Question 1

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2014 are as follows:  An end of the month (1/31/14) inventory showed that 120 units were on hand. How many units did the company sell during January 2014?

Accepted Answer

A)  80 
B)  120 
C)  200 
D)  280

Question 2

The following information is available through June 2014 for Kimchee Company:  On June 29, a fire completely destroyed Kimchee's inventory. Using the gross profit method, the estimated value of the inventory destroyed is

Accepted Answer

A)  W120,000,000. 
B)  W96,000,000. 
C)  W48,000,000. 
D)  W24,000,000.

Question 3

At December 31, 2014, Bosan Corporation has 4,900 units of model 63 and 3,500 units of model 64 in its ending inventory. Specific data with respect to each product follows:  What amount will be reported for inventory on Boson's statement of financial position after the company applies LCNRV?

Accepted Answer

A)  W75,950,000. 
B)  W69,020,000. 
C)  W68,530,000. 
D)  W68,180,000.

Question 4

The ______________ method tracks the actual physical flow of each unit of inventory available for sale; however, management may be able to manipulate ______________ by using this method.

Accepted Answer

The answer of The ______________ method tracks the actual physical...

Question 5

The following information is available for 2014 for Greenwich Company:  In May 2014, a flood washed away Greenwich's inventory. Using the gross profit method, the estimated value of the inventory destroyed is:

Accepted Answer

A)  £11,355,750 
B)  £8,398,950 
C)  £3,195,000 
D)  £1,575,000

Question 6

If the inventory reported on a Gottleib Company's statement of financial position at December 31, 2013 is overstated by €1,200,000, the company's retained earnings balance at December 31, 2014 will be

Accepted Answer

A)  understated by €1,200,000. 
B)  correct. 
C)  overstated by €1,200,000. 
D)  need more information to determine.

Question 7

Swiss-Mart Company's beginning inventory balance and purchase and sales transactions for the month of June were as follows:  Assuming that the company keeps perpetual inventory records, Swiss-Mart's inventory at June 30 on a LIFO basis is

Accepted Answer

A)  CHF3,000. 
B)  CHF3,200. 
C)  CHF3,300. 
D)  CHF3,500.

Question 8

A major difference between IFRS and GAAP is that GAAP specifically prohibits use of the FIFO cost flow assumption.

Accepted Answer

A) True 
 B)False

Question 9

In a period of rising prices, FIFO will have

Accepted Answer

A)  lower net income than average-cost. 
B)  lower cost of goods sold than average-cost. 
C)  lower income tax expense than average-cost. 
D)  lower net purchases than average-cost.

Question 10

Net realizable value is

Accepted Answer

A)  original cost plus costs to complete and sell. 
B)  selling price. 
C)  original cost less costs to complete and sell. 
D)  selling cost less costs to complete and sell.

Question 11

Julian Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

Accepted Answer

A)  $4,122 
B)  $4,131 
C)  $4,167 
D)  $8,694

Question 12

The following information is available for Massey Company:  Assume that Massey uses a periodic inventory system and that there are 700 units left at the end of the month.
Instructions
Compute the cost of ending inventory under the
(a) FIFO method.
(b) Average-cost method.

Accepted Answer

The answer of The following information is available for Massey...

Question 13

Jerry White is studying for the next accounting mid-term examination. What should Jerry know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of "net realizable value" in the lower-of-cost-or- net realizable value method?

Accepted Answer

The answer of Jerry White is studying for the next...

Question 14

In a period of rising prices, the inventory method which tends to report the lowest inventory is

Accepted Answer

A)  FIFO. 
B)  LISH. 
C)  Specific identification. 
D)  Average-cost.

Question 15

Which of the following statements is correct with respect to inventories?

Accepted Answer

A)  The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. 
B)  It is generally good business management to sell the most recently acquired goods first. 
C)  Under FIFO, the ending inventory is based on the latest units purchased. 
D)  FIFO seldom coincides with the actual physical flow of inventory.

Question 16

This information is available for Grant's Photo Corporation for 2013 and 2014.  Instructions
Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2013 and 2014. Comment on any trends.

Accepted Answer

The answer of This information is available for Grant's Photo...

Question 17

Inventories are reported in the current assets section of the statement of financial position immediately before receivables.

Accepted Answer

A) True 
 B)False

Question 18

India Eastern Corporation's computation of cost of goods sold is:  India East's inventory turnover is

Accepted Answer

A)  3.39 times. 
B)  4.49 times. 
C)  4.62 times. 
D)  4.78 times.

Question 19

Kirby Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Kirby Company developed the following information:  The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period.
Instructions
Using the gross profit method, prepare an estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.

Accepted Answer

The answer of Kirby Company suffered a loss of its...

Question 20

The LIFO cost flow assumption can also be called the LISH assumption.

Accepted Answer

A) True 
 B)False

Exam 6: Inventories

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2014 are as follows: An end of the month (1/31/14) inventory showed that 120 units were on hand. How many units did the company sell during January 2014?

The following information is available through June 2014 for Kimchee Company: On June 29, a fire completely destroyed Kimchee's inventory. Using the gross profit method, the estimated value of the inventory destroyed is

At December 31, 2014, Bosan Corporation has 4,900 units of model 63 and 3,500 units of model 64 in its ending inventory. Specific data with respect to each product follows: What amount will be reported for inventory on Boson's statement of financial position after the company applies LCNRV?

The method tracks the actual physical flow of each unit of inventory available for sale; however, management may be able to manipulate by using this method.

The following information is available for 2014 for Greenwich Company: In May 2014, a flood washed away Greenwich's inventory. Using the gross profit method, the estimated value of the inventory destroyed is:

If the inventory reported on a Gottleib Company's statement of financial position at December 31, 2013 is overstated by €1,200,000, the company's retained earnings balance at December 31, 2014 will be

Swiss-Mart Company's beginning inventory balance and purchase and sales transactions for the month of June were as follows: Assuming that the company keeps perpetual inventory records, Swiss-Mart's inventory at June 30 on a LIFO basis is

A major difference between IFRS and GAAP is that GAAP specifically prohibits use of the FIFO cost flow assumption.

In a period of rising prices, FIFO will have

Net realizable value is

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

The following information is available for Massey Company: Assume that Massey uses a periodic inventory system and that there are 700 units left at the end of the month. Instructions Compute the cost of ending inventory under the (a) FIFO method. (b) Average-cost method.

Jerry White is studying for the next accounting mid-term examination. What should Jerry know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of "net realizable value" in the lower-of-cost-or- net realizable value method?

In a period of rising prices, the inventory method which tends to report the lowest inventory is

Which of the following statements is correct with respect to inventories?

This information is available for Grant's Photo Corporation for 2013 and 2014. Instructions Calculate inventory turnover, days in inventory, and gross profit rate for Grant's Photo Corporation for 2013 and 2014. Comment on any trends.

Inventories are reported in the current assets section of the statement of financial position immediately before receivables.

India Eastern Corporation's computation of cost of goods sold is: India East's inventory turnover is

The LIFO cost flow assumption can also be called the LISH assumption.