Exam 6: Merchandise Inventory

The ending Merchandise Inventory for the current accounting period is understated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

Maintaining good controls over merchandise inventory ensures that inventory purchases and sales are properly authorized and accounted for by the accounting system.

In a period of rising costs,the last-in,first-out (LIFO)method results in a higher cost of goods sold and a lower net income than the first-in,first-out (FIFO)method.

Companies often disclose that the LCM rule is followed in notes to their financial statements.

Roadside Company had the following balances and transactions during 2018: Beginning Merchandise Inventory 30 units at \ 74 March 10 Sold 28 units June 10 Purchased 60 units at \ 84 October 30 Sold 54 units What is the amount of the company's ending Merchandise Inventory,as disclosed in the December 31,2018 balance sheet,using the periodic LIFO inventory costing method?

Which of the following inventory valuation methods should be used for unique items?

Companies can choose between reporting ending Merchandise Inventory using specific identification,FIFO,LIFO,weighted-average,or lower-of-cost-or-market.

An overstatement of ending merchandise inventory in the current period results in an understatement of cost of goods sold in the current period.

Fast selling inventory is less likely to ________.

Lower-of-cost-or-market (LCM)requires that merchandise inventory be reported in the financial statements at the lower of the historical cost or the current selling price of the inventory.

A company changes its inventory costing method each period in order to maximize net income.This is a violation of the consistency principle.

Handbags Company had 500 units of inventory on hand at the end of the year.These were recorded at a cost of $18 each using the last-in,first-out (LIFO)method.The current replacement cost is $15 per unit.The selling price charged by Handbags Company for each finished product is $23.In order to record the adjusting entry needed under the lower-of-cost-or-market rule,the Cost of Goods Sold will be ________.

In a period of rising costs,the first-in,first-out (FIFO)method results in a higher cost of goods sold and a lower gross profit than the last-in,first-out (LIFO)method.

Under the last-in,first-out (LIFO)method,the cost of goods sold is based on the oldest purchases.

The disclosure principle states that a company should report enough information for outsiders to make knowledgeable decisions about the company.

In the weighted-average inventory costing method,when using the periodic inventory system,a single weighted average cost per unit is computed for the entire period.

The periodic inventory records of Canine Veterinary Supply indicate the following for the month of April: Apr. 1 Beginning merchandise inventory 15 units @ \3 2 each 7 Purchase 7 units @ \3 4 each 18 Purchase 12 units @ \3 7 each 26 Purchase 10 units @ \4 0 each As of April 30,Canine counts 8 units of merchandise inventory on hand. Compute ending merchandise inventory and cost of goods sold for Canine using the weighted-average inventory method.(Round the per unit cost to two decimal places.)

A higher days' sales in inventory is preferable.

Which of the following remains the same regardless of the inventory costing method used by a company? Assume the cost of inventory is rising.

Given the same purchase and sales data,and assuming the cost of inventory is rising,the costing methods for inventory will result in different amounts for cost of goods sold.