Exam 6: Inventories

Top Trimaran manufactures sailboats. Due to recessionary conditions which have significantly depressed sales, the company had to cut back production to levels significantly below the normal level of 900 units a year. In 2013, the company's production resulted in the following figures: Actual amounts of variable and fixed costs were not materially different from standard costs. Required: Determine the amount of cost that should be included in inventories and the gross margin for the year. Top Trimaran uses the first-in, first-out cost flow assumption.

Which inventory method provides the highest quality information for the balance sheet?

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 2013 financial reporting?

What costs are not included in the cost of inventories?

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

What journal entry is required after the inventory count under the perpetual inventory system when shrinkage has been detected?

Using the following information, what amount of "shrinkage" would be identified under the periodic inventory system?

What is the purpose of using a "cost allocation system" such as FIFO?

Which of the following is a potential journal entry required after the inventory count under the periodic inventory system?

Use the chart provided below to determine the impact of a company expensing $4,000 transportation costs related to the purchase of its inventory. At year end, the company had sold 50% of the affected inventory items.

Explain what problems are created for the auditor by the use of the absorption costing method under GAAP.

Identify whether the following are benefits of using a perpetual inventory system (in comparison to a periodic system).

Assume that ending inventory in fiscal 2012 is overstated by $1,000.What impact will this have on fiscal 2013 financial reporting?

Which statement best explains the FIFO cost flow assumption?

Comfy Feet manufactures slippers. In 2011, the company hired a new bookkeeper who did not have appropriate training. The bookkeeper charged all of the following costs for manufacturing 70,000 pairs of slippers to "Production Expense." The company had zero work-in-process at the end of both 2010 and 2011. Finished goods amounted to 20,000 pairs at $9.00 per pair at the end of 2010. There were 6,500 pairs in finished goods inventory at the end of 2011. Required: a. Provide the adjusting journal entry or entries at Dec 31, 2011 to correct the bookkeeper's errors and properly record the above expenditures recorded in the "Production Expense" account. b. Assume the company uses a periodic inventory system and the FIFO cost flow assumption for finished goods. Calculate the cost of goods sold and the ending value of finished goods inventory for the year 2011. c. Now assume the company uses the weighted-average cost flow assumption. Calculate the cost of goods sold and the ending value of finished goods.

Explain what happens if the value of inventory recovers after it has been written down. How often will such an adjustment actually be made to inventory?

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?

What issues arise on the initial recognition and measurement of inventory?

Which statement is correct about the specific identification method?

Assume that ending inventory in fiscal 2012 is overstated by $1,000.What impact will this have on fiscal 2013 financial reporting?