Exam 8: Inventories and the Cost of Goods Sold

During a period of steadily falling prices,which of the following methods of measuring the cost of goods sold is likely to result in the lowest taxable income?

Inventory turnover In the spaces provided,indicate the likely effect of each of the following events or strategies upon the inventory turnover rate.Use the following code letters: I for Increase,D for Decrease,and NE for No Effect. ______ (a)Switched from the LIFO flow assumption to FIFO during a period of rising prices. ______ (b)Dramatically increased advertising expense. ______ (c)Increased the sales price of merchandise that is so popular it is difficult to keep in stock. ______ (d)Implemented internal control procedures to reduce a serious inventory shrinkage problem. ______ (e)Switched from a restrictive credit policy to offering liberal terms to credit customers.

Which of the following results in the inventory being stated at the most current acquisition costs?

Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?

If the ending inventory is overstated in the current year:

Many companies state in their annual reports that inventory is shown at the lower of its cost or market value.This means that the inventory:

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

Green Leaf Company had the following information available on December 31: Management applies the LCM rule on the basis of inventory category and includes wheelbarrows and hoses in the large implement category and shovels and gloves in the small implement category.What is the write-down required?

The lower-of-cost-or-market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on:

If the beginning inventory of the current year and the ending inventory of the past year were overstated by the same amount:

The choice of inventory valuation method can help achieve each of the following independent goals,except:

During periods of inflation,which method will yield the smallest ending inventory and the largest cost of goods sold?

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

Retail method Omega Signs uses the retail method to estimate ending inventory in its monthly financial statements.The following information is available for the month ended April 30: Using the retail method:

During periods of rising prices,and being primarily concerned with tax implications,most of the companies would select:

Inventory flow assumptions Arrow,Inc.uses a perpetual inventory system.On January 22,2015,the company had 200 units of a particular product on hand,with a total cost of $2,400.The per-unit costs were: On January 24,2015,Arrow sold 65 units of this product. Using the three flow assumptions listed below,compute (1)the cost of goods sold,and (2)the cost of the inventory of this product on hand after this sale.Show your computations as per below format.

Gross profit rate is equal to:

The Multi-Tech Company uses the gross profit method to estimate inventories.Fill in the missing amounts.

In a periodic inventory system,the cost of goods sold is determined as follows:

In a period of rising prices,a company is most likely to use the specific identification method of pricing inventory if: