Exam 6: Inventories and Cost of Sales

Perch Company reported the following purchases and sales for its only product. Perch uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

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

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

Identify and describe the four inventory valuation methods.

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as expenses when incurred. The argument that supports this is called:

The choice of an inventory valuation method can have a major impact on gross profit and cost of sales.

A company had the following ending inventory costs: Product Units on Hand Unit Cost NRV Calculate the lower of cost and net realizable value for each individual item.

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.)

In applying the lower of cost and net realizable value (NRV) to inventory valuation, NRV is defined as:

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.

A company's total cost of inventory was $305,000 and its net realizable value is $297,000. Under the lower of cost and net realizable value, the amount reported should be $305,000.

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

The inventory turnover ratio is computed by dividing average merchandise inventory by cost of goods sold.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

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

Few companies take a physical count of inventory each year, and rely on inventory records alone to determine the inventory value.

A company has inventory with a net realizable value of $217,000 and a cost of $241,000. According to the lower of cost and net realizable value, the inventory should be written down to $217,000.