Exam 6: Inventories and Cost of Sales

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

A company had the following purchases during its first year of operations: January: Purchases February: 10 units at \ 120 May: 20 units at \ 130 September: 15 units at \ 140 November: 12 units at \ 150 On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge. What are the challenges Patrick refers to?

The inventory turnover ratio:

Describe the internal controls that must be applied when taking a physical count of inventory.

Incidental costs for acquiring merchandise inventory, such as import duties, freight, storage, and insurance, should not be added to the cost of inventory.

Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:

A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at \ 120 6 units February: 20 units at \ 125 5 units May: 15 units at \ 130 9 units September: 12 units at \ 135 8 units November: 10 units at \ 140 13 units On December 31, there were 26 units remaining in ending inventory. Using the Periodic LIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

A company's current inventory consists of 5,000 units purchased at $6 per unit. Replacement cost has now fallen to $5 per unit. What is the entry the company must record to adjust inventory to market?

Eastview Company uses a periodic LIFO inventory system, and has the following purchases and sales: January 1 150 units were purchased at \ 9 per unit. January 17 120 units were sold. January 20 160 units were purchased at \ 11 per unit. January 29 150 units were sold. What is the value of ending inventory?

Generally accepted accounting principles require that the inventory of a company be reported at:

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

In the retail inventory method of inventory valuation, the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items.

Errors in the period-end inventory balance only affect the current period's records and financial statements.

Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to the ending inventory using FIFO. Date Activities Units Acquired at Cost Units Sold at Retail May 1 Beginning Inventory 150 units @\ 10.00 5 Purchase 220 units @\ 12.00 10 Sales 140 units @\ 20.00 15 Purchase 100 units @\ 13.00 24 Sales 90 units @\ 21.00

Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had $100,000 in sales during the second quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory by the gross profit method is:

If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:

Lucia Company reported cost of goods sold for Year 1 and Year 2 as follows: Y ear 1 Y ear 2 Beginning inventory \ 120,000 \ 130,000 Cost of goods purchased 250,000 Cost of goods avail able for sale 370,000 405,000 Ending inventory 130,000 135,000 Cost of goods sold \ 240,000 \ 270,000 Lucia Company made two errors: 1)ending inventory at the end of Year 1 was understated by $15,000 and 2)ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods sold figure for Year 2 would be:

Mary's Antiques does not have its own retail location, instead maintains inventory in its warehouse and sells merchandise through Oldtime Antique Mall. Oldtime does not assume responsibility for goods until they are sold to customers at which time it takes a commission for items sold and sends the sale proceeds to Mary's. Identify which company has the role of the consignor and the consignee. Which company should include any unsold goods as part of its inventory?

A company uses the periodic inventory system and had the following activity during the current monthly period. November 1: Beginning inventory 100 units @\ 20 November 5: Purchased 100 units @\ 22 November 8: Purchased 50 units @\ 23 November 16: Sold 200 units @\ 45 November 19: Purchased 50 units @\ 25 Using the weighted-average inventory method, the company's ending inventory would be: