Exam 6: Inventories and Cost of Sales

The ______________________ method of assigning costs to inventory and cost of goods sold required that we divide the cost of goods available for sale by the units of inventory available at the time of each sale.

A company made the following purchases during the year: On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using specific identification, calculate the cost of the ending inventory.

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

In applying the lower of cost and net realizable value (NRV) to inventory valuation, NRV is defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory. If the company uses the weighted average periodic method, what would be the cost of the ending inventory?

The inventory valuation method that tends to smooth out erratic changes in costs is:

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

A company uses the periodic inventory system, and the following information is available. All purchases and sales are on credit. 1. Prepare the general journal entries to record: The October 6 purchase. The October 12 sale. 2. Assuming the periodic inventory system is used, determine both the cost of the ending inventory and the cost of goods sold using the LIFO method for October.

Under LIFO, the most recent costs are assigned to ending inventory.

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using FIFO.

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: 1. Use the retail inventory method to estimate the company's year-end inventory at cost. 2. A year-end physical count at retail prices yields a total inventory of $404,800. Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

Fun Land Toy Stores has taken a physical count of its inventory at January 31, its fiscal year-end. After reviewing the accounting records and documentation, the following items have been discovered: (a) An invoice from Fleck Co. indicates that $30,000 of toys were shipped to Fun Land on January 27, terms FOB shipping point. The toys and invoice did not arrive at Fun Land until February 2 and were not included in the physical count. (b) An invoice from Grande indicates that $8,000 of toys were shipped to Fun Land on January 29, terms FOB destination. The toys and invoice did not arrive at Fun Land until February 2 and were not included in the physical count. The physical count and cost assignment on January 31 prior to these two items is $440,000. The cost of goods sold for Fun Land is $2,100,000. 1. Calculate the amount that should be reported as ending inventory for Fun Land. 2. Calculate the days' sales in inventory before and after the appropriate adjustments for inventory.

Goods in transit are automatically included in inventory.

Days' sales in inventory is calculated as:

What costs are assigned to merchandise inventory? Identify all costs including the incidental costs.

If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Physical counts of inventory:

The ______________________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.