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Exam 5: Accounting for Inventories

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Question 41

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During a period of rising inventory prices, the amount of ending inventory reported on the balance sheet will be lower using the LIFO cost flow method than with FIFO.

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B) False

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Question 42

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Explain the computation of and the significance of inventory turnover.

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Inventory turnover is computed...

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Question 43

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How does the physical flow of goods differ from the flow of costs?

Ignoring the impact of income tax, how does the choice between FIFO and LIFO affect a company's cash flows in an inflationary environment? How does income tax impact your answer? Why?

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?

What ratio (usually an average from prior periods)can be used in estimating the current period's ending inventory?.________ a)The amount of ending inventory will be $10 assuming the LIFO cost flow method was used.________ b)Cost of goods sold would be $24 assuming the weighted-average cost flow method was used.________ c)Cash flow from operating activities in June would be $28 assuming a FIFO cost flow method was used.________ d)Cash flow from operating activities in June would be $26 independent of what cost flow method was used.________ e)The amount of gross margin would be $26 assuming the FIFO cost flow method was used.

Howard Company uses the perpetual inventory system. The company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate. At the end of the current year, the cost of the inventory was $19,456 and its current market value is $19,950. Indicate how the required adjustment affects the elements of the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NA

Singleton Company's perpetual inventory records included the following information:

Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $50. The other, purchased in February, cost $66. One of the items was sold in March at a selling price of $190. Poole uses LIFO. Which of the following statements is true?

Diaz Company's first year in operation was Year 1. For Year 1, its cost of goods sold using FIFO was $240,000, and its ending inventory was $58,400. If Diaz had used the LIFO cost flow method, its ending inventory would have been $56,000. Required:a)What would the cost of goods sold have been with LIFO?b)Based on this information, was Year 1 a period of rising inventory prices or falling inventory prices?

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

The following transactions apply to Sam's Skateboards. Assume the use of the perpetual inventory method and that all transactions were for cash. Required:Determine the amount of ending inventory using a FIFO cost flow.

Chase Company 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?

The following information relating to the current year was taken from the records of Poole Company: Required:a)Assuming that Poole uses the LIFO cost flow method, determine how much product cost would be allocated to cost of goods sold, and how much to inventory at the end of the year.b)Based on your results from part (a), calculate inventory turnover and average number of days to sell inventory.c)Assuming that Poole uses the FIFO cost flow method, determine how much product cost would be allocated to Cost of Goods sold, and how much to inventory at the end of the year.d)Based on your results from part (c), calculate inventory turnover and average number of days to sell inventory.e)Compare your results from parts (b)and (d). Do LIFO and FIFO give the same results for inventory turnover? Which is higher, and why?

The inventory records for Radford Company reflected the following: What is the amount of ending inventory assuming the FIFO cost flow method?

Chase Company uses the perpetual inventory method. The inventory records for Chase reflected the following information: Assuming Chase uses a LIFO cost flow method, what is the amount of cost of goods sold for the sales transaction on January 18?

The adjusting entry to recognize the write down of inventory based on the lower-of-cost-or-market rule will

A company uses a cost flow method (such as last-in, LIFO or FIFO)to allocate product costs between cost of goods sold and beginning inventory.

Chase Company uses the perpetual inventory method. The inventory records for Chase reflected the following information: Assuming Chase uses a LIFO cost flow method, what is the amount of cost of goods sold for the sales transaction on January 18?

Jones Company sells exercise bikes. Its beginning inventory was 100 units at $200 per unit. During the year, Jones made two purchases of the bikes: first, a 300-unit purchase at $220 per unit, and then 200 units at $250 per unit. The ending inventory for the year was 250 units. Required:Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Jones uses each of the following inventory cost flow methods:a)FIFOb)LIFOc)Weighted average(Round intermediate calculations to two decimal places. Round final answers to whole dollars.)