Exam 7: Inventory

Carolina Company has a normal markup of 40%. Its cost-to-sales ratio is

Superior Slippers Ltd. uses the gross margin method to calculate the cost of its ending inventory. In 2020, the company had beginning inventory of $475,000 and purchases of $3,750,000. The company has traditionally marked up its inventory 45% and in 2020 had sales of $5,250,000. Instructions Calculate Superior Slippers Ltd.'s ending inventory for 2020.

Riverside Ltd. uses a perpetual inventory system and had the following activity for a single inventory item: Instructions Using the perpetual system, determine the ending inventory and cost of goods sold under: a) FIFO b) Weighted-average (round unit cost to nearest cent) Show your work.

Which of the following would be most likely to use the specific identification method?

When a company is evaluating whether or not to use a perpetual vs. a periodic inventory system the following statement is most accurate.

Once the manufacturing process is complete, the product is transferred from the Work-in-Process account to Raw Materials account.

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost formula?

Allegra Ltd. has just completed a physical inventory count at year end, July 31, 2020. Only the items on the shelves, in storage, and in the receiving area were counted. The inventory amounted to $77,000. Allegra uses a perpetual inventory system. During the year-end audit, the independent CPA discovered the following additional information: 1. There were goods in transit on July 31, 2020, from a supplier with terms FOB destination, costing $8,500. These items were excluded from the physical inventory count. 2. On July 27, 2020, a regular customer purchased goods for cash amounting to $1,000 and left them for pickup on August 4, 2020. Allegra had paid $1,200 for the goods and included them in the physical inventory count. 3. Allegra Ltd, on the date of the inventory count, received notice from a supplier that goods ordered earlier at a cost of $10,000, were shipped on July 28, 2020; the terms were FOB shipping point. The goods had not yet been received. These items were excluded from the physical inventory. 4. On July 31, 2020, there were goods in transit to customers, with terms FOB shipping point, amounting to $800 (expected delivery on August 8, 2020). The items were excluded from the physical inventory count. 5. On July 31, 2020, Allegra shipped $2,500 worth of goods to a customer, FOB destination. This shipment arrived on August 5, 2020. These items were not included in the physical inventory count. 6. Allegra, as the consignee, had goods on consignment that cost $5,000. These items were included in the physical inventory count. Instructions Analyze the above information and calculate a corrected amount for the ending inventory. Explain the rationale for your treatment of each item.

Which of the following cost formulas would be most appropriate for costing an inventory of liquids stored in tanks?

Ariel Co.'s gross profit margin increased from 41.5% in 2020 to 44.3% in 2021. Possible reasons may include:

Use the following information to answer questions 70-71. Pal Distributers Inc. values its inventory on an LCM basis. The following data came from the 2020 inventory, which consisted of two items: -The appropriate carrying value for the entire inventory when applying the LCM rule using net realizable value on an item-by-item basis would be

Gross margin is the difference between sales revenue and costs of goods available for sale.

Perpetual inventory systems provide more timely information than periodic systems.

Which of the following statements best describes net realizable value when applying the LCM rule?

Net realizable value is also known as the

One strategy managers use to reduce the holding costs of inventory is

Prairie Fruit is a fruit distributor located in Sudbury, Ontario. The company has been losing significant business over the past year and the manager has asked you to use the following information to calculate the company's inventory ratios to help identify any areas of concern:

Which cost formula will produce the same results under both the periodic and perpetual inventory systems?

The following information is available for Acme Inc.: Instructions Use the above information to calculate the cost of goods available for sale and cost of goods sold for Acme Inc. for the year ended July 31, 2021.

Perpetual inventory systems are incapable of identifying inventory shrinkage.