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Exam 5: Inventories and Cost of Goods Sold

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Question 41

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When an inventory system updates the Inventory account at the time of each sale,this is known as:

A) a periodic system
B) a contra-purchase system
C) a perpetual system
D) an accrual system

E) A) and B)
F) None of the above

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Question 42

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School Time Corp.completed a physical inventory at the end of 2014.A review of the physical inventory procedures and records uncovered several errors that are described below.In the columns provided,indicate the effect,if any,on the four financial statement items listed.Use the following codes for your answers:

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Question 43

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Baucus,Inc. Baucus,Inc.reported the following information for 2014 and 2013: Refer to the information for Baucus,Inc. How much is the cost of purchases for 2014?

Which inventory costing method results in the highest inventory balance during a period of rising prices?

The following is from Silverstein Inc.'s 2014 income statement. How much will Silverstein report as its cost of goods sold in its 2014 income statement?

Cooking Corner Cooking Corner reported inventory on its balance sheet at December 31,2013 at $32,000.During 2014,Cooking Corner purchased goods totaling $634,000 on account with terms of 2/10,n/30,FOB shipping point.Total charges paid by Cooking Corner directly to the freight company were $1,000.At the end of 2014,inventory on hand totaled to $45,000.Net sales for 2014 totaled $1,300,000.Cooking Corner employs a periodic inventory system. Refer to the information about Cooking Corner. How much is Cooking Corner's cost of goods sold assuming that Cooking Corner takes advantage of one-half of the cash discount?

The gross profit ratio is calculated as gross profit divided by net income.

The three forms or states in the development of inventory for a manufacturer are direct materials,direct labor,and finished goods.

Sales revenue is an inflow of assets.

Sales Discounts is classified as what type of account?

Under the ____________________ method,an increase in inventory is shown as an adjustment to net income in the operating activities category of the cash flow statement.

Hound Dog Bisquits reported the following financial data for 2013 and 2014: Provide the answer for each missing letter above.

Accountants should be aware that LIFO liquidations can potentially result in which of the following?

The following is from Silverstein Inc.'s 2014 income statement. How much will Silverstein report as cost of goods purchased in its 2014 income statement?

Purchase discounts decrease the total cost of merchandise acquired.

If a company understates its ending inventory balance for 2012 by $15,500,what are the effects on its net income for 2012 and 2011? Effect on 2012 Net Income Effect on 2011 Net Income

The three distinct types of cost to a manufacturer are direct materials,direct labor,and manufacturing overhead.

It important that the proper amount be assigned to inventory because the amount assigned to inventory will affect the amount eventually recorded as net sales.

Carrington Inc.manufactures digital cameras and has experienced noticeable declines in the purchase price of many of the components it uses,including memory components.Which inventory costing method should Carrington use if it wants to maximize net income? Explain your answer.

If ending inventory is understated,then cost of goods sold is overstated.