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Exam 6: Inventories and Cost of Sales

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Question 21

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The cost of an inventory item includes the ____________, plus ______________ costs necessary to put it in a place and condition for sale.

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Invoice price minus ...

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Question 22

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The lower of cost and net realizable value rule for inventory valuation must be applied to each individual unit separately, and not to major categories of inventory.

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B) False

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Question 23

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On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500 Net sales for fourth quarter: $40,000 Net purchases for fourth quarter: $27,500 This company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

One of the most important decisions in accounting for inventory is determining the unit costs assigned to inventory items.

An understatement of the beginning inventory balance will understate cost of goods sold and overstate net income.

A company reported the following data: Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

An error in the period-end inventory causes an offsetting error in the next period and therefore:

IFRS reporting currently does not allow which method of inventory costing?

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each separate product.

A company uses the periodic inventory system and had the following activity during the current monthly period. In a periodic inventory system, using the weighted-average inventory method, the company's ending inventory would be:

An overstated beginning inventory will ______________ cost of goods sold and _____________ net income.

Days' sales in inventory:

Tops had cost of goods sold of $8,321 million and its ending inventory was $2,027 million. Therefore its days' sales in inventory equals 89 days.

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

Gotham Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Gotham was the consignor. The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Gotham on December 28 and shipped FOB destination on that date. Gotham did not receive the goods until January 2 of the following year. The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000. The ending inventory balance of $412,000 included $43,000 of consigned inventory for which Gotham was the consignee. Based on this information, the correct balance for ending inventory on December 31 is:

A company reported the following data related to its ending inventory: Product Units Available Cost NRV 849 100 $10 $11 842 75 16 14 847 60 14 13 860 40 16 20 Calculate the lower of cost and net realizable value on the inventory applied separately to each product.

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory turnover of $1,965 million. Its days' sales in inventory equals:

Net realizable value for damaged or obsolete goods is sales price plus the cost of making the sale.

The understatement of the ending inventory balance causes: