Exam 6: Reporting and Analyzing Inventory

In accounting for inventory, the assumed flow of costs must match the physical flow of goods.

Use the following information regarding Black Company and Red Company to answer the question "Which of the following is Black Company's "cost of goods sold" for 2013 (to the closest dollar)?"

Hess Company's inventory records show the following data for the month of September: A physical inventory on September 30 shows 150 units on hand. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

What is the primary basis of accounting for inventories? What is the major objective in accounting for inventories?

The inventory turnover is calculated by dividing cost of goods sold by

Johnson Company has a high inventory turnover that has increased over the last year. All of the following statements are true regarding this situation except Johnson County:

The following information was available for Bowyer Company at December 31, 2014: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Bowyer's days in inventory in 2014 was

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

The accountant at Landry Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $8,740. The LIFO method will result in income before taxes of $8,100. What is the difference in tax that would be paid between the two methods?

Echo Sound Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. The inventory method which results in the highest gross profit for June is

In the first month of operations, Dieker Company made three purchases of merchandise in the following sequence: (1) 200 units at $6, (2) 300 units at $7, and (3) 400 units at $8. Assuming there are 250 units on hand, compute the cost of the ending inventory under (1) the FIFO method and (2) the LIFO method. Dieker uses a periodic inventory system.

LIFO can be used

Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2014 are as follows: An end of the month (1/31/2014) inventory showed that 160 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

Whitman Corporation sells six different products. The following information is available on December 31: When applying the lower of cost or market rule to each item, what will Whitman's total ending inventory balance be?

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants to maintain a high current ratio. Which inventory costing method should Ace consider using?

An inventory turnover that is too high may indicate that the company is losing sales opportunities because of inventory shortages.

Dennis Lee, an auditor with Knapp CPAs, is performing a review of Dobson Company's inventory account. Dobson did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $640,000. However, the following information was not considered when determining that amount. 1. Included in the company's count were goods with a cost of $200,000 that the company is holding on consignment. The goods belong to Agler Corporation. 2. The physical count did not include goods purchased by Dobson with a cost of $40,000 that were shipped FOB shipping point on December 28 and did not arrive at Dobson's warehouse until January 3. 3. Included in the inventory account was $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. 4. The company received an order on December 29 that was boxed and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of $30,000. The goods were not included in the count because they were sitting on the dock. 5. On December 29, Dobson shipped goods with a selling price of $90,000 and a cost of $70,000 to Central Sales Corporation FOB shipping point. The goods arrived on January 3. Central Sales had only ordered goods with a selling price of $10,000 and a cost of $8,000. However, a sales manager at Dobson had authorized the shipment and said that if Central wanted to ship the goods back next week, it could. 6. Included in the count was $50,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Dobson's products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, "since that is what we paid for them, after all." Instructions Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item.

An overstatement of ending inventory in one period results in

Consigned goods are held for sale by one party although ownership of the goods is retained by another party.

GAAP's provision for ownership of goods (goods-in-transit or consigned goods), as well as which costs to include in inventory, as compared to IFRS are: