FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Accounting for Inventories

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

The Internal Revenue Service allows a company to use LIFO for income tax purposes only if it also uses LIFO for financial reporting.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Chase Co.uses the perpetual inventory method.The inventory records for Chase reflected the following information: -Assuming Chase uses a FIFO cost flow method,what is the cost of goods sold for the sales transaction on January 31?

A) $1,020
B) $1,005
C) $1,045
D) $340

E) All of the above
F) None of the above

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

When using the gross margin method to estimate inventory,which of the following is a step in the computation?

Nelson Corporation is required to record an inventory write-down of $2,500 as a result of using the lower-of-cost-or-market rule.Which of the following shows how this entry would affect the financial statements?

West Corporation's Year 1 ending inventory was overstated by $20,000;however,ending inventory for Year 2 was correct.Which of the following statements is correct?

Vargas Company uses the perpetual inventory system and the FIFO cost flow method.During the current year,Vargas purchased 400 units of inventory that cost $15.00 each.At a later date during the year,the company purchased an additional 800 units of inventory that cost $18.00 each.Vargas sold 500 units of inventory for $27.00.What is the amount of cost of goods sold that will appear on the current year's income statement?

The gross margin method of estimating inventory is not useful in detecting inventory fraud.

Misty Mountain Outfitters is a merchandiser of specialized fly fishing gear.Its cost of goods sold for Year 2 was $295,000,and sales were $690,000.The amount of merchandise on hand was $50,000,and total assets amounted to $585,000.What is the average number of days to sell inventory? (Round to the nearest day. )

International Financial Reporting Standards (IFRS)do not permit the use of the LIFO inventory cost flow method.

During a period of rising inventory prices,a company's cost of goods sold would be higher using the LIFO cost flow method than with FIFO.

During a period of rising inventory prices the LIFO cost flow method will result in higher total assets than FIFO.

Warner Company purchased two units of a product for $36 and later purchased one more for $40.If the company uses the weighted average cost flow method,and it sold one unit of the product for $60,its gross margin would be $22.00.

In a period of rising inventory prices,use of the FIFO cost flow method would cause a company to pay more income taxes than would use of LIFO.

Rowan Company has four different categories of inventory.The quantity,cost,and market value for each of the inventory categories are as follows: The company carries inventory at lower-of-cost-or-market applied to the entire stock of inventory in the aggregate.How would the implementation of the lower-of-cost-or-market rule impact the elements of the company's financial statements?

The inventory records for Radford Co.reflected the following: -If the company uses the weighted-average inventory cost flow method,what is the average cost per unit (rounded) for May?

Generally accepted accounting principles restrict or limit a company's freedom to change inventory cost flow methods from one year to the next.

When prices are rising,which method of inventory,if any,will result in the lowest relative net cash outflow (including the effects of taxes,if any) ?

Singleton Company's perpetual inventory records included the following information: -If Singleton uses the LIFO cost flow method,its ending inventory would be $1,260.

A discount merchandiser is likely to have a higher inventory turnover than more upscale stores with higher merchandise prices.

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.Poole uses LIFO.Which of the following statements is true?