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Exam 7: Inventory and Cost of Goods Sold

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Question 1

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Match the term to the appropriate definition.There are more definitions than terms. -FIFO

A) Inventory costing method that uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory.
B) The inventory that starts the manufacturing process.
C) Inventory costing method that assumes that the costs of the last goods purchased are the costs of the first goods sold.
D) Beginning Inventory + Purchases - Ending Inventory
E) Inventory costing method that identifies the cost of the specific item that was sold.
F) A valuation rule that requires Inventory to be written down when its market value falls below its cost.
G) Goods that are held for sale in the normal course of business or are used to produce other goods for sale.
H) The difference between net sales and cost of goods sold.
I) Inventory that was in process and now is completed and ready for sale.
J) Beginning Inventory + Purchases - Cost of Goods Sold
K) Requires that if LIFO is used on the income tax return,it also must be used in financial statement reporting.
L) Goods that are in the process of being manufactured.
M) The expense that follows directly after Net Sales on a multiple step income statement.
N) Consists of products acquired in a finished condition,ready for sale without further processing.
O) Inventory costing method that assumes that the costs of the first goods purchased are the costs of the first goods sold.
P) A measure of the average number of days from the time inventory is bought to the time it is sold.
Q) Inventory items being transported.
R) Goods a company is holding on behalf of the goods' owner.
S) How many times (on average) that inventory has been bought or sold.

T) F) and O)
U) D) and R)

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Question 2

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Alphabet Company,which uses the periodic inventory method,purchases different letters for resale.Alphabet had no beginning inventory.It purchased A thru G in January at $4 per letter.In February,it purchased H thru L at $6 per letter.It purchased M thru R in March at $7 per letter.It sold A,D,E,H,J and N in October.There were no additional purchases or sales during the remainder of the year. If Alphabet Company uses the weighted average method,what is the cost of its ending inventory? (Round the per unit cost to two decimal places and then round your answer to the nearest whole dollar. )

A) $38
B) $48
C) $67
D) $75

E) All of the above
F) B) and C)

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Question 3

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One of the most common sources of misstatement in financial statements is the:

Lower of cost or market can be applied on an item or total inventory basis.

Sun Concepts sells and installs solar energy products.Information from the financial statements for the last two years revealed the following: $\begin{array}{cccc} & \text { Beginning Inventory } & \text { Ending Inventory } & \text { Cost of Goods Sold } \\\text { Year 1 } & \$ 90,000 & \$ 130,000 & \$ 605,000 \\\text { Year 2 } & 130,000 & 110,000 & 720,000\end{array}$ The inventory turnover ratio in Year 1 was:

Nordic Industries uses a periodic inventory system.During its first month of operations,Nordic Industries purchased inventory as follows: There were 100 units in ending inventory on January 31. Under the FIFO cost method,what is the cost of goods sold for January?

Which method will result in the same cost of goods sold amount whether it is computed using the periodic inventory system or the perpetual inventory system?

If the market value of goods in inventory is $26,000 below its cost,the company should:

When costs to purchase inventory are rising,using LIFO leads to reporting a ________ than FIFO.

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

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

Nordic Industries uses a periodic inventory system.During its first month of operations,Nordic Industries purchased inventory as follows: There were 100 units in ending inventory on January 31. Under the LIFO cost method,what is the cost of goods sold for January?

Sparks Furniture Company carries three lines of sofas.Information about the sofa inventory as of the end of its most recent fiscal year follows.If LCM/NRV is applied to each separate product line,what is the amount of the adjustment that must be made to the company's inventory? $\begin{array} { l c c c } \text { Product Line } & \text { Cost per Unit } & \text { Market Value per Urit } & \text { Quartity } \\\text { Rustic } & \$ 700 & \$ 725 & 190 \\\text { Mediterranearn } & 600 & 605 & 300 \\\text { Conternporary } & 950 & 820 & 275\end{array}$

Which of the following statements about inventory costing methods is correct?

If the Ball Corp.writes down its inventory,its:

Acme Company's balance sheet shows three inventory accounts-raw materials,work in process,and finished goods.Acme Company must be a:

Barron Industries has the following information: What is Barron's number of days to sell?

The records of Alberta Inc.included the following information: $\begin{array} { l r } \text { Cost of goods sold } & \$ 1,800,000 \\\text { Begirniring irventory } & 435,000 \\\text { Ending irventory } & 465,000\end{array}$ What is the number of days to sell?

Pearl Company has a perpetual inventory system.The company uses the FIFO method to assign costs to inventory and cost of goods sold.Consider the following information: $\begin{array}{llrc}\text { Date } & \text { Description } & \text { Units } & \text { Cost per unit } \\\text { April 1 } & \text { Beginning inventory } & 1,000 & \$ 5 \\\text { April 2 } & \text { Purchase } & 750 & \$ 4 \\\text { April } 5 & \text { Sales } & 1,250 &\end{array}$ What amounts would be reported as cost of goods sold and ending inventory for April?

Langston Company updates its inventory periodically.The company's cost of goods sold was $2,700 and purchases were $5,600 during the year.The company's ending inventory count was $5,000.What was the amount of beginning inventory?