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Exam 7: Reporting and Interpreting Inventories and Cost of Goods Sold

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Question 101

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It is more useful to compare a company's inventory turnover with its own results from prior periods than with the results of other companies:

A) because companies may use different accounting methods which may cause the turnovers to vary significantly.
B) because larger companies' ratios are not comparable with smaller companies' ratios.
C) on extremely rare occasions. Little information can be gleaned from comparing a company's current and prior period results.
D) because knowing the results of other companies does not help you manage or evaluate the company in which you are interested.

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

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Question 102

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Which of the following statements about inventory turnover analysis is not correct?

A) In making comparisons of financial statements, it is desirable to compare data calculated using the same inventory costing methods.
B) The inventory turnover ratio and days to sell measure will be affected by the cost flow assumptions used, which causes problems for financial statements users.
C) Inventory turnover also can vary significantly between companies within the same industry.
D) The inventory turnover and days to sell ratios are consistent among companies in different industries.

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

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Question 103

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Bluebell Company sells blue jeans.Last year,bell-bottom jeans were fashionable; this year,boot cut jeans are in style.The company has 375 units of bell-bottom jeans with a cost of $17 per unit and a market value of $15 per unit.The inventory also includes 1,000 units of boot cut jeans with a cost of $16 per unit and a market value of $19 per unit. Required: Part a - Explain whether this situation requires an adjustment to the accounting records. Part b - Prepare the journal entry,if any,that is required to adjust the Inventory account.

LIFO and weighted average results will be the same using either a perpetual or periodic system.

Which of the following is not one of the primary goals of inventory management?

Which of the following would be considered merchandise inventory?

Which of the following would not be affected by the choice of an inventory costing method (that is,choosing between FIFO,LIFO,weighted average,and specific identification) ?

Eaton Electronics uses a periodic inventory system.On March 31, Eaton has two plasma TVs on hand at a cost of $1,500 each (serial numbers 11534892 and 11534894) .In April, the company purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 11542631 through 11542634) .In May, the company purchases five more identical TVs for $1,600 each (serial numbers 11550964 through 11550968) .In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631) .There were no additional purchases or sales during the remainder of the year. -Use the information above to answer the following question.Eaton Electronics uses the specific identification method.What is its cost of goods sold?

Inventory shipped FOB shipping point and in transit on the last day of the year should be included in:

Alpha Company uses a periodic inventory system.The company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each.Alpha's weighted average cost per unit is:

Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased?

Cost of goods sold = Beginning inventory + Purchases - Ending inventory

If inventory costs have been falling during the year,which cost method results in the highest gross profit for the year?

The most commonly used inventory costing method in the U.S.is:

A company can use LIFO to prepare its U.S.tax return and FIFO to prepare its financial statements.

Which inventory method is typically used when accounting for expensive and unique inventory items?

Which company will have the lower number of days to sell?

Which of the following is merchandise inventory?

The following company purchases and sells collectors' coin sets.The company uses the LIFO inventory costing method.In the first two sections of the table below,each coin set is identified by its letter and its cost.The third section indicates when coin sets were sold. Required: For each inventory costing method given below,fill in the blanks to indicate the letter of the coin set which will be used to calculate either cost of goods sold or the cost of ending inventory. Part a.Periodic Inventory System Cost of Goods Sold = _____ + _____ + _____ + _____ + _____ Ending Inventory = _____ + _____ + _____ Part b.Perpetual Inventory System Cost of Goods Sold = _____ + _____ + _____ + _____ + _____ Ending Inventory = _____ + _____ + _____

A company uses a weighted-average perpetual inventory system.The following transactions took place during the month of August: What is the per-unit value of ending inventory on August 31? (Round each per unit cost to two decimal points.)