FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Accounting for Inventories

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Days' sales in inventory:

A) Is also called days' stock on hand.
B) Focuses on average inventory rather than ending inventory.
C) Is used to measure solvency.
D) Is calculated by dividing cost of goods sold by ending inventory.
E) Is a substitute for the acid-test ratio.

F) None of the above
G) A) and B)

Correct Answer

verified

Show Answer

Question 62

Essay

Review LaterAdd Note

Review Later

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory. $\begin{array}{|l|l|}\hline \text { January 1: } & \text { Purchased } 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { February 5: } & \text { Purchased } 60 \text { units at } \$ 12 \text { per unit } \\\hline \text { March 16: } & \text { Sold } 40 \text { Units for } \$ 16 \text { per unit } \\\hline\end{array}$ Prepare the general journal entries to record the March 16 sale using the LIFO inventory valuation method.

Correct Answer

verified

Show Answer

Question 63

Essay

Review LaterAdd Note

A company uses the periodic inventory system and the following information is available. All purchases and sales are on credit. $\begin{array}{|l|l|r|r|r|r|}\hline&&&&& \text { Unit } \\&&& \text { Unit } & \text { Total } &\text { Sales } \\&&\text { Units } & \text { Cost } & \text { Cost } & \text { Price } \\\hline 10 / 01 & \text { Inventory balance } & 30 & \$ 3 & \$ 90 \\\hline 10 / 06 & \text { Purchase } & 70 & 4 & 280 \\\hline 10 / 11 & \text { Purchase } & 45 & 5 & 225 \\\hline 10 / 16 & \text { Purchase } & \underline{50} & 6 & 300 \\\hline & \text { Goods available } & 195 & & \$ 895 \\\hline\\\hline 10 / 12 & \text { Sale } & 100 & & & \$ 10 \\\hline 10 / 20 & \text { Sale } & 60 & & & 11 \\\hline & \text { Goods sold } & 160 & & & \\\hline & & \\\hline 10 / 31 & \text { Inventory balance } & 35 \\\hline\end{array}$ 1. Prepare the general journal entries to record: The October 6 purchase. The October 12 sale. 2. Assuming the periodic inventory system is used, determine both the cost of the ending inventory and the cost of goods sold using the LIFO method for October.

When units are purchased at different costs over time, it is simple to determine the cost per unit assigned to inventory.

The inventory valuation method that tends to smooth out erratic changes in costs is:

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 5, 8 units were sold for $55 each. Using the weighted-average perpetual inventory method, what was the value of the inventory on November 30?

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12, they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale?

The conservatism constraint:

A company sells a climbing kit and uses the periodic inventory system to account for its merchandise. The beginning balance of the inventory and its transactions during January were as follows: If the ending inventory is reported at $357, what inventory method was used?

It can be expected that companies that sell perishable goods have higher inventory turnover than companies that sell nonperishable goods.

A company had the following purchases during the current year: On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September and 10 from November. Using the specific identification method, what is the cost of the ending inventory?

Some companies use the _________________ constraint or the __________________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

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

What costs are assigned to merchandise inventory?

Given the following information, determine the cost of goods sold for December 31 using the FIFO periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

Given the following information, determine the cost of ending inventory at June 30 using the LIFO perpetual inventory method. Assume this is the first month of the company's operations. June 1: 15 units were purchased at $20 per unit. June 15: 12 units were sold. June 29: 8 units were purchased for $25 per unit.

When the __________ method is used with a periodic inventory system, cost of goods sold is assigned costs from the most recent purchases for the period.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its days' sales in inventory equals:

Generally accepted accounting principles require that the inventory of a company be reported at: