error should have been corrected.

A company may use more than one inventory cost flow method at the same time.

When the terms of sale are FOB shipping point, legal title to the goods remains with the seller until the goods reach the buyer.

Your former college roommate is opening a new retail store and asks you "Which inventory costing method should I use?" What is your response? Include a comparison of the tax effect, balance sheet effect, and income statement effect for FIFO versus LIFO.

When applying the lower of cost or market rule to inventory valuation, market generally means

If goods in transit are shipped FOB destination

The LIFO method is rarely used because most companies do not sell the last goods they purchase first.

Of the following companies, which one would not likely employ the specific identification method for inventory costing?

At May 1, 2014, Heineken Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 400 units at $7 600 units at $8 The company sold 1,000 units during the month for $12 per unit. Heineken uses the average cost method. The value of Heineken's inventory at May 31, 2014 is

Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer.

Use the following information for Boxter, Inc., Clifford Company, Danforth Industries, and Evans Services to answer the question "What is Danforth's LIFO reserve for 2013?"

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Dole Industries had the following inventory transactions occur during 2014: The company sold 204 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars)

When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

Sassy Saxophones has the following inventory data: Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis.