Exam 6: Inventories

A particular production process requires two types of raw materials to produce the end product. Each unit of finished product requires three units of raw material A and 2 units of raw material B and processing costs of $35. The following provides information on inventories at year-end: Required: a. Evaluate these inventories to determine the amount of write-down, if any. b. Would your answer change if the replacement cost of raw material A were $11 per unit?

The following information was taken from the inventory records of Penelope Ltd.: What would be the gross margin, assuming that the weighted-average method is used in a periodic inventory system?

Crossway Outfitters is a retailer of outdoor clothing and equipment. The company has a standard mark-up of 60% on invoiced cost. Inventory at the beginning of the year was $1,840,000. During the year, the company purchased $14,300,000 of goods and recorded sales of $24,000,000. The year-end inventory count showed $2,590,000 in inventory measured at actual retail prices. Included in this total of $2,590,000 is $390,000 of goods that had been discounted by 25% relative to regular prices. Required: Using the retail inventory method, estimate the cost of inventory at the year-end and the amount of cost of goods sold.

Sarabjit Inc. produced the following information for December, 2012: Required: NOTE THAT EACH REQUIREMENT IS INDEPENDENT OF THE OTHERS. a)Determine if any of the transactions near year-end should be included in the December 31, 2012 inventory balance. b)Determine if there is any impairment of inventory at December 31, 2012. c)Determine the cost of goods sold for December 2012. d)The company has a historical gross margin of 25%. If sales were $400,000, what should ending inventory be at December 31, 2012?

Explain how a manufacturing company can manipulate earnings by including non-production costs in inventories. What does an auditor or financial statement user do to detect this type of manipulation?

Which statement best explains the specific identification method?

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?

Garrit Limited's income statement reported the following for the year ended Dec 31, 2012: Which is the correct statement about the income statement?

What issues arise on the subsequent measurement of inventory?

West Retail uses the retail method of inventory valued at average cost, lower of cost and market. The following information relates to 2012: What is the retail value of the 2012 ending inventory?

Assume that ending inventory in fiscal 2012 is overstated by $1,000.What impact will this have on fiscal 2012 financial reporting?

Which transaction would not be included in year end inventory?

When can inventory be overstated under the absorption costing method? Explain the precautions within GAAP to prevent a potential overstatement of inventory under the absorption costing method.

Which statement is correct about inventory errors?

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

A company has fixed production overhead costs totalling $20,000. The normal production level is 2,000 units per year, yielding a standard fixed overhead rate of $10.00 per unit. If the actual production level is 3,200 units, how much would be the amount of fixed overhead per unit and the amount of total fixed overhead included in inventory? Select the letter for the best answer:

What is the difference between the gross margin and the retail method for estimating ending inventory?

Which transaction would be included in the year end inventory?

Which statement best depicts the inventory cost flow equation?

Which statement is correct for about inventory systems?