Exam 6: Inventories

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

Emily Holmes owns and operates a large antique shop.She uses the specific identification method to account for transactions that affect inventory.Holmes recently completed a physical inventory of the merchandise in her shop as part of her year-end work.Today,her accountant called to inform her that it would be necessary to adjust the inventory figure shown on the balance sheet,which will increase Holme's tax liability.Holmes argued that the inventory had to be correct,because she counted it twice and matched every item to an invoice.Cite reasons why the accountant would find it necessary to adjust the inventory even if Holme's count is accurate.

Days' inventory on hand equals the inventory turnover divided by 365.

When taking a physical inventory under the retail method,it is necessary to know only the quantity of items on hand.

Inventory costing methods place primary reliance on assumptions about the flow of

An understatement of year 1's ending inventory will

Supply-chain management helps companies maintain lower levels of inventory.

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules?

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

Which costing method will produce the same result under both a perpetual and periodic system?

When the average-cost method is applied to a perpetual inventory system,a moving average cost per unit is computed with each purchase.

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work in process.

Use this information to answer the following question. A periodic inventory system is used. -Cost of goods sold under FIFO is

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

An unrealistic picture of the inventory's current value on the balance sheet is an argument against using

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

The matching of revenue with inventory costs is best achieved with the FIFO method.

In verifying a claim for a loss of inventory,an insurance company might use the gross profit method.

Costs incurred in storing inventory usually are not included in inventory costs.

Assume that during the physical count of the inventory of a large corporation last year,$650,000 of merchandise was not counted.The error was not detected,and the financial statements for the current fiscal year were prepared.Identify the individual statements that would be affected and explain the effect the error would have on each of these statements.