Exam 6: Inventories

SimBis Enterprises incurred the following costs to produce and sell its inventory in 2012: SimBis also noted that the following errors were made in recording transactions in 2012 (note that these errors only affect part (d)of this question): Required: a)Determine the cost of inventory under the absorption costing method. b)Determine the cost of inventory under the variable costing method. c)Explain how management could potentially manipulate net income by using absorption costing. What can an analyst or investor do to check if income has been manipulated through the use of absorption costing? d)Assume that, before any corrections, gross margin was $500,000 and ending retained earnings was $750,000. Determine the impact of any inventory errors on cost of goods sold and ending retained earnings for 2012.

Using the following cost information regarding finished goods, what would be the ending value of the finished goods inventory if the market value of the goods is $200,000?

Which statement best explains the gross margin method?

Which statement is correct about variable costing?

Which statement best explains "net realizable value"?

The following information was taken from the inventory records of Hari Ltd.: What would be the cost of goods sold, assuming that the LIFO method is used in a perpetual inventory system?

ABHAY Co. prepares monthly income statements. Inventory is counted only at year end; thus, month-end inventories must be estimated. All sales are made on account. The rate of mark-up on cost is 25%. The following information relates to the month of June. Accounts receivable, June 1 $121,000 Inventory, June 1 147,000 Collections of accounts during June 184,000 Purchases during June 165,000 Accounts receivable, June 30 127,000 Instructions Calculate the estimated cost of the inventory on June 30.

Explain the meaning of net realizable value and when raw materials, work in progress and finished goods inventories need to be written down.

A specialized retailer has a selection of five products. The following is information relating to these products. The company estimates selling costs to be 4% of selling price, primarily for sales commissions. Required: Determine the amount of inventory write-down per product required, if any.

Lee Limited began operations on January 1, 2012. The following data relate to the company's first 2 years in business: What is the correct cost of goods sold for 2013?

A fire destroyed the inventory of Mantis Company in June. Reconstructed data follows: What was the cost of the inventory lost in the fire?

Inventive Controls Ltd. was incorporated and started business early in January 2012 to manufacture electronic control devices to monitor traffic. Inventive purchased a small manufacturing plant and office building in a new industrial park and was in operation immediately. General ledger account balances at December 31, 2012 are as follows: At December 31, 2012, there was no work-in-process, but 30% of the units manufactured remained in ending finished goods inventory. Inventive uses the straight-line method to calculate depreciation. Required: a. Calculate the value of cost of goods sold and ending finished goods inventory under IFRS. b. Prepare an income statement for Inventive for the year ended December 31, 2012.

For the year ended December 31, 2012, Complex Company reported gross margin of $29,700, which was 30% of the sales for the period. The cost of goods available for sale was 120% of the cost of goods sold. The beginning inventory was twice as much as the ending inventory. What was the amount of purchases for 2012?

A retailer has a standard mark-up of 50% on invoiced cost. At the year end, 200 out of 5,000 products had been discounted by 20% of retail price. Required: Calculate the estimated costs as a percentage of retail price, separately for regular and discounted products.

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

Given the following information, what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system?

Consider the following inventory information for last year: The company uses a periodic inventory system. The year-end inventory count indicated 5,300 units left in inventory. Required: Using the first-in, first-out (FIFO)method, calculate the ending inventory value and the cost of goods sold for the year.

Explain the meaning of the following inventory costing methods: FIFO, specific identification, LIFO, and weighted average.

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

Which goods in transit would be recorded in inventory at year end?