Exam 9: Inventory and Cost of Goods Sold

The claim is sometimes made that the retail cost method is an approximation of the weighted-average method since the cost-to-retail percentage is computed as a weighted average of the cost-retail relationship of all goods available for sale during the period. Required: Evaluate the validity of the statement above.

The following information was taken from Frandsen Company's accounting records: There was no work-in-process inventory at the beginning or end of the year. Frandsen's cost of goods sold is

Davis Company's accounting records indicated the following information: A physical inventory taken on December 31, 2011, revealed actual ending inventory at cost was $1,150,000. Davis's gross profit on sales has regularly been about 25 percent in recent years. The company believes some inventory may have been stolen during the year. What is the estimated amount of missing inventory at December 31, 2011?

The inventory write-down rule under IAS 2 can best be labeled

The skeleton of the basic retail inventory calculation is presented below: Required: Explain how the following items would affect the computation of ending inventory using the retail inventory method:

A company sells four products: I, II, III, and IV. The company values all inventories using the lower-of-cost-or-market procedure. The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future. Additional information, shown below, is available for the most recent year as of December 31. See information regarding the four products above. Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31 for one unit of Product I?

If the ending inventory balance is understated, net income of the same period

The balance in Master Company's accounts payable account at December 31, 2011, was $1,100,000 before considering the following information: What amount should Master report as accounts payable in its December 31, 2011, balance sheet?

A company sells four products: I, II, III, and IV. The company values all inventories using the lower-of-cost-or-market procedure. The company has consistently experienced a profit margin of 20 percent of sales and expects this rate to hold for the future. Additional information, shown below, is available for the most recent year as of December 31. See information regarding the four products above. Using the lower-of-cost-or-market procedure, what is the reported inventory value at December 31 for one unit of Product II?

At the close of its fiscal year on March 31, 2011, Gren Industries, Inc. was in the process of relocating its plant. This resulted in some confusion relating to the inventory cutoff, as indicated by the following: Assuming that the company does not maintain a perpetual inventory system and that the books for the fiscal year have been closed, provide the necessary correcting entries. (Ignore income taxes.)

Ami Retailers purchased merchandise with a list price of $100,000, subject to a trade discount of 20 percent and credit terms of 2/10, n/30. At what amount should Ami record the cost of this merchandise if the gross method is used?

An example of an inventory accounting policy that should be disclosed is the

Kingston Company reported the following net income amounts: In 2012, the company discovered errors that been made in computing the ending inventories for 2009 and 2010, as follows: Compute the correct net incomes for (1) 2009, (2) 2010, and (3) 2011.

The Allen Company makes the following entry in its accounting records: This entry would be made when

The balance in Stockwell Company's accounts payable account on December 31, 2011, was $1,225,000 before the following information was considered: What amount should Stockwell report as accounts payable in its December 31, 2011, balance sheet?

Commodity X sells for $12.00; selling expenses are $2.40; normal profit is $3.00. If the cost of Commodity X is $7.80 and the replacement cost is $6.00, the lower of cost or market is

Which of the following inventory costing methods reports most closely the current cost of inventory on the balance sheet?

Stephens Inc. is a wholesaler of photography equipment. The activity for the VTC cameras during July is shown below: See information for Stephens Inc. above. If Stephens Inc. uses the average cost method to account for inventory, the ending inventory of VTC cameras at July 31 is reported as

The term LIFO reserve refers to

The following information is available for the Fister Company for 2011: The cost of goods sold is equal to 400% of selling expenses. Compute the cost of goods available for sale.