Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 14, Beech Soda, Inc. sold 25 units of this product. The other 28 units remained in inventory at January 31. $\begin{array}{|l|c|c|c|} \hline & \text { Quantity } & \text { Unit Cost } & \text { Total Cost } \\ \hline \text { Beginning inventory (Jan. 1) } & 16 & \$ 10 & \$ 160 \\ \hline \text { Purchase (Jan. 11) } & 14 & \$ 12 & 168 \\ \hline \text { Purchase (Jan. 20) } & \underline{ 23} & \$ 15 & \underline{345} \\ \hline \text { Total } & 53 & & \$ 673 \\ \hline \end{array}$ -Assuming that Beech Soda uses the FIFO flow assumption, the cost of goods sold to be recorded at January 14 is:

A) $278. B) $268. C) $393. D) $673. A) $278. B) $268. C) $393. D) $673.

Harding Systems, Inc. uses a periodic inventory system. The purchases of a particular product during the year are shown below: At December 31 the ending inventory consisted of 1,500 units. \[\begin{array} { l l l r } \text { Jan.1 } & \text { Beginning inventory } & 1,100 \text { units @ } \$ 7.25 & \$ 7,975 \\ \text { Feb. 7 } & \text { Purchase } & 1,450 \text { units } @ \$ 7.50 & 10,875 \\ \text { July 10 } & \text { Purchase } & 1,600 \text { units } @ \$ 8.00 & 12,800 \\ \text { Nov. 25 } & \text { Purchase } & \underline { 1,000 } \text { units } @ \$ 8.50 & \underline { 8,500 } \\ & \text { Total } & \underline { \underline { 5,150}}& \underline { \underline { 40,150 } } \end{array}\] -Compute the cost of the ending inventory based on the LIFO method of inventory valuation.

A) $12,500. B) $27,650. C) $10,975 D) $29,175. A) $12,500. B) $27,650. C) $10,975 D) $29,175.

Ace Systems, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 28, Ace Systems sells 18 units of this product. The other 12 units remain in inventory at January 31. $\begin{array} {l c c c } & \text { Quantity } & \text { Unit Cost } & \text { Total Cost } \\ \text { Beginning inventory (Jan. 1)}&10 & \$ 27.50 & \$ 275 \\ \text { Purchase (Jan. 15)}&15 & \$ 28.00 & \$ 420 \\ \text { Purchase (Jan. 23)}& \underline { 5 } & \$ 29.00 & \underline { \$ 145 } \\ \text { Total.}& \underline { 30 } & & \underline { \underline { \$ 840 } } \end{array}$ -Assuming that Ace Systems uses the FIFO flow assump?tion, the 12 units of this product in inventory at January 31 have a total cost of:

A) $341 B) $509. C) $499. D) Some other amount. A) $341 B) $509. C) $499. D) Some other amount.

Periodic inventory systems Tres Chic uses a periodic inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows: At December 31, the ending inventory of this product consisted of 850 units. Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation (Rounded): $\begin{array}{|c|l|l|c|} \hline \text { Jan } 1 & \text { Beginning inventory. } & 1,000 \text { units } @ \$ 14.00= & \$ 14,000 \\ \hline \text { Mar } 9 & \text { Purchase } & 1,050 \text { units } @ \$ 1450= & 15,225 \\ \hline \text { Aug } 11 & \text { Purchase } & 950 \text { units } @ \$ 15.00= & 14.250 \\ \hline \text { Dec } 23 & \text { Purchase } & 500 \text { units@\$15.75= } & 7.875 \\ \hline & \text { Total available for sale in year } & \overline{3.500} \text { units } & \$ 51.350 \\ \hline \end{array}$ \[\begin{array} { | l | l | l | l | } \hline & & \begin{array} { c } \text { Inventory at } \\ \text { Dec. } 31 \end{array} & \begin{array} { c } \text { Cost of } \\ \text { Goods Sold } \end{array} \\ \hline \text { (a) } & \text { Average cost } & \$ \underline{\quad\quad}& \$\underline{\quad\quad} \\ \hline \text { (b) } & \text { First-in, first-out } & \$\underline{\quad\quad} & \$\underline{\quad\quad} \\ \hline \text { (c) } & \text { Last in, first-out } & \$\underline{\quad\quad} & \$ \underline{\quad\quad}\\ \hline \end{array}\]

\[\begin{array} { | l | l | l | } \hlin

Exam 8: Inventories and the Cost of Goods Sold

Retail method Many large retailers take a physical inventory near year-end and state in their annual report that inventory has been valued by the "retail method." What does this mean? (Your answer should address [1] whether inventory is valued in the financial statements at cost or retail prices, and [2] how this dollar amount is determined.)

(Essay)

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Question 101

Beech Soda, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 14, Beech Soda, Inc. sold 25 units of this product. The other 28 units remained in inventory at January 31. Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 16 \ 10 \ 160 Purchase (Jan. 11) 14 \ 12 168 Purchase (Jan. 20) \ 15 Total 53 \ 673 -Assuming that Beech Soda uses the FIFO flow assumption, the cost of goods sold to be recorded at January 14 is:

(Multiple Choice)

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Question 102

The CPA firm auditing Capri Corporation found that net income had been overstated. Which of the following could be the cause?

(Multiple Choice)

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Question 103

Harding Systems, Inc. uses a periodic inventory system. The purchases of a particular product during the year are shown below: At December 31 the ending inventory consisted of 1,500 units. Jan.1 Beginning inventory 1,100 units @ \ 7.25 \ 7,975 Feb. 7 Purchase 1,450 units @\ 7.50 10,875 July 10 Purchase 1,600 units @\ 8.00 12,800 Nov. 25 Purchase units @\ 8.50 Total -Compute the cost of the ending inventory based on the LIFO method of inventory valuation.

(Multiple Choice)

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Question 104

Which of the following statements is not a characteristic of the LIFO method of pricing inventory?

(Multiple Choice)

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Question 105

Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250). Beginning inventory for the month was $60,000; purchases for the month were $175,000; and gross profit was 43%. -What were the gross sales for the month?

(Multiple Choice)

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Question 106

Busch, Inc. is a successful company, but has a lower inventory turnover rate than the industry average. Of the following, the most likely explanation is that Busch

(Multiple Choice)

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Question 107

In a periodic inventory system, overstating the amount of ending inventory will cause an understatement of gross profit in the following year.

(True/False)

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Question 108

Which of the following is not considered an acceptable inventory cost method according to GAAP?

(Multiple Choice)

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Question 109

Castle TV, Inc. purchased 1,000 monitors on January 5 at a per-unit cost of $185, and another 1,000 units on January 31 at a per-unit cost of $230. In the period from February 1 through year-end, the company sold 1,800 units of this product. At year-end, 200 units remained in inventory. -On Saturday, June 30, BD Pool Supplies sold merchandise to

(Multiple Choice)

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Question 110

At the end of last year, Games-2-Use had merchandise costing $140,000 in inventory. During January of the current year, the company purchased merchandise costing $102,000, and sold merchandise that it had purchased at a total cost of $84,000. Games-2-Use uses a perpetual inventory system. -The balance in the Inventory account at January 31 was:

(Multiple Choice)

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Question 111

During periods of inflation, the LIFO cost flow assumption will yield a lower inventory value than FIFO.

(True/False)

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Question 112

In a perpetual inventory system, the flow of inventory cost is:

(Multiple Choice)

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Question 113

Companies with perpetual inventories need not take physical inventory counts because inventory amounts are perpetually available.

(True/False)

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Question 114

If the terms of a sale are F.O.B. shipping point, the sale should not be recorded until the goods are delivered to the buyer.

(True/False)

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Question 115

The inventory turnover rate is equal to the average inventory divided by the cost of goods sold.

(True/False)

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Question 116

Ace Systems, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 28, Ace Systems sells 18 units of this product. The other 12 units remain in inventory at January 31. Quantity Unit Cost Total Cost Beginning inventory (Jan. 1) 10 \ 27.50 \ 275 Purchase (Jan. 15) 15 \ 28.00 \ 420 Purchase (Jan. 23) \ 29.00 Total. -Assuming that Ace Systems uses the FIFO flow assump?tion, the 12 units of this product in inventory at January 31 have a total cost of:

(Multiple Choice)

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Question 117

Gross profit method Horizon Company had sales of $1,750,000 during the current period and a gross profit rate of 40%. The company's cost of goods available for sale during the period was $1,400,000. The company's ending inventory must have amounted to $_______________.

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Question 118

As a result of taking an annual physical inventory, it usually is necessary in a perpetual inventory system to make an entry:

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Question 119

Periodic inventory systems Tres Chic uses a periodic inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows: At December 31, the ending inventory of this product consisted of 850 units. Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation (Rounded): Jan 1 Beginning inventory. 1,000 units @\ 14.00= \ 14,000 Mar 9 Purchase 1,050 units @\ 1450= 15,225 Aug 11 Purchase 950 units @\ 15.00= 14.250 Dec 23 Purchase 500 units@ \1 5.75= 7.875 Total available for sale in year units \ 51.350 Inventory at Dec. 31 Cost of Goods Sold (a) Average cost \ underline (b) First-in, first-out underline underline (c) Last in, first-out underline \

(Essay)

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Question 120

The CPA firm auditing Capri Corporation found that net income had been overstated. Which of the following could be the cause?

Which of the following statements is not a characteristic of the LIFO method of pricing inventory?

Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250). Beginning inventory for the month was $60,000; purchases for the month were $175,000; and gross profit was 43%. -What were the gross sales for the month?

Busch, Inc. is a successful company, but has a lower inventory turnover rate than the industry average. Of the following, the most likely explanation is that Busch

In a periodic inventory system, overstating the amount of ending inventory will cause an understatement of gross profit in the following year.

Which of the following is not considered an acceptable inventory cost method according to GAAP?

During periods of inflation, the LIFO cost flow assumption will yield a lower inventory value than FIFO.

In a perpetual inventory system, the flow of inventory cost is:

Companies with perpetual inventories need not take physical inventory counts because inventory amounts are perpetually available.

If the terms of a sale are F.O.B. shipping point, the sale should not be recorded until the goods are delivered to the buyer.

The inventory turnover rate is equal to the average inventory divided by the cost of goods sold.

Gross profit method Horizon Company had sales of $1,750,000 during the current period and a gross profit rate of 40%. The company's cost of goods available for sale during the period was $1,400,000. The company's ending inventory must have amounted to $_______________.

As a result of taking an annual physical inventory, it usually is necessary in a perpetual inventory system to make an entry:

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