Exam 6: Accounting for Merchandise Inventory

Piggly Wiggly Sales had six CD players in inventory on December 31. The players were purchased in November for $170. Price lists from Piggly Wiggly Sales' supplier indicate that the same CD player would now cost the company $168. The current sales price for each of the CD players is $320. Using the lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should be shown at:

Given the following data, what is the gross margin if cost of goods sold is determined using the FIFO periodic method? Sales revenue 200 units at \ 20 per unit Beginning inventory 60 units at \ 12 per unit Purchases 210 units at \ 13 per unit

When inventory prices are rising, the weighted-average method will generally result in a:

If inventory items may be identified individually, the business could easily use this method of inventory costing:

The journal entry to purchase merchandise under a periodic inventory system includes a:

Which statement addresses the consistency characteristic of accounting information?

The bookkeeper for Duncan Company made an error in recording the year-end inventory balance on December 31, 2018. As a result, ending inventory was understated by $37,000. a)What effect will this error have on cost of goods sold, gross margin, net income, and owner's equity in 2018? b)As of December 31, 2019, what will be the cumulative effect of this error on owner's equity?

Using the perpetual inventory method, what is the weighted-average cost of ending inventory rounded to the nearest whole dollar? Sales revenue 100 units at \ 10 per unit Beginning inventory 50 units at \ 8 per unit Purchases 90 units at \ 9 per unit

In a perpetual inventory system, recording a sale also includes a corresponding journal entry to record the inventory reduction.

Table 6-6 Sam's Wholesale Bikes January 1 inventory balance 15 units at \ 350 per unit January 4 purchase 50 units at \ 375 per unit January 15 sale 40 units at \ 550 per unit February 8 purchase 80 units at \ 405 per unit February 15 sale 70 units at \ 550 per unit -Refer to Table 6-6. What is the value of the February ending inventory assuming that Sam's uses the perpetual FIFO inventory method?

Table 6-2 Manuary 1 inventory balance 100 units at \ 10 per unit March 2 purchase 50 units at \ 11 per unit July 8 purchase 80 units at \ 10 per unit November 15 purchase 30 units at \ 12 per unit On December 31, a physical count reveals 80 units in ending inventory. -Referring to Table 6-2, the cost of ending inventory using the periodic weighted-average-cost method rounded to the nearest whole number would be:

Table 6-6 Sam's Wholesale Bikes January 1 inventory balance 15 units at \ 350 per unit January 4 purchase 50 units at \ 375 per unit January 15 sale 40 units at \ 550 per unit February 8 purchase 80 units at \ 405 per unit February 15 sale 70 units at \ 550 per unit -Refer to Table 6-6. What is the value of the February ending inventory assuming that Sam's uses the perpetual weighted-average inventory method?

Both accounting standards for private enterprises (ASPE)and international financial reporting standards (IFRS)follow the lower-of-cost-and-net-realizable-value rule to value inventory when market prices are changing. Explain how this relates to the accounting guideline of conservatism. Your answer should include a discussion of both conservatism and 'lower of cost and net realizable value'.

Overstating ending inventory in 2018 will overstate net income for 2019.

Table 6-6 Sam's Wholesale Bikes January 1 inventory balance 15 units at \ 350 per unit January 4 purchase 50 units at \ 375 per unit January 15 sale 40 units at \ 550 per unit February 8 purchase 80 units at \ 405 per unit February 15 sale 70 units at \ 550 per unit -Refer to Table 6-6. What is the cost of goods sold for the two months assuming that Sam's uses the perpetual FIFO inventory method?

The following data are available for Wood Products Company for 2019: Sales revenue \ 400,500 January 1 inventory at cost 110,600 Purchases 275,000 December 31 inventory at cost 98,000 The current net realizable value of the inventory on December 31 is $93,500. Compute gross margin for Wood Products Company assuming the use of the lower-of-cost-and-net realizable value rule to value ending inventory.

Given the following data: Ending inventory at cost \ 23,600 Ending inventory at net realizable value 24,000 Cost of goods sold (before consideration of the lower-of-cost-and-net-realizable-value rule) 37,000 Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net-realizable-value rule?

A FIFO perpetual inventory system:

Sam Levine Merchandising had the following transactions during May: May 1 Beginning inventory w as 20 units v alued at \ 25 per unit. May 5 Purchased 80 units of merchandise on account for \ 2,160 , terms n/15,FOB shipping point. May 9 Paid transportation cost on the May 5 purchase, \ 240 . May 10 Returned two units of defective merchandise purchased on May 5. May 11 Sold 30 units for \ 50 per unit on account. May 15 Paid for the May 5 purchase, less the return. May 20 Sold 10 units for \ 50 per unit on account. Required: 1. Assuming FIFO and that the perpetual inventory system is used, prepare the journal entries to record the above transactions. 2. Assuming weighted-average and that the periodic inventory system is used, prepare the journal entries to record the above transactions.

In a periodic inventory system, an overstatement of beginning inventory results in an overstatement of gross margin.