Exam 6: Inventories

Prior to a fire that destroyed most of its inventory,Verona Company had inventory purchases during the period of $80,000 and sales of $250,000.Verona began the period with $190,000 in inventory.Verona's typical gross profit percentage is 20 percent.Inventory that cost $10,000 survived the fire.Using the gross profit method,estimate the inventory loss from the fire.(Show your work.)

Use this information to answer the following question. Feb. 1 Inventory 200 units @ \ 6.00 6 Purchase 300 units @\ 6.60 13 Purchase 100 units @\ 7.20 20 Purchase 200 units @\ 7.80 25 Purchase 40 units @ \ 8.40 Total sales 620 units A periodic inventory system is used. Using FIFO,the cost assigned to ending inventory is

A fur dealer probably would use which of the following inventory methods?

Inventory is an example of a long-term asset.

A retail store has beginning inventory of $30,000,purchases of $220,000,sales of $200,000,and a normal gross margin of 25 percent.What is estimated inventory based on these facts and the gross profit method?

In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?

Which of the following is an inventory processing system?

Assume that during the physical count of the inventory of a large corporation for this year,$900,000 of merchandise was counted twice.The error was not detected,and the financial statements were prepared.Identify the individual statements that would be affected and explain the effect the count error would have on each.(Omit income tax consideration.)

Under the periodic inventory system,cost of goods sold is not recorded until the end of the accounting period.

Under rising prices,why will the FIFO method produce a higher ending inventory than LIFO?

What is a LIFO liquidation,and what is its effect on income before income taxes?

An overstatement of ending inventory in one period results in

If prices were to never change,there would be no need for alternative inventory methods.

A cost-to-retail percentage must be calculated when applying the retail method.

The specific identification method identifies the cost of each item in ending inventory.

Which of the following costs normally would be included in the inventory cost?

The average-cost method produces an ending inventory figure that is somewhere between the figures produced by FIFO and LIFO.

Use this inventory information for the month of September to answer the following question. Sept. 1 Beginning inventory 10 units @ \ 120 5 Purchase 60 units @ \ 112 14 Sale 40 units 21 Purchase 30 units @ \1 16 30 Sale 28 units Assuming that a perpetual inventory system is used,what is ending inventory on a FIFO basis?

Despite its advantages,the just-in-time operating environment produces increased carrying costs for inventory.

In a period of rising prices,which inventory method is best to use for tax purposes?