Exam 5: Inventories and Cost of Sales

Given the following information, determine the cost of goods sold for December 31 using the FIFO periodic inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit December 15: 20 units were purchased at $10.15 per unit December 22: 18 units were sold at $35 per unit

The consistency principle:

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million and average inventory of $1,965 million. Its days' sales in inventory equals:

One of the most important decisions in accounting for inventory is determining the unit costs assigned to each inventory item.

Toys "R" Us had cost of goods sold of $8,321 million and its ending inventory was $2,027 million. Based on this, its days' sales in inventory is equal to 89 days.

Identify the inventory valuation method that is being described for each situation below. In all cases, assume a period of rising prices. Use the following to identify the inventory valuation method: FIFO First in, first out LIFO Last in, first out SI Specific identification WA Weighted average a. The method that can only be used if each inventory item can be matched with a specific purchase and its invoice b. The method that will cause the company to have the lowest income taxes c. The method that will cause the company to have the lowest cost of goods sold d. The method that will assign a value to inventory that approximates its current cost e. The method that will tend to smooth out erratic changes in costs.

The cost of an inventory item includes the _____________, plus ______________ costs necessary to put it in a place and condition for sale.

According to IRS requirements, companies are allowed to use FIFO for financial reporting and LIFO for tax reporting.

In the retail inventory method of inventory valuation, the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.

Identify the items that are included in merchandise inventory. (In your answer address the special situations of goods in transit, consigned goods and damaged goods.)

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

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

A company reported the following data related to its ending inventory: Calculate the lower-of-cost-or-market on the: (a) Inventory as a whole and (b) inventory applied separately to each product.

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million and average inventory of $1,965 million. The inventory turnover equals:

A major goal in accounting for inventory is ______________ costs against sales.

The matching principle requires that the inventory valuation method follow the physical flow of inventory.

Given the following information, determine the cost of goods sold at December 31 using the LIFO periodic inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit December 15: 20 units were purchased at $10.15 per unit December 22: 18 units were sold at $35 per unit

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

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.