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Exam 7: Inventories

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Question 91

Multiple Choice

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The days' sales in inventory measures the

A) length of time it takes to acquire, sell, and replace the inventory
B) length of time it takes to acquire and receive payment for the inventory
C) number of days inventory is on hand prior to sale
D) number of days inventory takes to arrive after ordering

E) All of the above
F) C) and D)

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Question 92

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The three inventory costing methods will normally each yield different amounts of net income.

A) True
B) False

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Question 93

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Match each description to the appropriate cost flow assumption (a-c) . -Prohibited under International Financial Reporting Standards (IFRS)

When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

During the taking of its physical inventory on December 31, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be

FIFO reports higher gross profit and net income than the LIFO method when ​

Kristin's Boutique has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory?

Match each description to the appropriate cost flow assumption (a-d) . -Cost flow matches the unit sold to the unit purchased.

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and owner's equity?

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 ending inventory value for the month of May using the FIFO inventory cost method.

Direct disposal costs do not include special advertising or sales commissions.

On the basis of the following data, estimate the cost of the merchandise inventory at March 31 by the retail method. $\begin{array} { l l r r } \text { March 1 } & \text { Merchandise inventory } & \$ 250,000 & \$ 350,000 \\\text { March 1-31 } & \text { Purchases (net) } & 850,000 & 1,650,000 \\\text { March 1-31 } & \text { Sales } & & 845,000\end{array}$

If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September 30, based on the following data?? Sept. 1 Merchandise inventory (at cost) $~~~~~~~~~~~~~~\$ 125,000$ Sept. 1-30 Purchases, net (at cost) $~~~~~~~~~~~~~~~~~~~~~~~300,000$ Sept. 1-30 Sales $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~150,000$

Cost flow is in the reverse order in which costs were incurred when using

It is not unusual for large companies to use different inventory costing methods for different segments of their inventory.

Which of the following companies would be more likely to use the specific identification inventory costing method?

On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order.

During the taking of its physical inventory on December 31, Almond Supplies Company incorrectly counted its inventory as $545,000 instead of the correct amount of $554,000. Indicate the effects of the misstatement on Almond Supplies Company's balance sheet and income statement for the year ended December 31.

Cost flow is in the order in which costs were incurred when using