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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

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Question 51

True/False

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Inventory turnover under LIFO is greater than inventory turnover under FIFO when unit costs are increasing.

A) True
B) False

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Question 52

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Inventory turnover is calculated as cost of goods sold divided by average inventory.

A) True
B) False

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Question 53

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The journal entry to write down inventory under the lower of cost or net realizable value rule results in a decrease in both ending inventory and cost of goods sold.

At the end of 2019,a $5,000 understatement was discovered in the 2019 ending inventory as reflected in the inventory records.What were the 2019 effects of the $5,000 inventory error (before correction) ?

Which of the following statements is incorrect?

Jennings Company uses FIFO inventory costing.At the end of the annual accounting period,December 31,2019,the accounting records for the best-selling item in inventory showed the following: Calculate the following: 1.Goods available for sale 2.Ending inventory 3.Cost of goods sold

An overstatement of the 2019 ending inventory results in an overstatement of stockholders' equity as of the end of 2019.

The LIFO Reserve represents the excess of FIFO inventory costs over LIFO inventory costs.

A.Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes. ) B.Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

During periods of increasing unit costs,the LIFO inventory method will result in a higher inventory amount on the balance sheet and a lower net income than will the FIFO inventory method.

Which of the following statements is correct with respect to the determination of cash flows from operating activities?

Which of the following is correct?

Cranchey Company reported a LIFO ending inventory of $670,000 on its balance sheet at December 31,2019.Cranchey's disclosure notes to the financial statements reported that the LIFO Reserve at December 31,2018 was $32,000 and the LIFO Reserve at December 31,2019 was $40,000.Which of the following statements is correct for Cranchey Company for the effect of the LIFO Reserve in 2019 in converting LIFO amounts to FIFO amounts?

Assume Webster Company buys bicycle helmets at a unit cost of $30 and sells them at a unit price of $52.There was no inventory at the beginning of the period. Provide the journal entries required below by entering the account code of the appropriate account and the amount for each debit and credit:

Under the FIFO cost flow assumption during a period of rising costs,which of the following is false?

During periods of decreasing unit costs,use of the FIFO inventory method results in lower gross profit than would use of the LIFO method.

Which of the following statements is incorrect when inventory unit costs are increasing?

Redford Company hired a new store manager in October 2018,who determined the ending inventory on December 31,2018,to be $50,000.In March,2019,the company discovered that the December 31,2018 ending inventory should have been $58,000.The December 31,2019,inventory was correct.Ignore income taxes. Complete the following table to show the effects of the inventory error on the four amounts listed.Give the amount of the discrepancy and indicate whether it was overstated (O),understated (U),or had no effect (N).

Tinker's cost of goods sold in the year of sale (2019) was $750,000 and 2018 cost of goods sold was $770,000.The inventory at the end of 2019 was $188,000 and at the end of 2018 the inventory was $208,000. Tinker's inventory turnover during 2019 was closest to:

The inventory turnover