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Exam 5: Accounting for Inventories

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Question 71

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Identify and describe the four inventory valuation methods.

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The specific identification method assig...

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Question 72

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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 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

A) $304
B) $296
C) $288
D) $280
E) $276

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

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Question 73

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A company uses the periodic inventory system and had the following activity during the current monthly period:. Using the weighted-average inventory method, the company's ending inventory would be reported at:

A company's store was destroyed by a fire on February 10 of this year. The only information for the current period that could be salvaged included the following: Beginning inventory, January 1: $34,000 Purchases to date: $118,000 Sales to date: $140,000 Historically, the company's gross profit ratio has been 30%. Estimate the value of the destroyed inventory using the gross profit method.

Whether prices are rising or falling, FIFO always will yield the highest gross profit and net income.

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold?

The consistency concept:

Given the following information, determine the cost of goods sold at December 31 using the weighted-average 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.

Apply the retail method to the following company information to calculate the cost of the ending inventory for the current period: $\begin{array}{|l|r|r|}\hline &{\text { Cost }} &{\text { Retail }} \\\hline \text { Beginning inventory } & \$ 20,224 & \$ 31,600 \\\hline \text { Net purchases } & 59,508 & 97,000 \\\hline \text { Sales } & & 89,000 \\\hline\end{array}$

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market.

Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between ___________________ and ___________________.

All incidental costs of inventory acquisition and handling, whether necessary or not, are assigned to inventory.

The ______________________ method of assigning costs to inventory and cost of goods sold requires that the cost of goods available for sale be divided by the units of inventory available when each sale takes place.

The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost or stolen.

Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the LIFO cost of the company's January 31 inventory?

Goods in transit are included in a purchaser's inventory:

When taking a physical count of inventory, the use of prenumbered inventory tickets assists in the control process.

A company reported the following information regarding its inventory. Beginning inventory: cost is $70,000; retail is $130,000. Net purchases: cost is $65,000; retail is $120,000. Sales at retail: $145,000. The year-end inventory showed $105,000 worth of merchandise available at retail prices. What is the cost of the ending inventory?

Given the following information, determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method. Assume this is the first month of the company's operations. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 12: 2 units were sold.