Exam 7: Inventories

Condensed income statements for Sauk Company are shown below for two years. Compute the corrected income before income taxes for 2012 and 2013 assuming that the inventory as of the end of 2012 was mistakenly understated by $6,000.

An overstatement of ending inventory in one period results in

Pepin Company reports income before income taxes of $160,000 during 2013.If beginning inventory was overstated by $14,000 and ending inventory was understated by $16,000,calculate corrected income before income taxes for the year.(Show your work.)

Match each definition with the correct term below. -Cost flow

During November,Marquette Company sold 240 units of Product Y.Its beginning inventory and purchases during the month were as follows: Compute the cost of goods sold under each of three methods: (a)average-cost,(b)LIFO,and (c)FIFO.Assume the periodic inventory system is used.(Show your work.)

Inventory costing methods place primary reliance on assumptions about the flow of

Inventory methods such as LIFO and FIFO deal more with goods flow than with cost flow.

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Why will an understated beginning inventory produce an overstated income before income taxes for the same period? Will the understatement have a favorable or unfavorable effect on current year income taxes?

The higher the value assigned to ending inventory,the lower the gross margin.

A retail store has goods available for sale of $1 million at retail and $550,000 at cost,and ending inventory of $80,000 at retail.What is the estimated cost of ending inventory?

Given the following information about purchases and sales during the year,compute the cost to be assigned to ending inventory under each of three methods: (a)average-cost,(b)FIFO,and (c)LIFO.Assume the periodic inventory system is used.(Show your work.)

Use this information to answer the following question. A periodic inventory system is used; ending inventory is 147 units. What is cost of goods sold under LIFO?

Periodic and perpetual are examples of inventory costing systems.

Given equal circumstances,which inventory method probably would be the most time consuming?

Which of the following costs usually would not be included in the inventory cost?

The retail method is the only method that is useful in estimating the inventory cost.

Assuming that ending inventory for 2012 was overstated,indicate whether each of the following will be understated (U),overstated (O),or not affected (N). _____ 1.Beginning inventory for 2013 _____ 2.Cost of goods sold for 2012 _____ 3.Stockholders' equity at the end of 2013 _____ 4.Income before income taxes for 2013 _____ 5.Stockholders' equity at the end of 2012 _____ 6.Cost of goods sold for 2013 _____ 7.Income before income taxes for 2012

Match each definition with the correct term below. -Consignment

Use this information to answer the following question. A periodic inventory system is used. Cost of goods sold under FIFO is