Exam 13: Accounting for Merchandise Inventory

The following data applies to a particular item of merchandise: On hand at start of period 300 \ 5.10 purchase 500 5.20 purchase 700 5.30 purchase 600 5.50 Number of units available for sale 2,100 On hand at end of period Number of units sold during period ? Of the 1,600 units sold during the period, 300 were from the beginning inventory; 500 from the first purchase; 600 from the second purchase; and 200 from the last purchase. Using the specific identification costing method, the value of inventory on hand at the end of the period would be

The increasing use of computers and optical scanning devices at the point-of-sale probably will cause more businesses to switch from periodic to perpetual inventories.

Match the terms with the definitions. -The accounting practice that states that we should never anticipate gains, but always anticipate and account for losses.

The April 1 inventory of Inotech Inc. had a cost of $35,505 and had a retail value of $79,000. During April, merchandise was purchased for $125,000 and marked to sell for $262,500. April sales totaled $201,000. ​ Required: Calculate the following items using the retail method of inventory estimation.

If merchandise is shipped FOB destination, the merchandise is the property of the selling company until it is received by the buying company.

When prices are rising, net income calculated by using the last-in, first-out method is smaller than the amount determined from using either the first-in, first-out or the weighted-average method.

Last-in, first-out costing matches the most current cost of items purchased against the current sales revenue.

The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called

If market value is less than cost, the difference between the cost and market value of inventory is considered a loss due to holding inventory and should be reported on the income statement as an expense.

The "FIFO" and "LIFO" inventory costing methods are based on assumed cost flows that are not required to reflect the actual physical movement of merchandise within the company.

The principle of conservatism states that gains should not be anticipated but that all potential losses should be recognized.

Match the terms with the definitions. -A method of allocating merchandise cost which assumes that the first goods purchased were the first goods sold and, therefore, that the latest goods purchased remain in inventory.

Match the terms with the definitions. -A method of allocating merchandise cost in which each unit of inventory is recognized at its purchase price.

Under conditions of rising prices, the FIFO inventory method provides the highest gross profit because the most recent purchase costs are matched against sales revenue.

Assigning of the lower-of-cost-or-market to the items that comprise the inventory of merchandise at the end of the account period is an application of which of the following concepts?

Delmar Industries uses the perpetual inventory method in accounting for inventory. Prepare the necessary adjusting entry for each of the following independent cases using the cost of goods sold account.

If a difference is found between the physical count and the amount in the perpetual inventory records, the records must be corrected by an appropriate adjusting entry.

Match the terms with the definitions. -A variation of the gross profit method that is used by many retail businesses, to estimate the cost of goods sold and ending inventory.

When merchandise is acquired on account and the perpetual system of inventory is used, the journal entry for the purchase would include

An error in the reported inventory will cause errors in all of the following EXCEPT