Exam 6: Inventory Costing

McQuire Company uses the periodic inventory method and had the following inventory information available: A physical count of inventory on December 31 revealed that there were 600 units on hand. Instructions Answer the following independent questions and show calculations supporting your answers. a. Assume that the company uses the FIFO cost formula. The value of the ending inventory at December 31 is $__________. b. Assume that the company uses the average cost formula. The value of the ending inventory on December 31 is $__________. c. Determine the difference in the amount of income that the company would have reported if it had used FIFO instead of Average. Would income have been greater or less?

Goods that have been purchased FOB shipping point and are in transit at the year end should be included in the buyer's physical count of goods.

Chan Pharmacy reported cost of goods sold as follows: Chan made two errors: 1. 2015 ending inventory was overstated by $3,000. 2. 2016 ending inventory was understated by $9,000. Instructions Assuming the errors had not been corrected; indicate the dollar effect that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U).

The gross profit method of estimating inventory cannot be used if the gross profit margin has changed from the previous period.

The first-in, first-out (FIFO) inventory cost formula results in an ending inventory valued at the most recent cost.

Revaluation of inventories to net realizable value should occur

Use the following information for question 102-103. During its December 31, 2014 year-end inventory count, Jefferson Company failed to count items in transit to which it had legal title. As a result of this error, ending inventory was understated by $30,000. -Assuming the company makes no errors in 2015, Jefferson's owner's equity at the end of December 2015 will be

When valuing ending inventory under a perpetual inventory system, the

Having too much inventory can cost the company money in all the following areas EXCEPT

Which of the following statements concerning cost formulas in a periodic inventory system is INCORRECT?

Terry's Electronics uses the retail method to determine inventory cost. The following information is available for the month of January, 2014: Instructions Calculate the estimated cost of the January 31, 2014 inventory using the retail inventory method.

Westcoe Company's goods in transit at December 31 include sales made (1) FOB destination, and (2) FOB shipping point, and purchases made (3) FOB destination, and (4) FOB shipping point. Which items should be included in Westcoe's inventory at December 31?

The Singh Computer Shop begins operations on June 1 and uses a periodic inventory system. During June, the company had the following purchases and sales for its Model 10 Fastback Computer System: On June 30 an inventory count showed there were 8 units on hand. -Using the average cost formula, the amount allocated to the ending inventory on June 30 is

Garcia Sales sells golf bags and uses a periodic inventory system. Garcia's inventory records show that at April 1, there were 30 units on hand at a cost of $135 each. Transactions related to purchase and sale of golf bags in April were as follows: Instructions a. For each of the following cost formulas, calculate the ending inventory as at April 30 and the cost of goods sold for the month of April. Prove the cost of goods sold calculations. i. FIFO ii. Average b. Calculate the gross profit and gross profit margin that will be reported under each of the two cost formulas. c. Assume that Garcia is motivated to report the highest profit possible. Which method will they prefer? Would your answer be different if the cost of golf bags was increasing, instead of decreasing? What if the cost was fluctuating randomly? Assume Garcia cannot change the selling price of their product.

LCNRV is applied to inventory

Kersawani Company uses the perpetual inventory system and the average cost formula. The following information is available for the month of June: Instructions Prepare a schedule to show cost of goods sold and the value of the ending inventory for the month of June.