chapter 7 Inventories

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The inventory subsidiary ledger is used

All of these choices are correct.

Several controls are used to safeguard inventory, and one of those is to

hire security guards.

The inventory is added to the inventory records after all of the following are reconciled, except the

sales invoice.

Determine the ending inventory using the LIFO cost flow method, assuming that only one item was sold on March 24 for $14.

$10

Determine the gross profit using the weighted average cost flow method, assuming that only one item was sold on May 24 for $14.

$7

Determine the gross profit using the FIFO cost flow method, assuming that only one item was sold on May 24 for $14.

$8

Inventory cost flow assumptions address accounting issues except when

both of these choices address inventory accounting issues.

When the weighted average cost method is used for the perpetual inventory system, a weighted average unit cost for each item is determined

each time a purchase is made.

Determine the cost of merchandise sold for the transaction on October 25 using the perpetual inventory system and the FIFO method.

137

Determine the cost of merchandise sold for the transaction on September 25 using the perpetual inventory system and the FIFO method.

$77

When identical units of an item are purchased at different costs

an inventory cost flow method must be used under both a perpetual and a periodic inventory system.

Determine the gross profit using the periodic inventory system and the FIFO inventory method, assuming that 18 units were sold at a sales price of $14.

$148, 182

Determine the ending inventory using the periodic inventory system and the LIFO inventory method, assuming that 18 units were sold at a sales price of $14

Determine the ending inventory using the periodic inventory system and the weighted average cost method (rounded to the closest cent), assuming that 18 units were sold at a price of $14.

$36.48

When a periodic inventory system is used

only revenue is recorded each time a sale is made.

Which inventory cost method offers income tax savings during periods of rising prices?

LIFO inventory cost method

The inventory cost method that will yield a higher ending inventory during times of inflation will be the

FIFO inventory cost method.

The cost method that will yield an ending inventory value that is somewhere between possible high and low prices using traditional costing methods is the

weighted average inventory cost method.

Merchandise inventory is found on the balance sheet as a

current asset.

During the taking of the physical inventory, the company inadvertently counted its inventory as $89,000 instead of the correct amount of $87,000. Indicate the effect of the misstatement on the balance sheet of the current year.

Owner’s equity is overstated by $2,000.

Determine the value of the inventory at the lower of cost or market.

$146

The lower-of-cost or market method can be applied to

all of these choices are correct.

Financial statement data at December 31 for Alpine Company is shown below:
Determine inventory turnover for the year.

3.0

Financial statement data at December 31 for Alpine Company is shown below:
Determine the number of days’ sales in inventory for the year.

121.7 days

Financial statement data at December 31 for Ecco Company is shown below:
Determine inventory turnover for the year.

3.25

A physical inventory is used to

All of these choices are correct.

Determine the ending inventory using the LIFO cost flow method, assuming that only one item was sold on May 24 for $14.

$13

The three most common inventory cost flow methods are

FIFO, LIFO, and weighted average cost.

Which of the following is a benefit of using a computerized perpetual inventory system?

All of these choices are benefits of using a computerized perpetual inventory system.

Determine the cost of merchandise sold for the transaction on October 8 using the perpetual inventory system and the LIFO method.

$72

Which of the following is true regarding the perpetual LIFO inventory method?

The cost of the units sold is the cost of the most recent purchases.

Determine the gross profit using periodic inventory system and the LIFO inventory method, assuming that 18 units were sold at a sales price of $14.

172

The cost method that will yield an ending inventory that is closer to current prices is the

FIFO inventory cost method.

Morgan Industries is comparing and contrasting its ending inventory value in terms of the three common inventory costing methods in order to help management determine the most appropriate method to use. The company determines three values, which are: $96,000, $100,000, and $105,000. If management determines that $100,000 is the most appropriate value for its ending inventory, what inventory cost method has it most likely chosen?

weighted average inventory cost method

during the taking of the physical inventory, the company inadvertently counted its inventory as $98,000 instead of the correct amount of $89,000. Indicate the effect of the misstatement on the balance sheet of the current year.

Assets are overstated by $9,000.

Regarding consigned inventory

the manufacturer is the consignor.

Merchandise inventory should be reported as follows except:

as a long-term asset on the balance sheet.

Inventory turnover is calculated as:

Cost of Merchandise Sold / Average Inventory.

Financial statement data at December 31 for Ecco Company is shown below:
Determine the number of days’ sales in inventory for the year.

112.3 days

Inventory turnover measures

both of these are measured by inventory turnover.

Average inventory is computed as

(inventory at the beginning of the period plus inventory at the end of the period) divided by two.

The inventory is added to the inventory records after three documents are reconciled. One of those documents is the

receiving report.

Several controls are used to safeguard inventory except

allowing all employees access to the materials warehouse.

Determine the ending inventory using the FIFO cost flow method, assuming that only one item was sold on March 24 for $14.

$15

Determine the cost of merchandise sold for the transaction on September 8 using the perpetual inventory system and the LIFO method.

$36

When using the periodic LIFO inventory cost method, which of the following statements is correct?

The physical count determines the inventory on hand.

The cost method that will yield the highest taxable income during times of inflation is the

FIFO inventory cost method.

The specific identification inventory method can be used

All of these choices are correct.

Which of the following is true regarding the perpetual FIFO inventory method?

Costs are included in the cost of merchandise sold in the order in which units were purchased.

Determine the ending inventory using the periodic inventory system and the weighted average inventory cost flow method (round answers to the nearest cent).

$20.65

Using the following cost data, estimate the cost of ending merchandise inventory.

$57,000

Determine the gross profit using the weighted average cost flow method, assuming that only one item was sold on March 24 for $14.

$8

When using the periodic FIFO inventory cost method, which of the following statements is correct?

All of these choices are correct.

During the taking of the physical inventory, the company inadvertently counted its inventory as $34,000 instead of the correct amount of $43,000. Indicate the effect of the misstatement on the balance sheet of the current year.

Assets are understated by $9,000.

Number of days’ sales in inventory is calculated as

Average Inventory / Average Daily Cost of Merchandise Sold.

Marcos Industries uses the retail method of inventory costing. The retail value of the inventory is $478,000. If the ratio of cost to retail price is 60%, what is the amount of inventory to be reported on the financial statements?

$286,800

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