Exam 5: Inventories and Cost of Sales

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The simple rule for inventory turnover is that a low ratio is preferable.

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Eastview Company uses a perpetual LIFO inventory system,and has the following purchases and sales: January 1 150 units were purchased at \9 per unit. January 17 120 units were sold. January 20 160 units were purchased at \1 1 per unit. January 29 150 units were sold. - What is the value of cost of goods sold?

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Net realizable value for damaged or obsolete goods is sales price less the cost of making the sale.

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A company sells garden hoses and uses the perpetual inventory system to account for its merchandise.The beginning balance of the inventory and its transactions during September were as follows: September 1: Beginning balance of 18 units at $13 each September 12: Purchased 30 units at $14 each September 19: Sold 24 units at $30 selling price each September 20: Purchased 24 units at $17 each September 27: Sold 27 units at $30 selling price each If the ending inventory is reported at $276,what inventory method was used?

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Monarch Company uses a weighted-average perpetual inventory system,and has the following purchases and sales: January 1 20 units were purchased at \ 10 per unit. January 12 12 units were sold. January 20 18 units were purchased at \ 11 per unit. - What is the value of ending inventory? (Round average cost per unit to 2 decimal places,and final answer to the nearest dollar.)

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A company's warehouse contents were destroyed by a flood on September 12.The following information was the only information that was salvaged: 1.Inventory,beginning: $28,000 2.Purchases for the period: $17,000 3.Sales for the period: $55,000 4.Sales returns for the period: $700 The company's average gross profit ratio is 35%.What is the estimated cost of the lost inventory?

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Incidental costs for acquiring merchandise inventory,such as import duties,freight,storage,and insurance,should not be added to the cost of inventory.

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A company had the following ending inventory costs: Product Units of Hand Unit Cost Market Value A 10 \ 5 \6 B 50 8 7 C 35 10 11 Required: Calculate the lower of cost or market (LCM)value for each individual item.

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Match the inventory valuation method from the list below that is being described in each situation in letters a-e.In all cases,assume a period of rising prices.
The method that is used if each inventory item can be matched with a specific purchase and invoice.
FIFO: First in, first out
The method that will cause the company to have the lowest income taxes.
LIFO: Last in, first out
The method that will cause the company to have the lowest cost of goods sold.
WA: Weighted average
Correct Answer:
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Responses:
The method that is used if each inventory item can be matched with a specific purchase and invoice.
FIFO: First in, first out
The method that will cause the company to have the lowest income taxes.
LIFO: Last in, first out
The method that will cause the company to have the lowest cost of goods sold.
WA: Weighted average
The method that will assign a value to inventory that approximates current cost.
SI: Specific identification
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A company uses the retail inventory method and has the following information available concerning its most recent accounting period: At Cost At Retail January 1 beginning inventory \ 167,340 \ 304,240 Cost of goods purchased 561,850 1,021,560 Sales 940,400 Sales returns 40,200 1.Use the retail inventory method to estimate the company's year-end inventory at cost. 2.A year-end physical count at retail prices yields a total inventory of $404,800.Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

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Match the following terms with the appropriate definition. -An owner of goods who ships them to another party who will then sell the goods for the owner.

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What advantages does a perpetual inventory system have over periodic inventory system?

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A company had the following purchases and sales during its first month of operations: January 1 Purchased 10 units at \ 4.00 per unit January 9 Sold 6 units at \ 12.00 per unit January 17 Purchased 8 units at \ 5.50 per unit January 27 Sold 7 units at \ 12.00 per unit - Using the Periodic weighted average method,what is the value of cost of goods sold? (Round weighted average cost per unit to 2 decimal places.)

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Underwood had cost of goods sold of $8 million and its ending inventory was $2 million.Therefore,its days' sales in inventory equals 25 days.

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An understatement of ending inventory will cause

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________ is the estimated sales price of damaged goods minus the cost of making the sale.

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Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000,credit terms 2/10,n/30 that apply only to the $50,000; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000.Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions.Compute the cost that should be assigned to the inventory.

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In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

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Hull Company reported the following income statement information for the current year: Sales \ 410,000 Cost of goods sold: Beginning inventory \ 132,000 Cost of goods purchased Cost of goods available for sale 405,000 Ending inventory 144,000 Cost of goods sold Gross profit \ 149,000 The beginning inventory balance is correct.However,the ending inventory figure was overstated by $20,000.Given this information,the correct gross profit would be:

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The cost of an inventory item includes the ________,plus ________ costs necessary to put it in a place and condition for sale.

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