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Exam 5: Reporting and Analyzing Inventories

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Question 91

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An error that overstates the ending inventory balance will have what effect on the income statement for that year?

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An error that overstates the e...

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Question 92

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A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

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Question 93

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A company has the following per unit original costs and replacement costs for its inventory: Part A: 10 units with a cost of $3 and replacement cost of $2.50. Part B: 40 units with a cost of $9 and replacement cost of $9.50. Part C: 75 units with a cost of $8 and replacement cost of $7.50. Under the lower of cost or market method, the total value of this company's ending inventory must be reported as:

An overstatement of ending inventory will cause an overstatement of assets and an understatement of equity on the balance sheet.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the weighted average cost of the company's January 31 inventory?

The inventory turnover ratio is computed by dividing average inventory by cost of goods sold.

Lansing Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: During the year, 1,150 laptop computers were sold. What was ending inventory using the FIFO cost flow assumption?

The full disclosure principle:

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market.

A company made the following merchandise purchases and sales during the month of May. There was no beginning inventory. If the company uses the FIFO periodic inventory method, what would be the cost of the ending inventory?

Given the following information, determine the cost of ending inventory at November 30 using the weighted average perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

The ______________________ method of assigning costs to inventory and cost of goods sold under the perpetual system requires that the cost of goods available for sale be divided by the units of inventory available when each sale takes place.

Generally accepted accounting principles require that the inventory of a company be reported at its:

A company had inventory of 10 units at a cost of $14 each on November 1. On November 2, they purchased 15 units at $15 each. On November 6, they purchased 11 units at $16 each. On November 8, they sold 28 units for $59 each. Using the LIFO periodic inventory method, what was the cost of the 28 units sold?

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, custom-made inventory.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

The assignment of costs to cost of goods sold and inventory using weighted average yields the same results depending on whether a perpetual or periodic system is used.

A company that has operated with a 30% average gross profit ratio for a number of years had $100,000 in sales during the first quarter of this year. If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending inventory using the gross profit method is:

A company had 14 units of inventory at a cost of $18 each on July 1. On July 3, the company purchased 19 units at $19 each. On July 7, the company purchased 15 units at $20 each. On July 9, the company sold 36 units for $63 each. Given this information, determine the cost of the 12 units remaining in inventory after the July 9 sale using the LIFO periodic inventory method.