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Exam 7: Reporting and Interpreting Inventories and Cost of Goods Sold

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Question 31

Multiple Choice

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Generally accepted accounting principles (GAAP) require that the inventory be reported at:

A) market value.
B) historical cost.
C) lower of cost or market.
D) retail value.

E) C) and D)
F) None of the above

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Question 32

Multiple Choice

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A company uses a periodic inventory system.The company had beginning inventory of 3 units that cost $5 each.During the month,17 units were purchased for $6 each.The company sold 15 units during the month and had 5 remaining in ending inventory.If the company uses FIFO instead of LIFO to calculate cost of goods sold,then cost of goods sold will be:

A) higher using FIFO, leading to higher gross profit and higher income taxes
B) lower using FIFO, leading to higher gross profit and higher income taxes
C) lower using FIFO, leading to lower gross profit and lower income taxes
D) higher using FIFO, leading to lower gross profit and lower income taxes

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

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Question 33

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In each accounting period,a manager can select the inventory costing method that yields the highest net income.

An overstatement of ending inventory will cause an overstatement of assets and an understatement of stockholders' equity on the balance sheet.

Allsop Company had no beginning inventory.The company purchases 300 units of inventory in January at $5 each,500 units at $4 each in August,and 200 units at $6 each in November.The company sells 150 units during the year.Allsop uses a periodic inventory system and the LIFO inventory costing method.What is the cost of goods sold?

Ending inventory = Beginning inventory + Purchases + Cost of goods sold

The Xu Corporation uses a periodic inventory system.The company has a beginning inventory of 300 units at $5 each on January 1.Xu purchases 500 units at $4 each in February and 200 units at $6 each in March.There were no additional purchases or sales during the remainder of the year. -Use the information above to answer the following question.Xu sells 300 units during the quarter.If Xu uses the LIFO method,what is its cost of goods sold?

The journal entry to record a write-down of inventory from cost to its lower market value includes a:

The inventory turnover ratio directly measures:

Mountain People's Coop offers herbal tea for sale on consignment from Green Heron Company.Which company should report the inventory of unsold tea on its balance sheet?

Sun Concepts sells and installs solar energy products.Information from the financial statements for the last two years revealed the following: -Use the information above to answer the following question.The inventory turnover ratio in Year 1 was:

Beta Company uses a periodic inventory system.The company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each.It sold 90 units for $25 each.Beta's weighted average cost is:

If ending inventory in Year 1 is misstated,then Year 1's ______ also must be misstated.

Carrying insufficient quantities of inventory on hand:

Use the following to answer questions 179 - 180: Charter Company, which uses the perpetual inventory method, purchases different letters for resale.Character had a beginning inventory comprised of seven units at $4 per unit.The company purchased five units at $6 per unit in February, sold seven units in October, and purchased two units at $7 per unit in December. -Use the information above to answer the following question.If Charter Company uses the LIFO method,what is the cost of goods sold for the year?

When costs per unit are increasing,the inventory costing method that results in the higher income tax expense is the FIFO method.

Consider the following information for Maynor Company,which uses a periodic inventory system: The company sold 25 units on May 1 and 20 units on October 28. Required: Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods.(Round the per unit cost to two decimal places and then round your answer to the nearest whole dollar.) Part a.FIFO Part b.LIFO Part c.Weighted Average

An increasing inventory turnover ratio indicates:

At year end,CurlZ,Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box.Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ.CurlZ should report its inventory at:

The college campus bookstore uses a periodic inventory system.The bookstore purchases 400 copies of a textbook at $70 each in June,1,000 copies in August at $72 each,and 600 copies in December at $75 each.The bookstore sold 1,900 copies of the textbook during the year. Required: Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods. Part a.FIFO Part b.LIFO Part c.Weighted Average