Exam 5: Inventories and Cost of Sales

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements.The following information is available: Beginning inventory,January 1: $4,000 Net sales: $80,000 Net purchases: $78,000 The company's gross margin ratio is 25%.Using the gross profit method,the estimated ending inventory value would be:

When costs to purchase inventory regularly decline,which method of inventory costing will yield the lowest cost of goods sold?

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold,and does a better job of matching current costs with revenues on the income statement.

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. -If the company uses the LIFO periodic inventory method,what would be the cost of the ending inventory?

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Use the information below to determine the sales revenue,cost of goods sold and gross profit that would be reported for the company related to the March 16 sale assuming the company uses weighted average inventory valuation and a perpetual inventory system.

If the seller is responsible for paying freight charges,then ownership of inventory passes when goods arrive at their destination.

A company had beginning inventory of 10 units at a cost of $20 each on March 1.On March 2,it purchased 10 units at $22 each.On March 6 it purchased 6 units at $25 each.On March 8,it sold 22 units for $54 each.Using the FIFO perpetual inventory method,what was the cost of the 22 units sold?

Calculate the ending inventory using LIFO for a company that uses a perpetual inventory system,using the information given below.

The inventory turnover ratio is computed by dividing cost of goods sold by average merchandise inventory.

All of the following statements regarding the financial statement impact of inventory costing are true except.

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?

To avoid the time-consuming process of taking an inventory each year,most companies use the gross profit method to estimate ending inventory.

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system. -Determine the cost assigned to cost of goods sold using LIFO.

In the retail inventory method of inventory valuation,the retail amount of inventory is measured using selling prices of inventory items.

The inventory turnover ratio:

A company had the following purchases and sales during its first year of operations: On December 31,there were 26 units remaining in ending inventory. -Using the perpetual LIFO inventory costing method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)