Exam 8: Inventories and the Cost of Goods Sold

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:

Short-term creditors are likely to view a higher-than-average inventory turnover rate as indicating that:

On Saturday,June 30,BD Pool Supplies sold merchandise to

Which of the following results in the cost of goods sold being stated at the most current acquisition costs?

Merchandise sold F.O.B.destination belongs to the buyer while in transit.

Goods in transit between the buyer and the seller belong to:

In a periodic system,the only account in regard to inventory that is kept up-to-date is the inventory account.

The inventory turnover rate provides an indication of how quickly the average quantity of inventory on hand:

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

When the LIFO costing method is in use,the seller:

Effects of errors in inventory valuation Show the effect,if any,of each of the following errors on ending inventory,cost of goods sold,gross profit on sales,and net income by placing the appropriate symbol in each column.In use is the periodic inventory system.Use the following symbols: O = Overstated,U = Understated,NE = No Effect.

The primary reason a physical inventory is taken is to:

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

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.)

The LIFO conformity requirement permits a company to use LIFO for tax purposes only if the company also uses LIFO for internal reporting purposes.

During a period of steadily falling prices,which of the following methods of measuring the cost of goods sold is likely to result in reporting the highest gross profit?

Just-in-time inventory systems cannot be used in conjunction with the LIFO cost flow assumption.

Shrinkage losses At year-end,the perpetual inventory records of James Products indicate 105 units of a particular product in inventory,acquired at the following dates and unit costs: A complete physical inventory taken at year-end indicates only 93 units of this product actually are on hand. Determine the dollar amount of the shrinkage loss assuming that James uses:

For the purpose of delaying income taxes,during an inflationary period,which method would be best?

Colonial uses the retail method to estimate its monthly cost of goods sold and month-end inventory.At August 31,the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases)totaled $270,000.These goods had been priced for resale at $675,000.Sales in August totaled $450,000.The estimated inventory at August 31 is: