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Exam 7: Inventory

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Question 21

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An inventory of grocery items where the shelves are stocked from the back would be similar to which cost flow assumption?

A) FIFO
B) Specific identification
C) Moving average
D) FISH

E) C) and D)
F) A) and C)

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Question 22

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Use the following information for questions: A company had the following inventory activity during May: $\begin{array}{lrrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }&\text { Unit Price }\\\hline\text { Beginning inventory } & 100 & \$ 20.00 & \$ 2,000 & \\\text { Purchase: May 3 } & 900 & \$ 21.00 & 18,900 & \\\text { Sale: May 5 } & (900) & & & \$ 30.00 \\\text { Purchase: May 15 } & 1,000 & \$ 21.00 & 21,000 & \\\text { Sale: } & (900) & & & \$ 30.00\end{array}$ -If the company uses a perpetual system and the moving average cost flow assumption, what is the gross margin on the May 5 sale closest to?

A) $6,100
B) $8,100
C) $8,190
D) $8,550

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

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Question 23

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Tommy Co.prepares its estimate of LCM using the net realizable value.Inventory item 101 cost $45 and its current replacement cost is $50.The item is currently selling in the market for $55 and selling costs are estimated to be $6.Tommy expects to earn a profit of $4 on the sale of this item.In its year-end financial statements, Tommy Co.should value this item at:

Use the following information for questions: A company had the following inventory activity during January: $\begin{array}{lrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }\\\hline\text { Beginning inventory } & 800 & \$ 10.00 & \$ 8,000 \\\text { Purchase: January } 5 & 1,400 & 11.00 & 15,400 \\\text { Sale: January } 8 & (1,500) & & \\\text { Purchase: January 13 } & 900 & 10.50 & 9,450 \\\text { Sales: January } 24 & (900) & &\end{array}$ -If the company is using a perpetual system and the FIFO costing assumption, what is the cost of goods sold closest to?

Use of the FIFO cost flow assumption means that:

Which of the following is the correct flow of costs in a manufacturing operation?

Management incentives to overstate ending inventory include all of the following except:

The LCM rule is usually applied to groups of similar items.

Inventory sold as a result of liquidation or bankruptcy is:

If a company's inventory turnover ratio is 6.6 it takes them on average 55 days to sell their inventory.

Which of the following would be most likely to use the specific identification method?

Which of the following is not an inventory account in a manufacturing company?

Which of the following risks are unique to inventory as an asset class?

The cost flow assumption used by a firm must match the physical flow of units through the firm.

All of the following are typical manufacturing costs except:

Which of the following statements best describes net realizable value when applying the LCM rule?

Which of the following should be included in the cost of inventory?

Use the following information to answer questions Handel Inc.values its inventory on an LCM basis.The following data came from the 2011 inventory, which consisted of two items: $\begin{array}{lrr}&\text { Item \# 130}&\text { Item \# 140 }\\\hline\text { Original cost } & \$ 12,000 & \$ 15,000 \\\text { Selling price } & 15,000 & 26,000 \\\text { Estimated selling costs } & 5,000 & 10,000 \\\text { Replacement cost } & 13,000 & 15,000 \\\text { Normal profit margin } & 1,500 & 1,000\end{array}$ -The appropriate carrying value for the entire inventory when applying the LCM rule using net realizable value to the inventory as a whole would be:

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate:

Use the following information for questions: A company had the following inventory activity during January: $\begin{array}{lrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }\\\hline\text { Beginning inventory } & 800 & \$ 10.00 & \$ 8,000 \\\text { Purchase: January } 5 & 1,400 & 11.00 & 15,400 \\\text { Sale: January } 8 & (1,500) & & \\\text { Purchase: January 13 } & 900 & 10.50 & 9,450 \\\text { Sales: January } 24 & (900) & &\end{array}$ -If the company is using a perpetual system and the FIFO costing assumption, what is the ending inventory closest to?