Exam 5: Accounting for Inventories

If a company uses the LIFO cost flow method,it is not required by generally accepted accounting principles to apply the lower-of-cost-or-market rule.

-What is the average number of days to sell inventory for Company Y?

Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?

Singleton Company's perpetual inventory records included the following information: -If Singleton uses the weighted-average cost flow method,its average cost per unit would be $8.00.

If a company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate,its write-down of inventory is likely to be greater than if it applies the rule to individual items of inventory.

Landis Company is preparing its financial statements.Gross margin is normally 40% of sales.Information taken from the company's records revealed sales of $25,000;beginning inventory of $2,500 and purchases of $17,500.What is the estimated amount of ending inventory at the end of the period?

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows: Glasgow sold 220 units after purchase 3 for $17.00 each. -What is Glasgow's ending inventory under LIFO?

Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following information: -Assuming Chase uses a FIFO cost flow method,what is the ending inventory on January 31?

Which of the following businesses is most likely to use a specific identification cost flow method?

Hoover Company purchased two identical inventory items.The item purchased first cost $33.00.The item purchased second cost $35.00.Then Hoover sold one of the inventory items for $62.00.Based on this information,which of the following statements is true?

A loss resulting from application of the lower-of-cost-or-market rule is included in cost of goods sold if the loss is material in amount.

The lower-of-cost-or-market rule can be applied to which of the following?

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is immaterial,which of the following journal entries would be recorded?

Blake Company purchased two identical inventory items.The item purchased first cost $16.00,and the item purchased second cost $18.00.Blake sold one of the items for $24.00.Which of the following statements is true?

How is inventory turnover calculated?

Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method.On January 1,Year 2,Stubbs purchased 400 units of inventory that cost $8.00 each.On January 10,Year 2,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 700 units of inventory for $16.00 each,what is the amount of gross margin reported on the income statement?

If prices are rising,which inventory cost flow method will produce the lowest amount of cost of goods sold?

At the end of the Year 2 accounting period,DeYoung Company determined that the market value of its inventory was $79,800.The historical cost of this inventory was $81,400.DeFazio uses the perpetual inventory method.Assuming the amount is material,how will the entry necessary to reduce the inventory to the lower of cost or market affect the elements of the company's financial statements?

In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.