Exam 5: Inventories and Cost of Goods Sold

If a company has a number of days' sales in inventory equal to 60,that means that it takes about two months on average to sell its inventory.

Explain the relationship between the valuation of inventory and income measurement as it relates to the balance sheet and the income statement.

Flores Department Store currently uses the periodic inventory system. ​ Required Explain what the advantages would be to Flores if it uses the perpetual inventory system.Assume that Flores can use a computer system that is linked to its cash registers and that all products have bar codes that can be read by bar code readers attached to the cash registers.

A major advantage of the weighted average method of inventory costing is that

A counterbalancing inventory error is one where the error on the balance sheet is offset by the same amount of error on the income statement.

At the year-end inventory count,if goods in transit are shipped FOB destination point,they should be included in the inventory count of

Bower Corp.'s cost of sales has remained steady over the last two years.During this same time period,however,its inventory has increased considerably.What does this information tell you about the company's inventory turnover? Explain your answer.

Travelli Co.sold merchandise to Trapani Co.on account,$17,000,terms 2/15,net 45.The cost of the merchandise sold is $15,400.Travelli Co.issued an allowance for $1,750 for merchandise returned that originally cost $1,400.Trapani Co.paid the invoice within the discount period.What is amount of net sales from the above transactions?

Under the indirect method of preparing the statement of cash flows,a decrease in inventory is added to net income to determine cash flow from operating activities.

Xu Corp.started business at the beginning of 2017.Xu selected the FIFO method for its inventory.In order to maximize its profits for 2017under this method,prices must be

A company using the periodic inventory system must total the selling prices of the units on hand at the end of the period to value the ending inventory.

If the direct method is used to prepare the Operating Activities category of the statement of cash flows,the amount of cash paid to suppliers of inventory is shown as an addition in this section of the statement.

The cost of goods sold for Johnnie,Inc.totaled $1,305,000.Sales returns and purchase returns were $3,000 and $4,000,respectively.Purchases totaled $1,300,000.Discounts taken by Johnnie totaled $7,000,while discounts taken by customers totaled $5,000.Beginning inventory was $90,000.Determine the amount of ending inventory to be reported on Johnnie,Inc.'s balance sheet.

Ending inventory is equal to the cost of merchandise on hand plus

Share,Inc. The following data is available for one of the products sold by Share,Inc. ,which uses a perpetual inventory system. May 1 $\quad$ On hand, 10 units $@ \$ 2$ each 8 $\quad$ Sold 6 units@$10 each 14 $\quad$ Purchased 30 units $@ \$ 3$ each 23 $\quad$ Sold 24 units $@ \$ 10$ each -Refer to the data for Share,Inc. If the moving average method is used,how much is cost of goods sold for May?

The distinction between inventory and an operating asset is the intent of the owner.

Giant-Mart purchased a large shipment of shoes from Right Balance,Inc.on credit near the end of its accounting period.Right Balance shipped the shoes in January,and Giant-Mart received the shoes in February.Assume that Giant-Mart's accounting period ends on January 31,while Right Balance's accounting period ends on May 31. ​ Required If the shoes are shipped FOB destination point,who will pay the freight costs? If the shoes are shipped FOB shipping point,who will pay the freight costs?

If a customer returns merchandise which has already been paid for,the retailer may give either a cash refund or a credit on account.

The primary determinant in selecting an inventory costing method should be the ability of the method to accurately reflect the cost of goods sold of the period.

Digital Forces Selected data from the financial statements for Digital Forces is presented below. Net sales-2017 \ 200,000 Cost of sal es-2017 136,000 Selling and Administrative Expenses-2017 63,000 Other operating Expenses-2017 600 Income taxes-2017 3,000 Inventories-December 31,2016 11,000 Inventories-December 31,2017 13,000 Retained Earnings-December 31,2017 39,000 -Refer to the financial statement information for Digital Forces. ? What portion of every dollar is available to cover operating expenses and to contribute to profits for 2017?