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Exam 7: Inventory and Cost of Goods Sold

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Question 41

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A company should always keep extra inventory on hand; it could be needed if demand increases and it has to be bought sooner or later so it adds nothing to cost.

A) True
B) False

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Question 42

Multiple Choice

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For a merchandiser,inventory turnover refers to how many times:

A) during the period the company replaces its raw material inventory.
B) the company buys and sells its inventory.
C) the company produces and delivers its inventory of goods to customers.
D) All of the answers relate to inventory turnover.

E) A) and B)
F) A) and C)

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Question 43

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Beginning inventory plus purchases minus ending inventory equals cost of goods sold.

Which of the following is true regarding the differences between ASPE and IFRS regarding inventory valuation?

An increasing inventory turnover ratio indicates:

Most LIFO companies actually use FIFO during the period and then adjust to LIFO at the end of the period.

The Acme Corporation buys 300 units of merchandise in January at $5 each.Acme buys 500 units at $4 each in February and 200 units at $6 each in March.Acme sells 150 units during this quarter.Acme uses the LIFO Method.What is its cost of goods sold for the quarter?

Which of the following inventory method will give the highest net earnings in a period of rising prices?

To determine the effects of inventory errors on the financial statements in both the current year and the following year all you need is the cost of goods sold equation

The 2018 records of Thompson Company showed beginning inventory,$6,000; cost of goods sold,$14,000; and ending inventory,$8,000.The cost of purchases for 2018 was:

A company's inventory records contain the following information: $\begin{array} { | r | r | r | } \hline \text { Begirring Irventory: } & 300 \text { units } & \$ 780 \\\hline \text { Purchased on June 10 } & 400 \mathrm { urits } & 1,170 \\\hline \text { Purchased on Jurne 15 } & 500 \mathrm { urits } & 1,260 \\\hline \text { Purchared on Jure 28 } & \mathbf { 3 0 0 u n i t s } & 990 \\\hline & 1,500 & \$ 4,200 \\\hline\end{array}$ -According to the above table.The company sold 1,000 units during June and 500 units were in its ending inventory on June 30. If the company uses the weighted average inventory costing method,what is the cost of its ending inventory?

Last year bell-bottom jeans were fashionable and this year boot-cut jeans are.A retail company's inventory has 375 bell-bottom jeans that cost $17 each and could be replaced for $15.The inventory also includes 1,000 boot-cut jeans that cost $16 each and could be replaced for $19.Explain why this situation requires an adjustment to the accounting records,prepare the journal entry that would be used to make the adjustment,and show the effects of the adjustment on the accounting equation.

Most changes in sales revenue have no effect on cost of goods sold.

The measurement of inventory affects both the balance sheet and the income statement within an accounting period.

An adjustment to ending inventory under the Lower of cost and net realizable value (LC&NRV) rule would be most likely to be recorded by a company that sells:

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

Your company has 100 units in inventory,purchased at $16 per unit,and this inventory could be replaced at $14 per unit.

Alphabet Company,which uses the periodic inventory method,buys different letters for resale.It buys A through G in January at $4 per letter.It buys H through L at $6 per letter.It buys M through R in March at $7 per letter.It sells A,D,E,H,J and N in April. If the company uses the weighted average method,what is the cost of its ending inventory (rounded to the nearest dollar) ?

The inventory costing method chosen to by a company method must correspond to the physical flow of goods.

Inappropriate inventory levels reduce a company's net income,either by increasing cost or reducing revenue.