FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Cost-Based Inventories and Cost of Sales

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

The following information was available from the inventory records of a company for July 2008: $\begin{array} {| l|l| l|l| } \hline&& \text {unit }& \text {total }\\\hline& \text {units }& \text { cost}& \text { costs}\\\hline \text { Balance at July 1, 2008 .}&2,000&\$19.55&\$39,100\\\hline \text {Purchases: July 6,2008 . }&1,500&20.60&30,900\\\hline \text {July 16,2008 }&3,400&21.50&73,100\\\hline \text { Sales: July 7, 2008}&(1,800) \\\hline \text { July 31, 2008}&(3,200) \\\hline \text { Balance at July 31, 2008 .}&1,900\\\hline\end{array}$ Assuming that the company uses the periodic inventory system,what would be the inventory valuation at July 31,2008,using the weighted-average inventory method (rounded to the nearest dollar) ?

A) $39,046
B) $39,406
C) $39,900
D) $39,996

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

Correct Answer

verified

C

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

A company uses a periodic inventory system.At the end of 2013 a purchase on credit of $5,000 was not recorded.Also,it was incorrectly excluded from the 2013 ending inventory.What effect,will these errors have on the 2013 financial statements of the company if they are undetected?

A) Pre-tax income will be overstated $5,000 and assets and liabilities each will be understated.
B) Pre-tax income will be correct, but liabilities and assets each will be understated by $5,000.
C) Pre-tax income and liabilities will be understated $5,000 each.
D) Pre-tax income, assets, and liabilities will be overstated $5,000 each.
E) Pre-tax income, assets and liabilities each will be understated.

F) B) and C)
G) All of the above

Correct Answer

verified

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

A company completed the following transactions in the order given in its first year of operations: $\begin{array} { |l|l|l| } \hline&& \text { unit}\\\hline \text { transaction}& \text {units }& \text {coasts }\\\hline \text { Purchase.}&300&\$4.00\\\hline \text { Purchase.}&200&4.20\\\hline \text { Sales (@ \$8.00) }&280\\\hline \text { Purchase.}&400&4.40\\\hline \text { Sales (@ \$8.00) }&360\\\hline\end{array}$ Using the weighted-average inventory cost method (rounding each calculation to the nearest cent) the gross margin would be:

Under a periodic inventory system,cost of goods sold is a residual amount and,for all practical purposes,cannot be verified independently from the inventory records.

The specific cost identification inventory cost flow method has all of the following characteristics except:

The gross margin method is frequently used for all of the following except to:

If the cost ratio used in the retail inventory method were overstated (e.g.,80 percent instead of 70 percent) ,the estimated cost of ending inventory would be:

The retail inventory method may be used for all of the following except:

During Year 1,ABC Inc.'s ending inventory was overstated by $10,000.During Year 2,ABC Inc.'s ending inventory was understated by $20,000.Assuming that the Year 2 books have not yet been closed,the adjustment to Cost of Goods sold would be:

Which of the following should be included in the inventory cost of an item purchased?

The average cost method of inventory valuation can be applied in exactly the same way by using either the periodic or perpetual inventory system.

On June 1,2013,Yenex Corporation signed a binding,non-cancellable contract with AB Corporation to purchase,during the following 12 months,500 units of Product Z at $30 each.By December 31,2013,Yenex Corporation had purchased and paid for 400 of the units (debit inventory and credit cash,$12,000).At the end of 2013,Product Z could be purchased at a firm cash price of $27 per unit.(Assume amounts are material.) (a) Give any entry required at December 31,2013 (end of the accounting period). (b) On March 30,2013,Yenex Corporation purchased the remaining units under the contract.At that date,the units could have been purchased for a firm cash price of $28.Give the required entry (entries) under IFRS.

An inventory item was purchased for $3.00.Before it was finally sold it was given an initial markup of $1.00,followed by an additional markup of 50 cents,and then a markup cancellation of 50 cents,and finally a markdown of 40 cents.It was then sold for:

A company manufactures and sells four products; the related inventories are valued at lower-of-cost-or-market.The company considers a profit margin of 20 percent of sales to be normal for all four products.The following information was compiled as of December 31: $\begin{array}{|l|l|l|l|l|}\hline \text { Product } & \text { Original cost} & \text { Cost to replace } & \begin{array}{l}\text { Estimated Cost } \\\text { to Complete and } \\\text { sell }\end{array} & \begin{array}{l}\text { Expected Selling } \\\text { Price }\end{array} \\\hline \text { A } & \$ 70 & \$ 84 & \$ 30 &\$160 \\\hline\text { B } & 94 & 90 & 41 &190 \\\hline \text { C } & 35 & 30 & 10 & 60 \\\hline\text { D } & 90 & 92 & 118 & 200 \\\hline\end{array}$ Using lower-of-cost-or-NRV,the reported unit amount of the ending inventory for Product D is:

The primary basis of accounting for inventories is cost.A departure from the cost basis of pricing the inventory is required when:

Under the Lower of Cost and Market (LCM) rules,inventory write-downs are irreversible.

Items that were incorrectly omitted from 2013 credit purchases,but correctly included in the 2013 ending inventory would have the following 2013 effects:

A company has just completed its second year of operations.It will use the FIFO,LCM retail method for external reporting.The following information is available $\begin{array} { | l | r| r| } \hline & \text { Cost } & \text { Retail } \\\hline \text {Beginning inventory, January 1, 2002.}&\$7,200&\$12,000\\\hline \text {Sales revenues. }&35,200\\\hline \text {Purchases. }&31,200&48,000\\\hline \text {Net markdowns. }&12,800\\\hline \text {Net mark-ups. }&4,000\\\hline\end{array}$ The 2002 cost of goods sold will be:

A company using a periodic inventory system neglected to record a purchase of merchandise on credit at year end.This merchandise was omitted from the year end physical count.How will these errors affect assets,liabilities,owners' equity at year end and net earnings for the year? $\begin{array} { | l | l | l | l | l | } \hline & & & \text { Owners' } & \text { Net } \\\hline & \text { Assets } & \text { Liabilities } & \text { Equity } & \text { Earnings } \\\hline 1 & \text { No effect } & \text { overstate } & \text { understate } & \text { understate } \\\hline 2 & \text { No effect } & \text { understate } & \text { overstate } & \text { overstate } \\\hline 3 & \text { Understate } & \text { no effect } & \text { understate } & \text { understate } \\\hline 4 & \text { Understate } & \text { understate } & \text { no effect } & \text { no effect } \\\hline\end{array}$

A retail company uses the retail method of inventory valued at average cost,lower-of-cost-or-market.The following information relates to 2007 (in 000's) : $\begin{array} {|l|l|l| } \hline& \text {Retail }& \text {cost }\\\hline \text { Beginning inventory, January 1, 2007.}&\$120&\$72\\\hline \text {Sales revenue. }&\$352\\\hline \text {Purchases. }&\$312&\$480\\\hline \text {Net markdowns. }&\$128\\\hline \text { Net mark-ups..}&\$40\\\hline\end{array}$ What cost ratio should be used to determine the 2007 ending inventory valuation? Do not round to the nearest intermediate value.