Exam 5: The Purchase and Sale of Inventory

Fargo Engines Incorporated sells part number 45G to toy manufacturers around the world.Information about part number 45G is contained in the table below.Fargo uses a LIFO periodic inventory system. Determine the cost of goods sold and ending inventory cost of part 45G,if 2,000 units remain unsold in inventory at the end of the accounting period.

Assume TFG Company uses a periodic inventory system and overstates its ending inventory by $12,000.In other words,the company counts and states that its ending inventory is $50,000,when in fact the correct ending inventory balance should have been $38,000.Describe how this mistake of overstating inventory affects the income statement.

The Ribbon Company began operations on May 1.The following transactions took place in May: Purchased $400,000 of merchandise on account. Purchased an additional $200,000 of merchandise for cash. Paid $3,000 cash for freight to deliver the merchandise purchased. Paid $25,000 for the store managers' monthly salaries. The cost of the inventory purchased for the month of May equals ________.

Inventory data for Daisy Cutters,Inc.,are provided below.Sales for the month were 500 units sold for $30 each.The company maintains a periodic inventory system. Required: 1.Determine the gross profit for the month assuming the company uses the FIFO cost flow method. 2.Determine the gross profit for the month assuming the company uses the LIFO cost flow method. 3.Which method results in a higher cost of goods sold? Explain why.

On June 1, Treble Clef, Inc. had one piano in inventory. During June, five additional pianos were purchased--two on June 8, two on June 12, and one on June 25. The company sold three of the pianos on June 13, another one on June 19, and one more on June 28. Part A: Using the LIFO perpetual cost flow method, put the number of pianos in the appropriate column(s) to show: Part B: Using the FIFO perpetual cost flow method,put the number of pianos in the appropriate column(s)to show:

Which of the following DECREASES the cost of inventory purchased?

If Puffins Turnovers,Inc.,has an inventory turnover ratio of 73 times,then its average days in inventory must be ________.

Freight out is an operating expense recorded on the seller's books for the costs of shipping merchandise to buyers.

On June 1,beginning inventory consists of ten items that cost $100 each.On June 8,ten more items are purchased at $120 each.On June 12,fifteen items are sold for $200 each.On June 28,ten items are purchased at $130 each.Using periodic LIFO,cost of goods sold for the month ended June 30 equals ________.

Philipsburg Corporation sells mugs to fine retailers across the world.Data from its periodic inventory system is presented in the table below.Inventory is sold for $170 per unit.Operating expenses excluding cost of goods sold totaled $40,000. Which cost flow method would result in the LOWEST taxable income for the period?

If the shipping terms are FOB shipping point,the buyer has to pay for freight costs.

Using the following information,calculate the gross profit ratio,inventory turnover ratio,and the average days in inventory. 1.Gross profit ratio equals: ________ 2.Inventory turnover ratio equals: ________ 3.Average days in inventory equals: ________.

Which of the following companies will probably have the highest inventory turnover ratio?

Which financial statement(s)do you need to calculate a company's inventory turnover ratio?

After a lower-of-cost-or-market write down,Inventory will ________.

The gross profit ratio is the most useful way to determine if a merchandising company is selling its inventory effectively.

Mighty Ducks,Inc.'s inventory activity in October 2011 was as follows: Which of the following shows the correct effect on the accounting equation of the October 25 sale on account using the perpetual WEIGHTED AVERAGE COST method of accounting for inventory?

Philipsburg Corporation sells mugs to fine retailers around the world.It uses a FIFO perpetual inventory system.Inventory data is presented in the table below. Determine operating income for the period,assuming that 1,000 units were sold for $170 each.Operating expenses excluding cost of goods sold totaled $40,000.

Inventory data for Army & Navy Wear Co.are provided below.Sales for the month were 220 units sold for $12 each.The company maintains a periodic inventory system. Required: 1.Determine the cost of goods sold and ending inventory for the month assuming the company uses the FIFO cost flow method. 2.Determine the cost of goods sold and ending inventory for the month assuming the company uses the LIFO cost flow method. 3.Determine the cost of goods sold and ending inventory for the month assuming the company uses the weighted average method. 4.Which method would you recommend that the company use if its objective is to minimize its income tax liability?