FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Inventory and Cost of Goods Sold

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 41

True/False

Review LaterAdd Note

Review Later

During periods of rising costs,FIFO generally results in a higher cost of goods sold.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:

A) FIFO.
B) LIFO.
C) Weighted average.
D) Each method always produces a different amount.

E) B) and C)
F) A) and B)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

The following information relates to inventory for Shoeless Joe Inc. $\begin{array} { l l c c } \text { Date } & & \text { Quantity } & \text { Price } \\\text { March 1 } & \text { Beginning Inventory } & 20 & \$ 2 \\\text { March 7 } & \text { Purchase } & 15 & 3 \\\text { March 11 } & \text { Sale } & 25 & 7 \\\text { March 12 } & \text { Purchase } & 20 & 4\end{array}$ At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?

__________ is commonly referred to as the income statement approach.

Anthony Corporation reported the following amounts for the year: $\begin{array}{lr}\text { Net sales } & \$ 296,000 \\\text { Cost of goods sold } & 138,000 \\\text { Average inventory } & 50,000\end{array}$ Anthony's gross profit ratio is:

A company that has average inventory of $500 and cost of goods sold of $2,000 would have an inventory turnover ratio of 0.25.

Income before income taxes equals operating income plus nonoperating revenues less nonoperating expenses.

At the end of a reporting period,Gamble Corporation determines that its ending inventory has a cost of $300,000 and a market value of $230,000.What would be the effect(s) of the adjustment to write down inventory to market value?

Anthony Corporation reported the following amounts for the year: $\begin{array}{lr}\text { Net sales } & \$ 296,000 \\\text { Cost of goods sold } & 138,000 \\\text { Average inventory } & 50,000\end{array}$ Anthony's average days in inventory is:

At the beginning of 2012,Calston Incorporated reports inventory of $9,000.During 2012,the company purchases additional inventory for $25,000.At the end of 2012,the cost of inventory remaining is $8,000.Calculate cost of goods sold for 2012.

Consider the following information pertaining to OldWest's inventory: $\begin{array} { l c r c } \text { Product } & \text { Quantity } & \text { Cost } & \begin{array} { c } \text { Market } \\\text { Value }\end{array} \\\text { Revolvers } & 16 & \$ 120 & \$ 150 \\\text { Spurs } & 23 & 27 & 22 \\\text { Hats } & 12 & 56 & 40\end{array}$ At what amount should OldWest report its inventory?

After applying the lower-of-cost-or-market method,the accountant prepares a year-end adjustment.That adjustment would:

In a perpetual inventory system,the purchase of inventory is debited to:

Given the information in the table below,what is the company's gross profit? $\begin{array} { | l | r | } \hline \text { Sales revenue } & \$ 350,000 \\\hline \text { Accounts receivable } & \$ 280,000 \\\hline \text { Ending inventory } & \$ 230,000 \\\hline \text { Cost of goods sold } & \$ 180,000 \\\hline \text { Sales returns } & \$ 50,000 \\\hline \text { Sales discount } & \$ 20,000 \\\hline\end{array}$

Generally,a lower gross profit ratio reflects positively on a company's ability to manage its inventory.

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO.In an extended period of rising inventory costs,Company A's gross profit and inventory turnover,compared to Company B's,would be: $\begin{array} { l c c } & \text { Gross profit } & \text { Inventory turnover } \\\text { a. } & \text { Lower } & \text { Lower } \\\text { b. } & \text { Higher } & \text { Higher } \\\text { c. } & \text { Higher } & \text { Lower } \\\text { d. } & \text { Lower } & \text { Higher }\end{array}$

What is meant by the assertion that the lower-of-cost-or-market method is an example of conservatism in accounting?

When inventory costs are rising,__________ generally results in a higher amount of reported net income.

During 2012,a company sells 20 units of inventory.The company has the following inventory purchase transactions for 2012: $\begin{array} { l l c r r } \text { Date } & { \begin{array} { c } \text { Transaction }\end{array} } & \begin{array} { c } \text { Number } \\\text { of Units }\end{array} & \begin{array} { r } \text { Unit } \\\text { Cost }\end{array} & \begin{array} { r } \text { Total } \\\text { Cost }\end{array} \\\text { Jan. } 1 & \text { Beginning inventory } & 15 & \$ 60 & \$ 900 \\\text { Sep. } 8 & \text { Purchase } & 10 & 62 & 620 \\\hline& & 25 & & \$ 1,520 \\\hline\end{array}$ Calculate ending inventory and cost of goods sold for 2012 assuming the company uses FIFO with a periodic inventory system.

Accountants often call FIFO the balance sheet approach because the amount it reports for ending inventory better approximates the current cost of inventory.