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Exam 6: Inventory and Cost of Goods Sold

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Question 61

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Cost of Goods Sold is:

A) An asset account.
B) A revenue account.
C) An expense account.

D) All of the above
E) B) and C)

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Question 62

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The inventory turnover ratio measures:

A) The portion of inventory that becomes obsolete each period.
B) How many times the company purchases inventory during the current reporting period.
C) The times per period the average inventory balance is sold.

D) All of the above
E) A) and C)

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Question 63

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Inventory records for Dunbar Incorporated revealed the following: Dunbar sold 700 units of inventory during the month.Cost of goods sold assuming weighted-average cost would be (round weighted-average unit cost to four decimals and final answer to the nearest whole dollar) : $\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Apr. 1 } & \text { Beginning inventory } & 500 & \$ 2.40 \\\text { Apr. 20 } & \text { Purchase } & 400 & 2.50 \\\hline\end{array}$

When the value of inventory falls below its cost,companies other than those that use LIFO have the option of recording the inventory at cost or the lower net realizable value.Companies must report inventory at the lower of cost and net realizable value.

The following information relates to inventory for Shoeless Joe Inc.At what amount would Shoeless report cost of goods sold using the weighted-average cost flow assumption? (Round your answer to the nearest dollar) $\begin{array} { | l | l | c | r | } \hline \text { Date } & & \text { Quantity } & \text { Price } \\\hline \text { March 1 } & \text { Beginning Inventory } & 20 & \$ 2 \\\hline \text { March 7 } & \text { Purchase } & 15 & 3 \\\hline \text { March 11 } & \text { Sale } & 30 & 7 \\\hline \text { March 12 } & \text { Purchase } & 15 & 6 \\\hline\end{array}$

Inventory records for Marvin Company revealed the following: Marvin sold 2,300 units of inventory during the month.Ending inventory assuming LIFO would be: $\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\hline \text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\hline \text { Mar. 16 } & \text { Purchase } & 800 & 7.30 \\\hline \text { Mar. 23 } & \text { Purchase } & 600 & 7.35 \\\hline\end{array}$

Merchandising companies purchase inventories that are primarily in finished form for resale to customers.

In a period when inventory costs are falling,the lowest taxable income is most likely reported by using the inventory method of:

Inventory does not include:

Inventory is usually reported as a long-term asset in the balance sheet.Inventory is typically reported as a current asset because companies expect to convert it to cash in the near term.

The gross profit ratio measures the amount by which the sale price of inventory exceeds its cost per dollar of sales.

Northern Town Equipment has four types of products in its inventory.Northern applies the rules under lower of cost and net realizable value to its inventory at the end of each year as shown below: The year-end adjustment based upon the information above would include a: $\begin{array} { | l | c r | r | } \hline \text { Procuct } & \text { Quantity } & \text { Cost } & \begin{array} { r } \text { Net Realizable } \\\text { Value }\end{array} \\\hline \text { A } & 15 & \$ 7 & \$ 8 \\\hline \text { B } & 10 & 15 & 14 \\\hline \text { C } & 20 & 8 & 6 \\\hline \text { D } & 15 & 11 & 10 \\\hline\end{array}$

Inventory records for Marvin Company revealed the following: Marvin sold 2,300 units of inventory during the month.Ending inventory assuming FIFO would be: $\begin{array} { | l | l | c | r | } \hline \text { Date } & \text { Transaction } & \text { Number of Units } & \text { Unit Cost } \\\hline \text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\hline \text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\hline \text { Mar. 16 } & \text { Purchase } & 800 & 7.30 \\\hline \text { Mar. 23 } & \text { Purchase } & 600 & 7.35 \\\hline\end{array}$

Consider the following inventory data for two companies: Which of these companies had the higher inventory turnover ratio? $\begin{array} { | l | r | r | } \hline & \text { Nichols Inc., } & \text { Winters Inc., } \\\hline \text { Beginning inventory } & \$ 120,000 & \$ 150,000 \\\hline \text { Ending inventory } & 80,000 & 100,000 \\\hline \text { Purchases } & 240,000 & 310,000 \\\hline\end{array}$

The cost of inventory sold during the current year classified as a(n) ______ in the ______.

The LIFO conformity rule requires a company that uses LIFO for tax reporting to use FIFO for financial reporting.The LIFO conformity rule requires a company that uses LIFO for tax reporting to also use it for financial reporting.

Using the weighted-average cost method,the average cost of inventory is calculated as the average unit cost of inventory purchased during the year.The average is a weighted-average cost which includes both beginning inventory and purchases and is equal to total cost of goods available for sale divided by the total number of units available for sale.

Operating income is calculated as net sales minus.

Lebaron Co.'s beginning inventory is $2,000 and its ending inventory is $1,000.The inventory turnover is 6 times.Cost of goods sold for the year must equal:

The following information relates to inventory for Shoeless Joe Inc.At what amount would Shoeless report gross profit using LIFO cost flow assumptions? $\begin{array} { | l | l | c | r | } \hline \text { Date } & & \text { Quantity } & \text { Price } \\\hline \text { March 1 } & \text { Beginning Inventory } & 20 & \$ 2 \\\hline \text { March 7 } & \text { Purchase } & 15 & 3 \\\hline \text { March 11 } & \text { Sale } & 25 & 7 \\\hline \text { March 12 } & \text { Purchase } & 20 & 4 \\\hline\end{array}$