Exam 8: Inventories

The determination of the balance sheet cost of merchandise inventory is important to the determination of net income.

Use this inventory information for the month of March to answer the following questions. Assuming that a perpetual inventory system is used, what is ending inventory on a LIFO basis?

An understatement of year 1's ending inventory will

Given the following information about purchases and sales during the year, compute the cost to be assigned to ending inventory under each of three methods: (a) average-cost, (b) FIFO, and (c) LIFO. (Show your work.) Assuming that a periodic inventory system is used

Goods held on consignment should be included in the consignee's ending inventory.

When applying the retail method, which of the following would not be a component of the cost-to-retail percentage?

A retail store prices its goods to achieve a gross margin of 30 percent. Up to the date of a fire that destroyed the store's inventory, sales were $200,000 and cost of goods available for sale was $150,000. The estimated cost of the inventory destroyed is

In periods of rising prices, the FIFO method will result in a larger gross margin than the LIFO method.

Use this inventory information for the month of September to answer the following question. Assuming that a perpetual inventory system is used, what is ending inventory (rounded) under the average-cost method?

Which of the following companies would be most likely to use the retail method?

An understatement of ending inventory in a period will result in an overstatement of gross margin in the next period.

Use this information to answer the following question. A periodic inventory system is used. Using FIFO, the cost assigned to ending inventory is

Jayne's Department Store had net retail sales of $310,000 during the current year. The following additional information was obtained from the accounting records. Estimate the company's ending inventory at cost using the retail method. (Show your work.)

Applying the lower-of-cost-or-market rule follows which of the following accounting conventions?

Use this inventory information for the month of June to answer the following question. What is cost of goods sold under the specific identification method?

Which inventory method generally best follows the matching principle?

Use the following information to calculate cost of goods sold under each of three methods: (a) FIFO, (b) LIFO, and (c) average-cost. Assume the periodic inventory system is used. (Show your work.)

An understatement of ending inventory in one period results in

In periods of rising inventory prices, the LIFO method will result in a higher inventory valuation than will the average-cost method.

Why is the LIFO cost flow assumption an acceptable valuation method for merchandise inventory when it rarely matches the physical movement of the product?