Exam 9: Working Capital

How are inventories valued subsequent to acquisition?

At the end of a manufacturing company's accounting period, Work-in-Process is generally

The weighted-average cost-flow assumption falls between the other two in its effects, but it resembles FIFO more than LIFO in its effects on the financial statements.

Manufacturing overhead includes:

_____ provide information about liquidity-a firm's ability to meet short-term obligations as they come due.

IFRS prohibits use of the LIFO cost-flow assumption.

Solve for the missing piece of information for each of the following independent situations: Raw materials \ 1,000 \ 400 \ 300 \ 200 Cost of completed units 3,200 2,200 1,500 Manufacturing overhead 400 300 100 Ending work in process 1,200 800 400 Direct labor costs 2,200 1,000 100 1,000 Beginning work in process 750 700 400

City Bicycle City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500.Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500.The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ. Suppose the cycling store uses the LIFO cost-flow assumption.The cost of goods sold is _____, and the ending inventory is _____.

The following data relates to Rose Industries during Year 8. Januarv 1, Year 8 December 31 , Year 8 Raw Materials Inventory \ 47,570 \ 58,640 Work-in-Process Inventory 128,910 117,390 Finished Goods Inventory 36,250 47,220 $\text { It incurred factory costs for the year as follows: }$ Raw Materials Purchased \ 475,900 Labor Services Used 287,600 Other Factory Costs Incurred 129,200 $\text { Other data relating to the year are as follows: }$ Sales \ 1,360,000 Selling and Administrative Expenses \ 289,400 $\text { The income tax rate is } 40 \text { percent. }$ Required: a. Compute the cost of raw materials used during Year 8. b. Compute the cost of units completed during Year 8 and transferred to the finished goods storeroom. c. Compute net income for Year 8.

The inventory record for a particular item for Year 2 appears below. Inventory, January 1, Year 2 20,000 \ 0.20 \ 4,000 Purchases: March 2 4,000 .24 \ 960 April 30 3,000 .28 840 June 15 6,000 .32 1,920 September 30 2,000 .26 520 December 15 1.000 .20 200 Total purchases 16.000 \ 4,440 Total available for sale 36,000 \ 8,440 Units sold 28,000 Refer to the Inventory Record example.The cost of goods sold for year 2 under LIFO is:

In a period of rising prices, use of the FIFO rather than LIFO inventory cost flow assumption results in

During the first year of operations, a company granted warranties on its products.The estimated cost of the product warranty liability at the end of the year is $8,500.The product warranty expense of $8,500 should be recorded in the years the expenditures to repair the products covered by the warranty will be paid.

Inventory by specific identification would not be practical for

Claitin Inc.uses large warehouses to store its finished goods ready for sale.After its personnel and auditors conducted a physical inventory of goods on one side of its warehouses, Claitin Inc.transported a portion of the inventory to another part of the warehouse, removing the inventory tags that indicated that the items had already been counted in inventory, and thereby included the items a second time in inventory.In this way, the firm overstated its ending inventory for the current year, understated its cost of goods sold, and overstated its earnings.This action resulted in an overstatement of the beginning inventory for the next year.Assuming a correct count of the ending inventory for the second year, the action has the result of overstating cost of goods sold for the second year and understating earnings.Net income for the two years combined, however, is correctly stated, the net result of an overstatement in the first year offset by an equal understatement in the second year.The actions

Which of the following is/are true regarding inventory?

For manufacturing firms, the balance sheet reports the costs of incomplete items as

What are the cost-flow assumptions used in inventory measurement?

City Bicycle City Bicycle , a cycling store has a beginning inventory of one bi-level touring bicycle 1, for which it paid $2,500.Suppose that during the period the store purchases bi-level touring bicycle 2 for $2,900 and bi-level touring bicycle 3 for $3,000, and that it sells one bicycle for $5,500.The three bicycles are physically identical; the store acquired them at different times as their acquisition costs changed, so only their costs differ. Using the City Bicycle example, suppose the cycling store uses the weighted-average cost-flow assumption.The cost of goods sold is _____, and the ending inventory is _____.

Cox Merchandising Company began the year with merchandise inventory of $60,000, ended the year with merchandise inventory of $70,000, and had cost of goods sold of $110,000.What was the Cox Merchandising Company's net purchases for the year?

Fix-It Hardware began the month of November with 150 large brass switchplates on hand at a cost of $4.00 each.These switchplates sell for $7.00 each.The following schedule presents the sales and purchases of this item during the month of November. Purchases Date of Transaction Quantity Received Unit Cost Units Sold November 5 100 November 7 200 \ 4.20 November 9 150 November 11 200 4.40 November 17 220 November 22 250 4.80 November 29 100 Refer to the Fix-It Hardware example.A growing firm is contemplating switching from a FIFO to a LIFO cost flow assumption for inventories and cost of goods sold because it has recently experienced increasing manufacturing costs for its products and anticipates a prolonged period of increasing quantities and manufacturing costs in the future.The firm wishes to know which of the following statements about the effect of the switch to LIFO is/are correct, relative to remaining on FIFO (ignore income tax effects):