Exam 11: Inventory

Glenda Good and Danny Rock are department managers in the housewares and shoe departments, respectively, for Litwins, a large department store. Danny has observed Glenda taking inventory from her own department home, apparently without paying for it. He hesitates confronting Glenda because he is due to Litwins recently replaced its old periodic inventory system with a perpetual inventory system using scanners and bar codes. In addition, the annual inventory is to Required: 1. Is Danny's attitude justified? Why or why not? 2. What, if any, action should Danny take now?

During July, the following purchases and sales were made by Phast Company. There was no beginning inventory. Phast Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

Under the LCNRV basis in valuing inventory, inventory is valued at the lower of

The selection of an appropriate inventory cost flow method for an individual company is made by

The following information is available for Clancy Company: Beginning inventory 600 units at \ 4 First purchase 900 units at \ 6 Second purchase 500 units at \ 7.20 Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month. Instructions Compute each of the following under the average-cost method: (a) Cost of ending inventory. (b) Cost of goods sold.

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $65; second purchase $78; third purchase $68. If the company sold two units for a total of $200 and used periodic inventory system with FIFO costing, the gross profit for the period would be

Tyler Company uses the periodic inventory system and reported the following summarized annual data at the end of 2022: Sales revenue \ 1,000,000 Cost of goods sold* 600,000 Gross profit \ 400,000 *Based on an ending FIFO inventory of $240,000. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $150,000. Instructions (a) Restate the summary information on a LIFO basis. (b) What effect, if any, would the proposed change have on Tyler's sales revenue and gross profit? (c) If you were an owner of this business, what would your reaction be to this proposed change?

The ______________ method tracks the actual physical flow of each unit of inventory available for sale.

The term "FOB" denotes

The cost of goods available for sale consists of the cost of beginning inventory plus the cost of goods purchased during the period.

Which is added to the cost of inventory?

In a period of rising prices, FIFO will have

If the unit cost 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 following information is available for Clancy Company: Beginning inventory 600 units at \ 4 First purchase 900 units at \ 6.50 Second purchase 500 units at \ 7.20 Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month. Instructions Compute the cost of ending inventory under the (a) FIFO method. (b) LIFO method.

The cost of goods purchased during a period plus the beginning inventory is the cost of goods ________________ during the period.

A company uses the periodic inventory method and the beginning inventory is overstated by $9,000 because the ending inventory in the previous period was overstated by $9,000. The amounts reflected in the current end of the period balance sheet are

Elly Company uses a periodic inventory system. Details for the inventory and purchases accounts for the month of January, 2022 are as follows: Units Per unit price Total Balance, 1/1/22 200 \ 5.00 \ 1,000 Purchase, 1/15/22 100 5.30 530 Purchase, 1/28/22 100 5.50 550 An end of the month (1/31/22) inventory showed that 150 units were on hand. If the company uses FIFO and sells the units for $9 each, what is the gross profit for the month?

Use of the LIFO inventory cost flow method can result in reporting paper or phantom profits.

Manufacturers usually classify inventory into all the following general categories except

Ending inventory is estimated when