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

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Question 41

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Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31,2018 using the lower of cost or net realizable value valuation method?

A) The 2018 gross profit decreases.
B) The 2019 cost of goods sold is effectively decreased if the inventory is sold during 2019.
C) The 2018 ending inventory is decreased.
D) The 2019 gross profit is not affected if the inventory is sold during 2019.

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

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Question 42

Multiple Choice

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Maxim Corp.has provided the following information about one of its products: During the year,Maxim sold 400 units. - What is ending inventory using the average cost method?

A) $48,000.
B) $64,000.
C) $50,000.
D) $62,000.

E) C) and D)
F) B) and D)

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Question 43

Multiple Choice

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Which of the following statements is incorrect for a manufacturing entity?

During periods of decreasing unit costs,use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

When there is a $3,000,000 decrease in inventory and a $2,000,000 decrease in accounts payable,cash flow from operating activities increases by $1,000,000.

The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

Maxim Corp.has provided the following information about one of its products: During the year,Maxim sold 400 units. - What is cost of goods sold using the average cost method?

On December 15,2019,Transport Company accepted delivery of merchandise that it purchased on credit.As of December 31,2019,the company had neither recorded the transaction nor included the merchandise in its ending inventory amount because the seller's invoice had not been received.The effect of this omission on its balance sheet at December 31,2019, (end of the accounting period) was that

Compute the missing amounts that are numbered in parentheses for the income statement of each independent case.(Hint: Each case need not be calculated in the numerical order of the missing numbers. )

Which of the following businesses would not be as likely to use the specific identification method of inventory valuation?

On March 15,2019,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount. Which of the following journal entries is correct when Ryan Company pays for these goods on March 30,2019?

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

How much were inventory purchases when cost of goods sold was $250,000,beginning inventory was $20,000,and ending inventory was $25,000?

How much was ending inventory when sales revenue was $500,000,purchases were $310,000,beginning inventory was $22,000,and gross profit was $200,000.

Lauer Corporation has provided the following information about one of its laptop computers: During the year,Lauer sold 750 laptop computers. - What was cost of goods sold using the LIFO cost flow assumption?

Which of the following costs does not become a part of inventory of a manufacturer?

If two companies each use different inventory accounting methods,the companies can be made comparable from information reported in the financial statements by

Tinker's cost of goods sold in the year of sale (2019) was $750,000 and 2018 cost of goods sold was $770,000.The inventory at the end of 2019 was $188,000 and at the end of 2018 the inventory was $208,000. Tinker's average number of days to sell its inventory during 2019 is closest to: (Use 365 days a year. )

Which of the following is correct when,in the same year,beginning inventory is understated by $1,300 and ending inventory is understated by $700?

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000,beginning inventory $8,000,purchases $16,000 and gross profit $20,000.How much was Cassie's ending inventory?