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Exam 7: Inventories

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Question 81

Multiple Choice

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On the basis of the following data,what is the estimated cost of the merchandise inventory on May 31 using the retail method?​

A) $250,000
B) $360,000
C) $172,500
D) $187,500

E) All of the above
F) A) and B)

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Question 82

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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.

A) True
B) False

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Question 83

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Determine the total value of the merchandise using net realizable value.​

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

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

Merchandise inventory at the end of the year is overstated.Which of the following statements correctly states the effect of the error?

The average cost method will always yield results between FIFO and LIFO.

During periods of rapidly rising costs,the use of the LIFO method results in illusory or inventory profits.

Use the information below to answer the following questions. ​ 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 cost of merchandise sold for the year according to the average cost method?

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

The units of an item available for sale during the year were as follows:​ There are 19 units of the item in the physical inventory at December 31.The periodic inventory system is used.Determine the ending inventory cost using LIFO.

Under a periodic inventory system

​ Match each description to the appropriate cost flow assumption (a-c) . -Produces the highest ending inventory when costs are increasing

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

On the basis of the following data for Sanford Industries as of December 31,determine the value of the inventory at the lower of cost or market.Also,show how the merchandise inventory would appear on the balance sheet (assume that the cost was determined by the FIFO method).Apply lower of cost or market to each inventory item.

Beginning inventory,purchases,and sales data for widgets are as follows:​ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Match each situation to its impact (a-c) on the current year's net income. -Merchandise that was sold and shipped FOB shipping point on the last day of the year was not included in the seller's ending inventory.

Three identical units of merchandise were purchased during May,as follows:​​ 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.

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. ​ ​ -Assuming that the company uses the perpetual inventory system,determine the ending inventory for the month of May using the LIFO inventory cost method.

Use the information below to answer the following questions. ​ The following units of an inventory item were available for sale during the year: The firm uses the periodic inventory system. During the year, 60 units of the item were sold. ​ -The value of ending inventory using FIFO is​