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

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Question 41

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In a period of rising prices,the inventory costing method that will cause the company to have the lowest income tax expense is:

A) LIFO.
B) FIFO.
C) Weighted average.
D) Specific identification.

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

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Question 42

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Goods placed in inventory are initially recorded at:

A) market value.
B) the amount paid to acquire the asset.
C) the amount paid to prepare the asset for sale to customers.
D) the amount paid to acquire the asset and prepare it for sale.

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

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Question 43

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The number of days to sell is calculated as:

A fire destroyed some of Powell Company's records.Information from the documents found related to inventory is listed below. What was the amount of inventory that was purchased during the year?

A $15,000 overstatement of the current year's ending inventory was discovered after the financial statements for the year were prepared.How would that inventory error impact the current year's financial statements?

Which inventory costing method uses the oldest cost for cost of goods sold on the income statement and the newest cost for inventory on the balance sheet?

Goods available for sale equals:

Choose the appropriate letter to match the term and the definition.There are more definitions than terms. TERM 1.____ Consignment Inventory 2.____ Cost of Goods Sold 3.____ Cost of Goods Sold Equation 4.____ Ending Inventory Equation 5.____ Finished Goods Inventory 6.____ Goods in Transit 7.____ Gross Profit 8.____ Inventory 9.____ Merchandise Inventory 10.____ Raw Materials Inventory 11.____ Work in Process Inventory DEFINITION A.A valuation rule that requires Inventory to be written down when its market value falls below its cost. B.Inventory costing method that assumes that the costs of the first goods purchased are the costs of the first goods sold. C.Beginning Inventory + Purchases - Ending Inventory D.Consists of products acquired in a finished condition,ready for sale without further processing. E.The expense that follows directly after Net Sales on a multiple step income statement. F.Goods a company is holding on behalf of the goods' owner. G.Goods that are held for sale in the normal course of business or are used to produce other goods for sale. H.Goods that are in the process of being manufactured. I.Inventory costing method that identifies the cost of the specific item that was sold. J.The inventory that starts the manufacturing process. K.Inventory that was in process and now is completed and ready for sale. L.Inventory items being transported. M.A measure of the average number of days from the time inventory is bought to the time it is sold. N.How many times (on average)that inventory has been bought or sold. O.Requires that if LIFO is used on the income tax return,it also must be used in financial statement reporting. P.Beginning Inventory + Purchases - Cost of Goods Sold Q.The difference between net sales and cost of goods sold. R.Inventory costing method that assumes that the costs of the last goods purchased are the costs of the first goods sold. S.Inventory costing method that uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory.

Because LIFO uses older costs for inventory,in times of rising units costs:

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold.The company uses a periodic inventory system.Consider the following information: What amounts would be reported as the cost of goods sold and ending inventory balances for the year?

Ending inventory is incorrectly calculated in the current year.It is accurately calculated at the end of the next year.The error in the ending inventory in the current year:

Sun Concepts sells and installs solar energy products.Information from the financial statements for the last two years revealed the following: -Use the information above to answer the following question.Compared with Year 1,Sun Concept's number of days to sell in Year 2 was:

The Acme Corporation starts the year with a beginning inventory of 300 units at $5 per unit.The company purchases 500 units at $4 each in February and 200 units at $6 each in October.Acme sells 150 units during the year.Acme has a periodic inventory system and uses the FIFO inventory costing method.What is the amount of cost of goods sold?

FIFO,LIFO,and weighted average inventory costing methods are based on:

The LIFO inventory cost flow assumes that the cost of the newest goods purchased are:

In a period of falling prices,the inventory costing method that will cause the company to have the lowest cost of goods sold is:

Haltom Company updates its inventory perpetually.The company reported a beginning inventory of $7,500.During the year,the company recorded inventory purchases of $38,500 and cost of goods sold of $25,000. Required: Determine the amount of ending inventory.

Delta Diamonds uses a periodic inventory system.The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $500,two were purchased on July 9 for $550 each,and two were purchased on September 23 for $600 each.On December 24,it sold one of the diamonds that was purchased on July 9.Using the FIFO method,its cost of goods sold for the year ended is:

The assumption that a company makes about its inventory cost flow can affect cost of goods sold on its ______ and inventory on its _________:

When costs to purchase inventory are falling over time,using LIFO leads to reporting ______ cost of goods sold and ______ net income than FIFO.