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Exam 7: Inventories

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Question 21

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Use the information below to answer the following questions. Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. $\begin{array} { | c | l | c | c | } \hline \text { Date } & { \text { Blankets } } & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \\\hline 10 & \text { Sale } & 3 & \\\hline 17 & \text { Purchase } & 10 & 24 \\\hline 20 & \text { Sale } & 6 & \\\hline 23 & \text { Sale } & 3 & 30 \\\hline 30 & \text { Purchase } & 10 & \\\hline\end{array}$ ? -Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.

A) $108
B) $120
C) $72
D) $180

E) A) and B)
F) None of the above

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Question 22

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Under a periodic inventory system

A) accounting records continuously disclose the amount of inventory
B) a separate account for each type of merchandise is maintained in a subsidiary ledger
C) a physical inventory is taken at the end of the period
D) Merchandise Inventory is debited when goods are returned to vendors

E) B) and C)
F) A) and D)

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Question 23

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Which document authorizes the purchase of inventory from an approved vendor?

The units of an item available for sale during the year were as follows:? $\begin{array}{lrl}\text { Jan. } & 1 \text { Inventory } & 25 \text { units at } \$ 45 \\\text { Mar. } & 4 \text { Purchase } & 15 \text { units at } \$ 50 \\\text { June } & 7 \text { Purchase } & 35 \text { units at } \$ 58 \\\text { Nov. } & 15 \text { Purchase } & 20 \text { units at } \$ 65\end{array}$ There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

Use of the retail inventory method requires taking a physical count of inventory.

Beginning inventory, purchases, and sales for an inventory item are as follows:? $\begin{array} { r r r r r } \text { Sept. } 1 & \text { Beginning~inventory } & 24 \text { units } & @ &\$ 15 \\5 & \text { Sale } & 17 \text { units } & \\17 & \text { Purchase } & 10 \text { units } & @ & \$ 20 \\30 & \text { Sale } & 8 \text { units } &\end{array}$ Assuming a perpetual inventory system and the first-in, first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September 30.

The primary objectives of control over inventory are

Use the information below to answer the following questions. The following lots of a particular commodity were available for sale during the year: $\begin{array}{ll}\text { Beginning inventory } & 10 \text { units at } \$ 60 \\\text { First purchase } & 25 \text { units at } \$ 65 \\\text { Second purchase } & 30 \text { units at } \$ 68 \\\text { Third purchase } & 15 \text { units at } \$ 75\end{array}$ The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. -What is the amount of inventory at the end of the year rounded to the nearest dollar using the average cost method?

Beginning inventory, purchases, and sales data for hammers are as follows:? $\begin{array} { | l | c | l | l | } \hline & \text { Mar. } 3 & \text { Inventory } & 12 \text { units at } \$ 15 \\\hline & 11 & \text { Purchase } & 13 \text { units at } \$ 17 \\\hline & 14 & \text { Sale } & 18 \text { units } \\\hline & 21 & \text { Purchase } & 9 \text { units at } \$ 20 \\\hline & 25 & \text { Sale } & 10 \text { units } \\\hline\end{array}$ Assuming the business maintains a perpetual inventory system, complete the inventory cards and calculate the cost of merchandise sold and ending inventory under the following assumptions: (a) First-in, first-out? $\begin{array}{|l|l|l|l|}\hline ~\quad\quad\quad\quad&\quad~\quad\quad\quad\text { Purchases }\quad\quad\quad & \begin{array}{c}\quad\quad~~\quad\text { Cost of } \quad\quad\quad\quad\\\text { Merchandise Sold }\end{array} & \quad\quad\quad\quad\quad\text { Inventory }\quad\quad~ \\\end{array}$ $\begin{array}{|c|c|c|c|c|c|c|c|c|c|}\hline \text { Date } & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} \\\hline \text { Mar. 3 } & & & & & & & & & \\\hline 11 & & & & & & & & & \\\hline 14 & & & & & & & & & \\\hline 21 & & & & & & & & & \\\hline 25 & & & & & & & & & \\\hline \text { Balances } & & & & & & & & & \\\hline\end{array}$ (b) Last-in, first-out $\begin{array}{|l|l|l|l|}\hline ~\quad\quad\quad\quad&\quad~\quad\quad\quad\text { Purchases }\quad\quad\quad & \begin{array}{c}\quad\quad~~\quad\text { Cost of } \quad\quad\quad\quad\\\text { Merchandise Sold }\end{array} & \quad\quad\quad\quad\quad\text { Inventory }\quad\quad~ \\\end{array}$ $\begin{array}{|c|c|c|c|c|c|c|c|c|c|}\hline \text { Date } & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \text { Qty. } & \begin{array}{c}\text { Unit } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} \\\hline \text { Mar. 3 } & & & & & & & & & \\\hline 11 & & & & & & & & & \\\hline 14 & & & & & & & & & \\\hline 21 & & & & & & & & & \\\hline 25 & & & & & & & & & \\\hline \text { Balances } & & & & & & & & & \\\hline\end{array}$

"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner.

What is the amount of cost of merchandise sold for the year according to the LIFO method?

Inventory controls start when the merchandise is shelved in the store area.

Beginning inventory, purchases, and sales for an inventory item are as follows:?? $\begin{array} { | l | l | } \hline \text { Beginning inventory } & 150 \text { units } @ \$ 755 \\\hline \text { Sale } & 120 \text { units } \\\hline \text { First purchase } & 400 \text { units } @ \$ 785 \\\hline \text { Sale } & 200 \text { units } \\\hline \text { Second purchase } & 300 \text { units } @ \$ 805 \\\hline \text { Sale } & 290 \text { units } \\\hline\end{array}$ The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO?

Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

Which of the following measures the length of time it takes to acquire, sell, and replace inventory?

If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Merchandise Sold (COMS) , an equivalent equation can be written as?

The following data were taken from Castle, Inc. $\begin{array}{lr}\text { Cost of merchandise sold } & \$ 894,000 \\\text { Inventory, end of year } & 78,000 \\\text { Inventory, beginning of the year } & 92,000\end{array}$ Determine the inventory turnover ratio and the days' sales in inventory for Castle Inc. Round to two decimal places.

Which of the following is not an example of safeguarding inventory?

Match each situation to its impact (a-c) on the current year's net income. -Merchandise was purchased FOB destination on the last day of the year. The cost of the merchandise purchased was not included in ending inventory.

The choice of an inventory costing method has no significant impact on the financial statements.