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Exam 5: Inventories and Cost of Sales

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Question 91

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Given the following information,determine the cost of goods sold at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

A) $282.15
B) $332.10
C) $281.25
D) $290.70
E) $210.30

F) A) and D)
G) A) and C)

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Question 92

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On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements.The following information is available: Beginning inventory,July 1: $4,000 Net sales: $40,000 Net purchases: $41,000 The company's gross margin ratio is 15%.Using the gross profit method,the cost of goods sold would be:

A) $4,000
B) $5,000
C) $21,000
D) $25,000
E) $34,000

F) A) and D)
G) B) and E)

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Question 93

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Given the following items and costs as of the balance sheet date,determine the value of Light Company's merchandise inventory. - $2,000 goods sold by Light to another company.The goods are in transit and shipping terms are FOB shipping point. - $3,000 goods sold by another company to Light.The goods are in transit and shipping terms are FOB shipping point. - $4,000 owned by Light but in the possession of another company,the consignee. - Damaged goods owned by Light that originally cost $5,000 but now have an $800 net realizable value.

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

Given the following information,determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

Neither GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.

A company has inventory of 10 units at a cost of $10 each on June 1.On June 3,they purchased 20 units at $12 each.12 units are sold on June 5.Using the FIFO perpetual inventory method,what is the cost of the 12 units that were sold?

Days' sales in inventory:

Under LIFO,the most recent costs are assigned to ending inventory.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

If the _______________ is responsible for paying the freight,ownership of merchandise inventory passes when the goods arrive at their destination.

Interim statements:

Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

Goods on consignment are goods shipped by their owner,called the consignee,to another party called the consignor.

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Identify and describe the four inventory valuation methods.

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.

Given the following events,what is the per-unit value of ending inventory on November 30 if this company uses a weighted-average perpetual inventory system? November 1: 5 units were purchased at $6 per unit. November 12: 10 units were purchased at $7.50 per unit. November 14: 7 units were sold for $14 per unit. November 24: 12 units were purchased at $10 per unit.

If damaged goods can be sold at a reduced price,they are included in inventory at their ________________________.