Exam 6: Inventory Costing

All companies need to count their inventory at least once a year.

Bermuda Beach Boutique Company uses a perpetual inventory system. Beginning Inventory is 2,500 t-shirts at a cost $2.50 per shirt. During the year Bermuda Beach Boutique purchased the following shirts: All purchases and sales are on account. Instructions a. Calculate the cost of goods sold and ending inventory using average. b. Prepare journal entries to record the February 18 and the August 29 sales. All sales and purchases are made in cash only.

If there is a recovery in the value of inventory the write-up may

If the net realizable value declines to an amount lower than cost, the Cost of Goods Sold account will

Under the periodic system of inventory, if the number of units available for sale is the same as the ending inventory, no sales have been made in the period.

In a periodic inventory system the cost of goods available for sale is allocated between

The days sales in inventory ratio is the inventory ratio divided by the number of days in the year.

In a period of increasing prices, which cost determination method will result in the lowest amount of cash flow?

Which of the following best indicates that a company is managing its inventory efficiently?

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. -The company's inventory turnover for 2015 was approximately

The FIFO inventory cost formula assumes that the cost of the latest units purchased is

Inventory errors which affect the balance sheet will NOT affect the income statement.

A problem with the specific identification method is that

The following information is available about the inventory of Read's Ski House at the company's year end, December 31: Instructions a. Calculate the total cost of the ending inventory at December 31. b. Calculate the total net realizable value of the ending inventory at December 31. c. What amount would be reported on Read's December 31 balance sheet?

Which of the following statements is correct with respect to inventories?

If the ending inventory is understated, then the beginning inventory of the next period will be overstated.

An inventory count is generally more accurate when goods are not being sold or received during the counting.

An employee assigned to counting computer monitors in boxes should

Helsinki Furniture Sales uses the periodic inventory system. On April 30, 2014, the company's year end, a physical count was taken of the inventory on hand in both the warehouse and the retail store area for the purpose of determining cost of goods sold and ending inventory value. The preliminary inventory list prepared by the warehouse manager shows a total inventory on hand of $738,000. The following are items that the warehouse manager noted on a separate sheet. None of these items are currently part of the final inventory listing because the manager was not sure how they should be treated for inventory purposes. 1. On April 30, Helsinki shipped an order to a customer, FOB shipping point. The cost of the goods shipped is $9,650. Freight, which is to be paid by the appropriate party, will cost $375. 2. On April 30, a customer visited Helsinki's shop and selected a desk that she wanted to purchase and paid for it in full. The sales price of the desk was $3,500, and the cost was $2,200. The customer intends to send a truck to pick up the desk no later than May 2. The freight will cost $50 and will be paid by the customer. A "Sold" sign has been placed on the desk but it is still on display in the store. 3. Residing in Helsinki's warehouse is furniture costing $21,000 that was purchased in April and needs to be returned. The goods were special ordered for a customer who has since decided not to buy them after all. Helsinki's supplier has agreed to accept return of the goods and will allow a full credit on Helsinki's account as soon as they are received. A freight company is scheduled to pick up the merchandise on the morning of May 1, and so they have been set aside near the loading dock. The freight, which will be paid by the customer as a fee for the cancellation, is to cost $300. 4. Helsinki sells some of its merchandise in smaller towns by placing samples on consignment with local hardware stores. The manager noted that 15 desks at a cost of $1,200 each and 30 chairs at $75 each are currently out on consignment. 5. On May 2, a freight company delivered goods that cost $65,000 to Helsinki's warehouse. The goods had been shipped by the vendor on April 29, FOB destination. Freight on this shipment will amount to $400 and will be paid by the appropriate party. Instructions Calculate the correct inventory balance at April 30, 2014. For each of the above items, explain the basis of your treatment of the item.

Willets Coffee Equipment sells European style coffee makers and uses a periodic inventory system. Its inventory records show that at July 1, Willets had 12 units on hand at a cost of $220 each. Transactions related to purchase and sale of coffee makers in July were as follows: Instructions For each of the following cost formulas, calculate the ending inventory as at July 31 and the cost of goods sold for the month of July. Prove the cost of goods sold calculations. a. FIFO b. Average