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Exam 8: Inventories: Measurement

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Question 51

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Bunker Auto Supply purchased merchandise on January 4, 2018, at a price of $70,000, subject to credit terms of 2/10, n/30. Bunker uses the gross method for recording purchases and uses a periodic inventory system. Required: 1. Prepare the journal entry to record the purchase. 2. Prepare the journal entry to record the payment of one-half the invoice amount on January 11, 2018. 3. Prepare the journal entry to record the balance of the amount due on February 2, 2018.

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Question 52

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Shipping charges on outgoing goods are included in either cost of goods sold or selling expenses.

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Question 53

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The LIFO Conformity Rule states that if LIFO is used for:

Dollar-value LIFO eliminates the risk of LIFO liquidations.

FIFO periodic and FIFO perpetual always produce the same dollar amounts for cost of goods sold.

LIFO periodic and LIFO perpetual always produce the same dollar amounts for ending inventory.

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 qts. @ $2.40 on April 1. The ending inventory assuming LIFO and a periodic inventory system is:

Northwest Fur Co. started 2018 with $94,000 of merchandise inventory on hand. During 2018, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system. -Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

In a perpetual inventory system, which of the following is recorded at the time of the sale?

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -LIFO

Meteor Co. purchased merchandise on March 4, 2018, at a price of $30,000, subject to credit terms of 2/10, n/30. Meteor uses the net method for recording purchases and uses a periodic inventory system. Required: 1. Prepare the journal entry to record the purchase. 2. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on March 11, 2018. 3. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on April 2, 2018.

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2018 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2017. Assuming GG has a 40% income tax rate:

In periods when costs are rising, LIFO liquidations:

On January 1, 2018, the National Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1 was $200,000. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Required: Compute inventory amounts at the end of each year.

On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: - What inventory balance would Badger report on its 12/31/2020 balance sheet?

A company's estimate of merchandise that will be returned by customers should be:

Thompson TV and Appliance reported the following in its 2018 financial statements: -Thompson's 2018 gross profit ratio is:

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

-Required: Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses average cost and a perpetual inventory system.