Exam 8: Inventories and the Cost of Goods Sold

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:

[The following information applies to the questions displayed below.] 200 At the end of last year,Games-2-Use had merchandise costing $140,000 in inventory.During January of the current year,the company purchased merchandise costing $102,000,and sold merchandise that it had purchased at a total cost of $84,000.Games-2-Use uses a perpetual inventory system. -The amount of goods transferred from the Inventory account to the Cost of Goods Sold account during January was:

[The following information applies to the questions displayed below.] During the current year,Carl Equipment Stores had net sales of $600 million,a cost of goods sold of $500 million,average accounts receivable of $75 million,and average inventory of $50 million. -Refer to the information above.Carl Equipment 's inventory turnover rate is:

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:

Kent Company has used the same inventory method for many years.This is an example of which principle?

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

Inventory flow assumptions Briefly discuss the factors management should consider in deciding: (a)Whether to use specific identification or a cost flow assumption in measuring the cost of goods sold. (b)Whether to use FIFO or LIFO.(Assume a long-run trend of slowly rising prices. )

The higher a company's inventory turnover rate,the higher its gross profit.

Accounting terminology Listed below are eight technical accounting terms introduced in this chapter: 1.Just-in-time 2.Average-cost method 3.LIFO method 4.Gross profit method 5.Shrinkage losses 6.FIFO method 7.Retail method 8.Inventory turnover Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ a.The cost flow assumption in which the oldest units purchased are assumed to have remained in inventory. ________ b.A method of estimating the cost of goods sold and ending inventory based upon cost relationships from prior periods. ________ c.The practice of valuing inventory in the balance sheet at expected sales prices,rather than at cost. ________ d.An inventory cost flow assumption involving only one "cost layer." ________ e.The inventory cost flow assumption likely to result in the highest reported amount of gross profit during a period of rising prices. ________ f.A technique for minimizing a company's investment in inventory,particularly inventories of raw materials and finished goods. ________ g.A measure of a company's ability to sell its inventory quickly.

Which of the following is not considered an acceptable inventory cost method according to GAAP?

The gross profit method can be used for both interim and year-end financial reporting.

For the last several years Conway Corporation has operated with a gross profit rate of 40%.On January 1 of the current year,the company had on hand inventory with a cost of $600,000.Purchases of merchandise during January amounted to $150,000,and sales for the month were $360,000.Using the gross profit method,what is the estimated inventory at January 31?

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using:

An advantage to the LIFO method of accounting for inventory is that it values the cost of goods sold at current replacement costs.

With respect to the valuation of inventory and measurement of the cost of goods sold,the principle of consistency means that the same method should be applied:

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

[The following information applies to the questions displayed below.] At year-end,the perpetual inventory records of Anderson Co.indicate 60 units of a particular product in inventory,acquired at the following dates and unit costs: Purchased in August: 30 units at $750 per unit. Purchased in November: 30 units at $700 per unit. A complete physical inventory taken at year-end indicates only 50 units of this product actually are on hand -Assuming that Anderson uses the LIFO cost flow assumption,it should record this inventory shrinkage by:

The lower-of-cost-or-market rule:

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?

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