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Exam 6: Inventories

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Question 61

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

A) True
B) False

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Question 62

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The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item,by major classification of inventory,or by the total inventory.

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B) False

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Question 63

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Control of inventory should begin as soon as the inventory is received.Which of the following internal control steps is not done to meet this goal?

The following lots of a particular commodity were available for sale during the year: -The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the FIFO method?

The following lots of a particular commodity were available for sale during the year: -What is the amount of the inventory at the end of the year using the FIFO method?

Three identical units of merchandise were purchased during May,as follows: $\begin{array}{|l|l|l|c|c}\hline & \text { Magnesium XP } & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 1 & \$ 130 \\\hline 10 & \text { Purchase } & 1 & 136 \\\hline {19} & \text { Purchase } & \underline{1} & \underline{142} \\\hline \text { Total } & & \underline{3} & \underline{\$ 408} \\\hline\end{array}$ Assume that two units are sold on May 23 for $313 total.Determine the gross profit for May and ending inventory on May 31 using a FIFO,b LIFO,and c average cost methods.

Fill in the missing amounts from the chart below regarding the calculation of Bean Corporation's estimated inventory using the retail method of estimation.

If a company uses a periodic inventory system,the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Use the information below to answer the following questions. The 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. $\begin{array}{|c|l|c|c|}\hline \text { Date } & {\text { Blankets }} & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \\\hline 10 & \text { Sale } & 3 & \\\hline 17 & \text { Purchase } & 10 & \$ 24 \\\hline 20 & \text { Sale } & 6 & \\\hline 23 & \text { Sale } & 3 & \\\hline 30 & \text { Purchase } & 10 & \$ 30 \\\hline\end{array}$ -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.

Three identical units of merchandise were purchased during July,as follows: $\begin{array}{|c|c|c|r|}\hline {\text { Date }} & \text { Product Basic H } & \text { Units } & \text { Cost } \\ \hline \text { July } 3 & \text { Purchase } & 1 & \$ 35 \\ \hline 10 & \text { Purchase } & 1 & 36 \\ \hline 24& \text { Purchase } & \underline{1} & \underline { 37 }\\ \hline & \text { Total } & \underline{3} & \underline { \$ 108 }\\\hline\\\hline & \text { Average cost per unit }&&\underline { \$36 } \\\hline \end{array}$ Assume one unit sells on July 28 for $45. Determine the gross profit,cost of merchandise sold,and ending inventory on July 31 using a first-in,first-out,b last-in,first-out,and c average cost flow methods.

Which of the following is used to analyze the efficiency and effectiveness of inventory management?

A perpetual inventory system is an effective means of control over inventory.

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account: $\begin{array}{rlll}\text { June } 1 & \text { Balance } & \quad \quad&25 \text { units at } \$ 60 \\6 & \text { Sale } & \quad \quad& 20 \text { units } \\8 & \text { Purchase } & \quad \quad& 20 \text { units at } \$ 61 \\16 & \text { Sale } & \quad \quad&10 \text { units } \\20 & \text { Purchase } & \quad \quad& 20 \text { units at } \$ 62 \\23 & \text { Sale } & \quad \quad&25 \text { units } \\30 & \text { Purchase } & \quad \quad& 15 \text { units at } \$ 63\end{array}$ Calculate the cost of the ending inventory at June 30,using a the first-in,first-out FIFO method and b the last-in,first-out LIFO method.Identify the quantity,unit price,and total cost of each lot in the inventory.

During the taking of its physical inventory on December 31,2014,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

Use the information below to answer the following questions. The 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. $\begin{array}{|c|l|c|c|}\hline \text { Date } & {\text { Blankets }} & \text { Units } & \text { Cost } \\\hline \text { May } 3 & \text { Purchase } & 5 & \$ 20 \\\hline 10 & \text { Sale } & 3 & \\\hline 17 & \text { Purchase } & 10 & \$ 24 \\\hline 20 & \text { Sale } & 6 & \\\hline 23 & \text { Sale } & 3 & \\\hline 30 & \text { Purchase } & 10 & \$ 30 \\\hline\end{array}$ -Assuming that the company uses the perpetual inventory system,determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory cost method.

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined.

The specific identification inventory method should be used when the inventory consists of identical,low-cost units that are purchased and sold frequently.

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