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Exam 7: Inventories

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Question 41

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Use the following information 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. Assuming that the company uses the perpetual inventory system, determine the Gross Profit for the month of May using the LIFO cost method

A) $348
B) $452
C) $444
D) $356

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

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Question 42

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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 as follows:

A) assets overstated by $70,000;retained earnings understated by $70,000; net income statement understated by $70,000.
B) assets overstated by $70,000;retained earnings understated by $70,000; no effect on the income statement.
C) assets and retained earnings overstated by $70,000; net income overstated by $70,000.
D) assets and retained earnings overstated by $70,000; net income understated by $70,000.

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

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Question 43

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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 goods sold for the year according to the FIFO method?

The units of an item available for sale during the year were as follows: There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method. Show your work.

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.

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.

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

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 LIFO method?

A physical inventory should be taken at the end of every month.

Under a periodic inventory system

List three different security measures taken by stores to safeguard inventory.

During times of rising prices, which of the following is not an accurate statement?

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Complete the chart using the LIFO and FIFO costing methods, assuming a period of increasing costs:

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.

Use the following information 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. 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.

If the revenues are correctly reported and the Gross Profit of a company is understated, what is the effect on Owner's Equity?

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

In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal.

Match the following cost flow assumption to their inventory costing method: