Exam 5: Inventories and Cost of Sales

A company made the following purchases during the year: Jan. 10 15 units at \ 360 each Mar. 15 25 units at \ 390 each Apr. 25 10 units at \ 420 each July 30 20 units at \ 450 each Oct. 10 15 units at \ 480 each On December 31,there were 28 units in ending inventory.These 28 units consisted of 1 from the January 10 purchase,2 from the March 15 purchase,5 from the April 25 purchase,15 from the July 30 purchase,and 5 from the October 10 purchase.Using specific identification,calculate the cost of the ending inventory.

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made,it can be multiplied by the ending inventory at retail to estimate ending inventory at cost.

An advantage of the weighted-average inventory method is that it tends to smooth out the effects of price changes.

Given the following information,determine the cost of ending inventory at November 30 using the FIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

Whether prices are rising or falling,FIFO always will yield the highest gross profit and net income.

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income. Inventory Error Cost of Goods Sold Net Income Understatement of beginning inventory Understatement of ending inventory Overstatement of beginning inventory Overstatement of ending inventory

When purchase costs regularly rise,the ___________________ method of inventory valuation yields the lowest gross profit and net income,providing a tax advantage.

A company had inventory of 5 units at a cost of $20 each on November 1.On November 2,they purchased 10 units at $22 each.On November 6,they purchased 6 units at $25 each.On November 8,they sold 18 units for $54 each.Using the LIFO perpetual inventory method,what was the cost of the 18 units sold?

Given the following information,determine the cost of ending inventory at November 30 using the weighted-average perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

During January,a company that uses a perpetual inventory system had beginning inventory,purchases,and sales as follows.What was the weighted-average cost of the company's January 31 inventory?

During a period of steadily rising costs,the inventory valuation method that yields the lowest reported net income is:

Explain why the lower of cost or market rule is used to value inventory.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

A company's cost of inventory was $317,500.Due to phenomenal demand for this product,the market value of its inventory increased to $323,000.According to the consistency principle,this company should write up the value of its inventory.

A company has inventory of 10 units at a cost of $10 each on June 1.On June 3,they purchased 20 units at $12 each.12 units are sold on June 5.Using the FIFO periodic inventory method,what is the cost of the 12 units that were sold?

A company had inventory on November 1 of 5 units at a cost of $20 each.On November 2,they purchased 10 units at $22 each.On November 6,they purchased 6 units at $25 each.On November 8,8 units were sold for $55 each.Using the FIFO perpetual inventory method,what was the value of the inventory on November 8 after the sale?

Match each of the following terms with the appropriate definition.

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

If damaged and obsolete goods cannot be sold,they are not included in inventory.

A company has the following per unit original costs and replacement costs for its inventory: Part A: 10 units with a cost of $3 and replacement cost of $2.50. Part B: 40 units with a cost of $9 and replacement cost of $9.50. Part C: 75 units with a cost of $8 and replacement cost of $7.50. Under the lower of cost or market method,the total value of this company's ending inventory must be reported as: