Exam 9: Inventory and Cost of Goods Sold

Paper Depot is a wholesaler of office supplies. The activity for Model III calculators during August is shown below: -See information for Paper Depot above.If Paper Depot uses a FIFO periodic inventory system,the ending inventory of Model III calculators at August 31 is reported as

The Kidde Corporation uses the lower-of-cost-or-market method to value inventory.Data regarding the items in work-in-process inventory are presented below. The value for cost to be used in the lower-of-cost-or-market comparison for the markers is

The balance in Wellstocked Company's accounts payable account on December 31,2014,was $1,225,000 before the following information was considered: •Goods shipped FOB destination on December 21,2014,from a vendor to Wellstocked were lost in transit.The invoice cost of $45,000 was not recorded by Wellstocked.On December 28,2014,Wellstocked notified the vendor of the lost shipment. •Goods were in transit from a vendor to Wellstocked on December 31,2014.The invoice cost was $60,000,and the goods were shipped FOB shipping point on December 28,2014.Wellstocked received the goods on January 6,2015. What amount should Wellstocked report as accounts payable in its December 31,2014,balance sheet?

May Retailers purchased merchandise with a list price of $100,000,subject to a trade discount of 20 percent and credit terms of 2/10,n/30.At what amount should May record the cost of this merchandise if the gross method is used?

Purchases and sales during a recent period for Lantern, Inc. were: Beginning inventory was 100 units at $1 each. -See information for Lantern,Inc.above.Given this information,what is the ending inventory if the periodic LIFO costing alternative is used?

Paper Depot is a wholesaler of office supplies. The activity for Model III calculators during August is shown below: -See information for Paper Depot above.If Paper Depot uses a FIFO cost perpetual inventory system,the ending inventory of Model III calculators at August 31 is reported as

From the following information,determine the amount of freight-in.

Which statement is true about the gross profit method?

An overstatement of ending inventory in Period 1 would result in income of Period 2 being

Comet Company prepares monthly income statements.A physical inventory is taken only at year-end; hence,month-end inventories must be estimated.All sales are made on account.The rate of markup on cost is 50 percent.The following information relates to the month of May: The estimated cost of the May 31 inventory is

Merchandise shipped FOB shipping point on the last day of the year should ordinarily be included in

Athletes Sporting Goods began operations February 1,2014.Athletes sells baseball bats to high schools and colleges throughout the country.The company uses a periodic system.A summary of inventory records for the month of February appears below: All bats are sold for $47.50.Athletes takes all discounts that are offered and uses the net method for recording purchases.On February 28,there were 470 bats on hand. (1)Compute the ending inventory cost under FIFO. (2)Compute the gross margin on sales under LIFO. (3)Compute the ending inventory cost under LIFO. (4)Give the journal entry to record the February 2 purchase.

Asteroid Sales Corp.was organized on January 1,2013.On December 31,2014,the company lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take place.Data from the records disclosed the following: On January 1,2014,Asteroid's pricing policy was changed so that the gross profit rate would be 3 percentage points higher than the one earned in 2013. Salvaged undamaged merchandise was marked to sell at $24,000,while damaged merchandise marked to sell at $16,000 had an estimated net realizable value of $3,600. Determine the company's inventory loss due to the fire that occurred on December 31,2014.

The following information was obtained from the accounts of Foxx Company: Given this information,the cost of goods available for sale is

During periods of rising prices,when the FIFO inventory cost flow method is used,a perpetual inventory system would

The gross margin method is a method for estimating inventory based on the assumption that a constant gross margin estimated on recent sales can be used to estimate inventory values from current sales.The gross margin method is not acceptable for use in external financial statements,but can be used to test the accuracy of other cost flow assumptions. Required: Identify reasons that make the gross margin method unacceptable for external financial statements.

The inventory write-down rule under IAS 2 can best be labeled

Current generally accepted accounting principles state that a departure from the cost basis of pricing inventory is required when the utility of the goods is no longer as great as its cost.Accordingly,the lower-of-cost-or-market rule is applied to inventories such that,if market is less than cost,an adjustment is made to record the loss and to restate ending inventory at the lower value. What effect would the failure to apply the lower-of-cost-or-market method have on the income statement in current and future periods?

The Cleft Music Company was formed on December 1,2013.The following information is available from Cleft's inventory records: The company uses a periodic inventory system,and a physical inventory on November 30,2014,shows 9,600 units on hand.Prepare schedules to compute the ending inventory at November 30,2014,under each of the following inventory methods: (1)FIFO. (2)LIFO. (3)Average cost.

The gross profit method of estimating inventory would NOT be useful when