Exam 6: Cost of Goods Sold and Inventory

Dietz, Inc. sells merchandise on credit. If a customer pays its balance due within the discount period, what is the effect of the payment on Dietz's accounting equation?

Xu, Inc. reported the following information for 2013 and 2012: Determine the following amounts for Xu, Inc. for 2013:

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -Arrangement whereby goods owned by one party are held and offered for sale by another party.

Irwin Company counted its ending inventory as $178,000 at year-end, January 31, 2013. Upon review of the records, it was noted that the following items were in transit during the count: - Goods totaling $2,000 shipped by the supplier FOB destination on January 31 were received February 5th and were not counted by Irwin Company. - Goods totaling $5,000 shipped by the supplier FOB shipping point on January 30 were received February 2nd and were not counted by Irwin Company. - Goods totaling $6,000 shipped by Irwin Company to a customer FOB shipping point on January 31 were received by the customer on February 3rd and were counted by Irwin Company. What is Irwin Company's correct inventory balance on January 31, 2013?

The journal entries required for purchase and sales transactions using the perpetual system are more complex than under the periodic system but offer the advantage of

The following journal entry was included in the accounting records of Jentzen Corp.: Based on this information, it is likely that the company:

Draw and label T-accounts to illustrate the relationship between the various inventory accounts and cost of goods sold for: (a)a merchandiser; and (b)a manufacturer. Use the following account titles: Cost of Goods Sold, Finished Goods Inventory, Merchandise Inventory, Raw Materials Inventory, Work-in-Process Inventory, and Other Production Costs.

A loss in inventory value caused by application of the lower of cost or market (LCM)rule is recorded in a "Loss from Impairment" account.

Ending inventory is equal to the cost of items on hand plus

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

For a merchandising company, the cost of goods sold is subtracted from net sales to arrive at gross profit.

Match the terms with the descriptions provided. a.Manufacturers d.Wholesalers b.Merchandisers e.Service companies c.Retailers -Companies such as Macy's and Target.

The following inventory transactions occurred at Zapata, Inc. which uses a perpetual inventory system: Record the appropriate journal entry for each of these transactions.

Match the terms with the descriptions provided. a.Consignment f.Purchase allowance b.Discount period g.Purchase discounts c.Inventory h.Purchase returns d.LIFO Reserve i.Purchases e.Lower of cost or market rule -The time span during which purchase discounts are available.

Identify which inventory costing method achieves the effect listed in the following items. (Choices may be used more than once.) a.FIFO method c.Average cost method b.LIFO method d.Specific identification method -Prices are declining; ending inventory is lower with this method.

A customer returned damaged goods for credit. Under a perpetual system, which of the seller's accounts decreases?

A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.

Regan Company Regan Company reported net income of $95,000 for 2013. Early in 2014, the company discovered that its 2013 ending inventory was overstated by $5,000. -Refer to the information provided for Regan Company. Determine the financial statement effects of the inventory error for 2014.

A manufacturing company reported total inventory of $75,000. Assuming the following account balances, what is this company's work in process inventory?

Identify which inventory costing method achieves the effect listed in the following items. (Choices may be used more than once.) a.FIFO method c.Average cost method b.LIFO method d.Specific identification method -Prices are rising; ending inventory best approximates replacement cost with this method.