Exam 6: Inventory Costing

In 2015, Hidey Company had average inventory of $86,000. The 2015 income statement showed net sales of $2,200,000 and gross profit of $420,000. In 2014, it was taking the company approximately 30 days to sell its inventory. -In 2015, the company's days sales in inventory

If the item of inventory that had been previously written down has been sold, a reversal should be recorded.

A company purchased inventory as follows: 200 units at $9 300 units at $10 The average unit cost for inventory is

If inventories are valued using the retail inventory method, they should not be classified as a current asset on the balance sheet.

Only smaller companies need to do an annual physical count of inventory.

O'Neil's Hardware Store, in St. John's, NL, prepared the following analysis of cost of goods sold for the previous three years: Profit for the years 2013, 2014, and 2015 was $83,000, $32,000, and $67,000, respectively. Since income had declined so much from 2013 to 2015, Mr. O'Neil hired a new accountant to investigate the cause(s) for the declines. The accountant determined the following: 1. Purchases of $42,000 that occurred in 2013 were not recorded until 2014. 2. The December 31 2013 inventory should have been $23,000. 3. The 2014 ending inventory included inventory costing $6,000 that was purchased FOB destination point and was in transit at year end. 4. The 2015 ending inventory did not include goods costing $3,000 that were shipped on December 29 to Rosewell Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year. Instructions Determine the correct income for each year. (Show all calculations.)

If the physical inventory count shows an amount which is lower than the estimate from the calculation of the gross profit method of inventory estimation, the estimate should be used for the amount reported on the balance sheet.

Selection of an inventory cost formula by management does NOT usually depend on

If the cost of goods sold is $250,000 and the inventory turnover is 2.8, then the average inventory and days sales in inventory are:

Companies are allowed to use the specific identification cost determination method when the goods are interchangeable.

Pete's Packaging reported its cost of goods sold as follows: The ending inventory at September 30, 2013 was overstated by $6,500. Instructions a. Calculate the correct cost of goods sold for both years. b. Describe how the error has affected the financial statements for 2013 and for 2014, and for the two years combined.

Which of the following statements is true regarding inventory cost formulas?

In July, Unique Jewels Company purchased the following items: On July 22, one ring from the July 2 purchase was sold for $19,500 and 2 rings from the July 20 purchase were sold for $1,520 each. All sales and purchases are made on credit. Instructions a. Calculate ending inventory and cost of goods sold using specific identification. b. Prepare the journal entry to record the July 22 sale.

Starshine Coffee Equipment sells European style coffee makers and uses a perpetual inventory system. Its inventory records show that on June 1, Starshine had 12 units on hand at a cost of $220 each. Transactions related to purchase and sale of coffee makers in June were as follows: Instructions For each of the following cost formulas, calculate the ending inventory as at June 30 and the cost of goods sold for the month of June. Prove the cost of goods sold calculations. a. FIFO b. Average

When using FIFO, beginning inventory + purchases - cost of goods sold = ending inventory.

Internal control is the process designed and implemented by management to help their organization achieve reliable financial reporting.

Kitchener Department Store prepares monthly financial statements but only takes a physical count of merchandise inventory at the end of the year. The following information has been developed for the month of July: The net sales for July amounted to $150,000. Instructions Use the retail inventory method to estimate the ending inventory at cost for July. Show all calculations to support your answer.

LCNRV is an acronym for

Newman Department Store estimates inventory by using the retail inventory method. The following information was developed: The estimated cost of the ending inventory is

If prices are falling, FIFO will report the lower profit and average the higher.