Exam 17: Merchandise Inventory

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?

On June 29, Hurricane Moriah destroyed the warehouse where The Adams Bicycle Sales Company stored their inventory. The inventory was, for the most part, carried away by the force of the storm. The usual gross profit rate for the company was 45%. The beginning inventory of $120,000 was recorded on the prior year's financial reports. The net sales to date are known to be $474,500, and net purchases (including freight-in charges and purchases returns) were $325,000. Using the gross profit method of inventory valuation, determine the value of the inventory that was destroyed.

In a period of rising prices, the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.

The weighted average cost of an inventory item is calculated by

The use of the LIFO method of inventory valuation

The October 1^st inventory of the David Charles Company had a recorded cost of $19,500. Its retail value was $39,000. During the month of October, purchases in the amount of $30,320 (including freight of $320) were made and priced at retail for $67,000. Sales for the month of October amounted to $74,000. What is the October cost of goods sold and the ending inventory at cost and at retail?

The ________________ method of inventory costing must be used for financial accounting purposes if it is chosen for federal income tax purposes.

The lower the ending inventory valuation, the ____________________ the reported net income.

Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.

The lower the ending inventory valuation, the ____________________ the cost of goods sold.

The use of the FIFO method of inventory valuation

The following information concerns several of the inventory items at DC's. Description Quantity Unit Cost Market Value Department A: Model XP 235 50 \ 22.90 \ 21.50 Model XP 376 75 26.75 25.00 Model XP 522 60 20.00 21.00 Department B: Model ZY 114 15 75.00 75.00 Model ZY 232 24 100.00 92.00 Model ZY 183 12 145.00 142.50 Determine the amount of inventory to be reported on the financial statements using the lower of cost or market method of valuation under each of the following options. 1. Lower of cost or market for each item separately 2. Lower of total cost or total market 3. Lower of total cost or total market by department

Adams Company uses the specific identification method. At the end of the year, it had 24 units of its giant floating tricycles that were sold for use by tourists in the ocean or on large lakes. Explain how the physical count of inventory and the cost of ending inventory will be calculated.

The price the business would have to pay to buy an item of inventory through usual channels in usual quantities is either market price or __________________ cost.

A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?

On July 1, 2013, a fire destroyed the entire inventory of Stewart Clothes, a retail store. The accounting records that were saved showed that the firm's gross profit rate was 40 percent of net sales. During the period of January 1 to July 1, 2013, the store had net sales of $345,000 and net purchases of $325,000. On December 31, 2013, the inventory was $50,000. 1. What is the estimated cost of goods sold for the period? 2. What is the estimated ending (destroyed) inventory? 3. What is the estimated gross profit for the period?

The Lower of Cost or Market rule is based on which accounting principle?

The ____________________ method of estimating inventory requires the use of data about both cost and selling prices.

The firm had a beginning inventory of 50 units with a unit cost of $10. Purchases during the year were as follows: March-50 units with a unit cost of $12; July-60 units with a unit cost of $15. If the average cost method is used, the value of the ending inventory of 45 units is

Information about the Maxwell Company's inventory of one item during 2013 is given below. Units Unit Cost Beginning Inventory, Jan. 1, 2013 80 \ 24 Purchases: March, 2013 45 24 July, 2013 75 22 November, 2013 100 21 Ending Inventory, Dec. 31, 2013 55 Compute the cost of the ending inventory and cost of goods sold under each of the following methods. 1. Average cost method 2. First in, first out (FIFO) method 3. Last in, first out (LIFO) method