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Exam 5: Accounting for Inventories

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Question 31

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In an inflationary period,which inventory cost flow method,FIFO or LIFO,is more desirable from a tax standpoint? Why?

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In an inflationary period,LIFO is more d...

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Question 32

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Inventory turnover is calculated by dividing:

A) cost of goods sold by inventory.
B) sales by inventory.
C) beginning inventory by the ending inventory.
D) inventory by cost of goods sold.

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

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Question 33

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Poole Company purchased two identical inventory items.One of the items,purchased in January,cost $4.50.The other,purchased in February,cost $4.75.One of the items was sold in March at a selling price of $7.50.Select the correct answer assuming that Poole uses a LIFO cost flow.

Use the following information for questions Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following -Assuming Chase uses a FIFO cost flow method,the ending inventory on January 31 is:

If prices are rising,which inventory cost flow method will produce the lowest amount of cost of goods sold?

The following information is for Benitez Company for 2016: Required: Assuming that Benitez uses the FIFO cost flow method, a)How much product cost would be allocated to Cost of Goods Sold? b)How much product cost would be allocated to Merchandise Inventory at the end of the year? c)Calculate the average number of days to sell inventory for the year.

If Bowman Company is using LIFO,how would the accountant compute cost of goods sold when recording a sale under the perpetual inventory system?

Use the following information for questions The inventory records for Radford Co.reflected the following -Determine the amount of cost of goods sold assuming the LIFO cost flow method.

Misty Mountain Outfitters is a merchandiser of specialized fly fishing gear.Its cost of goods sold for 2016 was $295,000,and sales were $690,000.The amount of merchandise on hand was $50,000,and total assets amounted to $585,000.Using this information,which of the following answers correctly states the average days in inventory ratio? Round to the nearest day.

Kincaid Camera Shop applies the lower-of-cost-or-market rule to individual items of inventory.In 2016,some of Kincaid's inventory lost value due to obsolescence.Other items increased in market value.In total,the market value of Kincaid's inventory was higher at the end of 2016 than the cost of the inventory.Would Kincaid have an adjustment to make at the end of 2016 due to the lower-of-cost-or-market rule? Would the answer be any different if Kincaid applied the rule in aggregate rather than to individual items?

If Bowman Company is using FIFO,how would the accountant compute cost of goods sold when recording a sale under the perpetual inventory system?

The lower-of-cost-or-market rule: can be applied to

Explain the computation of the inventory amount if the lower-of-cost-or-market rule is applied using the individual inventory item approach.

Blake Company purchased two identical inventory items.The item purchased first cost $16.00,and the item purchased second cost $18.00.Blake sold one of the items for $24.00.Which of the following statements is true?

In most businesses,the physical flow of goods occurs on a FIFO basis,but a different cost flow method is allowed under generally accepted accounting principles.

What are the circumstances that might cause a company to need an estimate of the amount of its inventory?

Burton Supply uses the perpetual inventory method.At the end of the year Burton Supply had the following items in inventory. Required: a)Determine the amount of inventory Burton Supply is showing on its books before any adjustment. b)Determine the amount of ending inventory using lower of cost or market applied to each individual item. c)Prepare the journal entry necessary to adjust inventory. d)Determine the amount of ending inventory using lower of cost or market applied to total inventory in aggregate. e)Which method (individual items or aggregate)produces the smallest amount of total assets?

Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?

Koontz Company uses the perpetual inventory method.On January 1,2016,the company's first day of operations,Koontz purchased 400 units of inventory that cost $7.50 each.On January 10,2016,the company purchased an additional 600 units of inventory that cost $9.00 each.If Koontz uses a weighted average cost flow method and sells 550 units of inventory,the amount of inventory appearing on balance sheet following the sale will be approximately:

Sierra Company uses the weighted average inventory cost flow method.How would Sierra's accountant compute cost of goods sold when recording a sale under the perpetual inventory system?