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Exam 6: Inventory and Cost of Goods Sold

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Question 81

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

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Question 82

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Using the weighted-average cost method,the average cost of inventory is calculated as the average unit cost of inventory purchased during the year.

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Question 83

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For each item below,indicate whether FIFO or LIFO will generally result in a higher reported amount when inventory costs are rising versus falling. $\begin{array} { l c c c } { \begin{array} { c } \text { Inventory } \\\text { Costs }\end{array} } & \begin{array} { c } \text { Higher } \\\text { total assets }\end{array} & \begin{array} { c } \text { Higher } \\\text { cost of goods sold }\end{array} & \begin{array} { c } \text { Higher } \\\text { net income }\end{array} \\\hline \text { Rising } &\\\text { Falling } &\\\end{array}$

During periods when inventory costs are rising,cost of goods sold will most likely be:

During 2012,a company sells 400 units of inventory for $85 each.The company has the following inventory purchase transactions for 2012: $\begin{array} { l l c c c } \text { Date } &{ \text { Transaction } } & \begin{array} { c } \text { Number } \\\text { of Units }\end{array} & \begin{array} { r } \text { Unit } \\\text { Cost }\end{array} & \begin{array} { c } \text { Total } \\\text { Cost }\end{array} \\\text { Jan. 1 } & \text { Beginning inventory } & 60 & \$ 70 & \$ 4,200 \\\text { May 5 } & \text { Purchase } & 180 & 72 & 12,960 \\\text { Nov. 3 } & \text { Purchase } & 190 & 75 & 14,250 \\\hline& & 430 & & \$ 31,410 \\\hline\end{array}$ Calculate ending inventory and cost of goods sold for 2012 assuming the company uses LIFO with a periodic inventory system.

What does it mean that FIFO has a balance sheet focus and LIFO has an income statement focus?

Using the information below,determine the ending inventory value applying the lower-of-cost-or-market method. $\begin{array}{llll}\text { Inventory Item } & \text { Quantity } &{\text { Cost }} &\text { Market }\\\hline\text { Cutlets } & 200 & \$ 12 & \$ 14 \\\text { Chops } & 400 & \$ 16 & \$ 14 \\\text { Shanks } & 300 & \$ 15 & \$ 12\end{array}$

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 gross profit using LIFO cost flow assumptions?

Inventory records for Marvin Company revealed the following: $\begin{array} { l l c r } \text { Date } & { \text { Transaction } } & \begin{array} { c } \text { Number } \\\text { of Units }\end{array} & \begin{array} { r } \text { Unit } \\\text { Cost }\end{array} \\\text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\text { Mar. 16 } & \text { Purchase } & 800 & 7.30 \\\text { Mar. 23 } & \text { Purchase } & 600 & 7.35\end{array}$ Marvin sold 2,300 units of inventory during the month.Ending inventory assuming LIFO would be:

A company reports the following amounts for 2012: $\begin{array} { l r } \text { Inventory (beginning) } & \$ 20,000 \\\text { Inventory (ending) } & 30,000 \\\text { Purchases } & 160,000 \\\text { Purchase returns } & 10,000\end{array}$ Calculate cost of goods sold,the inventory turnover ratio,and the average days in inventory for 2012.