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Exam 17: Merchandise Inventory

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Question 21

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The following data concerns selected inventory items. Determine the amount to be reported as the inventory valuation at cost or market, whichever is lower, under each of the following methods. 1. Lower of cost or market for each item separately 2. Lower of total cost or total market 3. Lower of total cost or total market by department

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1. $3,941.25; 2. $4,023.25 (lo...

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Question 22

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When inventory is valued at the lower of cost or market, the accountant is applying the principle or convention called ___________________.

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Question 23

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What is the specific identification method for valuing inventory? What types of businesses are likely to use this method? Why?

The June 1 inventory of the Kaufman Company had a cost of $8,000 and a retail value of $20,000. During June, merchandise was purchased for $36,000 and marked to sell for $60,000. June sales totaled $45,000. Use the retail method to compute the answers to the following questions. 1. What is the retail value of the ending inventory as of June 30? 2. What is the approximate cost of the ending inventory? 3. What is the cost of goods sold during June?

When the ____________________ method is used, the cost of the ending inventory is computed by using the cost of the latest purchases.

The gross profit method of determining ending inventory cost

In periods of rising prices, use of the ____________________ method of inventory valuation results in the lowest inventory cost on the balance sheet.

The cost of the earliest merchandise purchased is assigned to ending inventory when a company uses

To safeguard its inventory, organizations implement various types of controls. List some general internal controls that may be in place in a business.

The LIFO method of inventory valuation assigns the cost of the most recent purchases to the ending inventory.

What is RFID? What is the benefit to RFID?

Which of the following inventory costing procedures requires a physical count of merchandise a minimum of once a year at yearend?

The retail method is a means of estimating

The price a business would pay for its inventory is

For each of the following statements, determine which method of inventory valuation (FIFO or LIFO) it depicts. 1. ___________________ The item sold is assigned a cost. 2. ___________________ The ending inventory is higher under this method when costs are rising. 3. ___________________ The cost of goods sold is higher under this method when costs are rising. 4. ___________________ When prices are rising, this method results in higher net income. 5. ___________________ If this method is used for federal tax purposes, it must also be adopted for it financial accounting. 6. ___________________ This method is not accepted in some countries. 7. ___________________ When prices are rising, the average cost method will result in an ending inventory that is higher than which method?

The ____________________ method of inventory valuation is a procedure developed for charging the current costs of goods against current sales prices.

In the ____________________ method of inventory valuation, inventory cost is determined by multiplying the number of units in inventory by a unit cost, which is calculated by dividing the cost of goods available for sale by the units of merchandise available for sale.

If other items remain the same, the larger the ending inventory valuation, the

An assumption necessary to the use of the Gross Profit method is that the

The average cost method of inventory valuation will always result in the lowest reported net income.