Question 1

Days' sales in inventory is calculated as:

Accepted Answer

A)  Ending inventory divided by cost of goods sold. 
B)  Cost of goods sold divided by ending inventory. 
C)  Ending inventory divided by cost of goods sold times 365. 
D)  Cost of goods sold divided by ending inventory times 365. 
E)  Ending inventory times cost of goods sold.

Question 2

If obsolete or damaged goods can be sold,they will be included in inventory at their original cost.

Accepted Answer

A) True 
 B)False

Question 3

Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.

Accepted Answer

A) True 
 B)False

Question 4

A company's inventory records indicate the following data for the month of April:
 $$\begin{array} { | l | l | l | } 
\hline \text { April 1 } & \text { Beginning } & 350 \text { units at \$18 each } \
\hline \text { April 5 } & \text { Purchase } & 290 \text { units at \$20 each } \
\hline \text { April 9 } & \text { Sale } & 500 \text { units at \$55each } \
\hline \text { April 14 } & \text { Purchase } & 250 \text { units at \$22 each } \
\hline \text { April 20 } & \text { Sale } & 200 \text { units at \$55 each } \
\hline \text { April 30 } & \text { Purchase } & 240 \text { units at \$25each } \
\hline
\end{array}$$ 
If the company uses the first-in,first-out (FIFO)method and the perpetual inventory system,what would be the cost of the ending inventory?

Accepted Answer

The answer of A company's inventory records indicate the following...

Question 5

A company reported the following data:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { Cost of goods sold } & \$ 425,000 & \$ 486,000 \
\hline \text { Ending inventory } & 140,000 & 175,000 \
\hline
\end{array}$$ 
Required:
1.Calculate the days' sales in inventory for each year.
2.Comment on the trend in inventory management.

Accepted Answer

The answer of A company reported the following data:
 \[\begin{array}...

Question 6

Regardless of what inventory method or system is used,cost of goods available for sale must be allocated between ________ and ________.

Accepted Answer

The answer of Regardless of what inventory method or system...

Question 7

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 8

According to IRS guidelines,companies may use FIFO for financial reporting and LIFO for tax reporting.

Accepted Answer

A) True 
 B)False

Question 9

Regardless of the inventory costing system used,cost of goods available for sale must be allocated at the end of the period between

Accepted Answer

A)  beginning inventory and net purchases during the period. 
B)  ending inventory and beginning inventory. 
C)  net purchases during the period and ending inventory. 
D)  ending inventory and cost of goods sold. 
E)  beginning inventory and cost of goods sold.

Question 10

When costs to purchase inventory regularly decline,which method of inventory costing will yield the lowest gross profit and income?

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  Weighted average. 
D)  Specific identification. 
E)  Gross margin.

Question 11

The ________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of particular items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Accepted Answer

The answer of The ________ method of assigning costs to...

Question 12

Salmone Company reported the following purchases and sales for its only product.Salmone uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using LIFO.
$$\begin{array} { | c | l | l | l | } 
\hline \text { Date } & { \text { Activities } } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \
\hline \text { May 1 } & \text { Beginning Inventory } & 150 \text { units @ } \$ 10.00 & \
\hline5& \text { Purchase } & 220 \text { units @ } \$ 12.00 & \
\hline 10& \text { Sales } & & 140 \text { units @ } \$ 20.00 \
\hline 15 &\text { Purchase } & 100 \text { units @ } \$ 13.00 & \
\hline 24&\text {Sales } & & 90 \text { units @ } \$ 21.00 \
\hline
\end{array}$$

Accepted Answer

A)  $2,860 
B)  $2,460 
C)  $2,590 
D)  $2,850 
E)  $2,980

Question 13

Match each of the following terms with the appropriate definition.
-An inventory valuation method where each item in inventory is identified with a specific purchase and invoice.

Accepted Answer

A) Conservatism constraint 
B) Inventory turnover 
C) Net realizable value 
D) Retail inventory method 
E) Days' sales in inventory
F)Weighted average inventory method
G)Interim statements
H)LIFO method
I)FIFO method
J)Specific identification method

Question 14

A company had the following purchases and sales during its first year of operations:
$$\begin{array} { | l | l | l | } 
\hline & \text { Purchases } & \text { Sales } \
\hline \text { January: } & 10 \text { units at } \$ 120 & 6 \text { units } \
\hline \text { February: } & 20 \text { units at } \$ 125 & 5 \text { units } \
\hline \text { May: } & 15 \text { units at } \$ 130 & 9 \text { units } \
\hline \text { September: } & 12 \text { units at } \$ 135 & 8 \text { units } \
\hline \text { November: } & 10 \text { units at } \$ 140 & 13 \text { units } \
\hline
\end{array}$$
On December 31,there were 26 units remaining in ending inventory.
-Using the Perpetual LIFO inventory valuation method,what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

Accepted Answer

A)  $8,670. 
B)  $5,400. 
C)  $5,470. 
D)  $5,130. 
E)  $5,305.

Question 15

Salmone Company reported the following purchases and sales of its only product.Salmone uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using FIFO.
$$\begin{array} { | c | l | l | l | } 
\hline \text { Date } & { \text { Activities } } & \text { Units Acquired at Cost } & \text { Units Sold at Retail } \
\hline \text { May 1 }&\text {Beginning Inventory } & 150 \text { units @ } \$ 10.00 & \
\hline 5& \text { Purchase } & 220 \text { units @ } \$ 12.00 & \
\hline 10& \text { Sales } & & 140 \text { units @ \$20.00 } \
\hline 15 &\text { Purchase } & 100 \text { units @ } \$ 13.00 & \
\hline 24& \text { Sales } & & 90 \text { units @ \$21.00 } \
\hline
\end{array}$$

Accepted Answer

A)  $2,980 
B)  $2,460 
C)  $2,850 
D)  $2,590 
E)  $5,440

Question 16

Consignment goods are:

Accepted Answer

A)  Goods shipped by the owner to the consignee who sells the goods for the owner. 
B)  Reported in the consignee's books as inventory. 
C)  Goods shipped to the consignor who sells the goods for the owner. 
D)  Not reported in the consignor's inventory since they do not have possession of the inventory. 
E)  Always paid for by the consignee when they take possession.

Question 17

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Accepted Answer

A) True 
 B)False

Question 18

The understatement of the ending inventory balance causes:

Accepted Answer

A)  Cost of goods sold to be overstated and net income to be understated. 
B)  Cost of goods sold to be overstated and net income to be overstated. 
C)  Cost of goods sold to be understated and net income to be understated. 
D)  Cost of goods sold to be understated and net income to be overstated. 
E)  Cost of goods sold to be overstated and net income to be correct.

Question 19

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge.What are the challenges Patrick refers to?

Accepted Answer

The answer of Patrick Randall of Sports Supplies finds that...

Question 20

The Community Store reported the following amounts on their financial statements for Year 1,Year 2,and Year 3:
  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\begin{array} { c } 
\text { For the year ended } \
\text { December 31 }
\end{array} $
$\begin{array} { | l | r | r | r | } 
\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\hline \text { Cost of goods sold } & \$ 75,000 & \$ 87,000 & \$ 77,000 \
\hline \text { Net income } & 22,000 & 25,000 & 21,000 \
\hline \text { Total current assets } & 155,000 & 165,000 & 110,000 \
\hline \text { Equity } & 287,000 & 295,000 & 304,000 \
\hline
\end{array}$ 
It was discovered early in Year 4 that the ending inventory on December 31,Year 1 was overstated by $6,000,and the ending inventory on December 31,Year 2 was understated by $2,500.The ending inventory on December 31,Year 3 was correct.Ignoring income taxes determine the correct amounts of cost of goods sold,net income,total current assets,and equity for each of the years Year 1,Year 2,and Year 3.

Accepted Answer

The answer of The Community Store reported the following amounts...

Exam 5: Inventories and Cost of Sales

Days' sales in inventory is calculated as:

If obsolete or damaged goods can be sold,they will be included in inventory at their original cost.

Whether purchase costs are rising or falling,FIFO always will yield the highest gross profit and net income.

Regardless of what inventory method or system is used,cost of goods available for sale must be allocated between and .

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

According to IRS guidelines,companies may use FIFO for financial reporting and LIFO for tax reporting.

Regardless of the inventory costing system used,cost of goods available for sale must be allocated at the end of the period between

When costs to purchase inventory regularly decline,which method of inventory costing will yield the lowest gross profit and income?

The ________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of particular items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Match each of the following terms with the appropriate definition. -An inventory valuation method where each item in inventory is identified with a specific purchase and invoice.

Consignment goods are:

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

The understatement of the ending inventory balance causes:

Patrick Randall of Sports Supplies finds that maintaining appropriate levels of inventories while controlling costs is a major challenge.What are the challenges Patrick refers to?