Exam 6: Inventories

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2016 financial reporting?

Under which cost flow assumption is it the easiest for management to manipulate income?

Which method cannot be used in Canada to allocate inventory costs between the income statement and the balance sheet?

What is the meaning of the terms "F.O.B.destination point"?

Which statement is correct about variable costing?

Which statement is correct about cost allocation methods under GAAP?

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

Why are inventories reported at the lower of cost and market?

What is the purpose of using a "cost allocation system" such as FIFO?

Comfy Feet manufactures slippers.In 2015,the company hired a new bookkeeper who did not have appropriate training.The bookkeeper charged all of the following costs for manufacturing 70,000 pairs of slippers to "Production Expense." The company had zero work-in-process at the end of both 2014 and 2015.Finished goods amounted to 20,000 pairs at $9.00 per pair at the end of 2014.There were 6,500 pairs in finished goods inventory at the end of 2015. Required: a.Provide the adjusting journal entry or entries at Dec 31,2015 to correct the bookkeeper's errors and properly record the above expenditures recorded in the "Production Expense" account. b.Assume the company uses a periodic inventory system and the FIFO cost flow assumption for finished goods.Calculate the cost of goods sold and the ending value of finished goods inventory for the year 2015. c.Now assume the company uses the weighted-average cost flow assumption.Calculate the cost of goods sold and the ending value of finished goods.

Which goods in transit would not be recorded in the buyer's inventory at year end?

Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2017 financial reporting?

Which statement is correct for about inventory systems?

The following information was taken from the inventory records of Helena Ltd.: What would be the cost of goods sold,assuming that the FIFO method is used in a periodic inventory system?

At the end of 2016,a company reported cost of goods sold of $4,800,which represented 80% of the goods available for sale.The beginning inventory amount was twice as much as the ending inventory amount.What was the amount of purchases for 2016?

Inventive Controls Ltd.was incorporated and started business early in January 2016 to manufacture electronic control devices to monitor traffic.Inventive purchased a small manufacturing plant and office building in a new industrial park and was in operation immediately.General ledger account balances at December 31,2016 are as follows: At December 31,2016,there was no work-in-process,but 30% of the units manufactured remained in ending finished goods inventory.Inventive uses the straight-line method to calculate depreciation. Required: a.Calculate the value of cost of goods sold and ending finished goods inventory under IFRS. b.Prepare an income statement for Inventive for the year ended December 31,2016.

Which statement best explains the LIFO cost flow assumption?

In early 2017,Darwin's Pet Shop discovered that some of its inventory of puppies were not what the supplier purported them to be.550 puppies that were supposed to be purebred (and therefore expensive)were in fact sired by parents with unknown history.As at the fiscal year ended December 31,2016,300 of these puppies had been sold while 250 remained in inventory.Purebred puppies cost $140 each and they would retail for $415.Non-purebreds have replacement cost of $30 each,and the estimated sale price is $100 each.Darwin is pursuing the supplier to obtain a refund for the cost difference.However,whether there will be compensation is uncertain. Required: a.Record the journal entry for the write-down of puppy inventory on December 31,2016.Note any assumptions necessary. b.Suppose the error (non-purebreds treated as purebreds)had not been discovered.Indicate the effect of this error on the following accounts (i.e. ,were they over- or understated,and by how much?): i.Inventory,December 31,2016; ii.Cost of goods sold,year 2016;and iii.Cost of goods sold,year 2017. Note: The owners of Darwin's Pet Shop do not intend to disclose the puppy inventory error to the buyers of the 300 puppies,nor do they intend to compensate them.This is clearly an ethical issue,but it is not a factor in this question.

Dianna Co.prepares monthly income statements.Inventory is counted only at year end;thus,month-end inventories must be estimated.All sales are made on account.The rate of mark-up on cost is 20%.The following information relates to the month of September. Required: Calculate the estimated cost of the inventory on September 30.