Exam 5: Inventories and Cost of Goods Sold

When the market value of inventory items has declined below its cost, which method would be the most appropriate in complying with GAAP?

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

The inventory account a manufacturer uses to record the cost of products completed and available for sale is called

If ending inventory is understated, then cost of goods sold is overstated.

During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?

Net purchases equal purchases less purchase return, allowances, and discounts plus transportation-in.

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

Sales returns and allowances is a contra ____________________ account.

Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. -Invoice price paid for resale goods

Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers. -Cost of completed, but unsold items.

George's Department Store is a merchandising company that uses the periodic inventory system.Selected account balances are listed below: Sales \ 200,000 Purchases 90,000 Inventory (beginning) 23,000 Inventory (ending) 17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 -Refer to the account information for George's Department Store Calculate George's cost of goods purchased

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

Both U.S.GAAP and international financial reporting standards (IFRS) require the use of the lower-of-cost-or-market rule to value inventories.

If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.

Complete the following data taken from the condensed income statements for merchandising companies: Action, Break, & Connors. Action Break Connors Net income 315 ? 215 Sales ? 865 560 Gross profit 430 ? 325 Operating expenses ? 125 ? Cost of merchandise sold 545 320 ?

Adam Inc.uses a perpetual inventory system. Jan. 1 On hand, 10 units at \ 2 each \ 20 4 Sold 8 units for \ 10 each 80 22 Purchased 50 units at \ 4 each 200 26 Sold 48 units for \ 10 each 480 If Adam uses the FIFO method, how much is ending inventory on January 31?

All of the following statements are true except:

The amount recognized on the Income Statement as the cost of inventory will be recognized as a(n) _________________________.

Shipping terms of ___________________________________ mean that the buyer pays shipping costs.