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Exam 8: Inventory

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Question 1

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Goods in transit that are shipped FOB shipping point should be included

A) in the inventory of the buyer.
B) in the inventory of the seller.
C) in the inventory of the shipping company.
D) in no one's inventory until they arrive at their destination.

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

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Question 2

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Purchases and inventory misstated Omitting both the purchase of goods and the inventory results in an understated inventory and accounts payable. Net income is not affected. Assuming a company has a current ratio greater than 1, why is it still important to adjust for the error in inventory record keeping.

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Although total working capital is unchan...

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Question 3

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Year-end entries to update inventory accounts Omaha Corporation uses FIFO and a periodic inventory system. You have been provided with the following information relating to the company's inventory for the year ended December 2020: $\begin{array}{llcc} \text { Beginning inventory Jan 1 } & \$24,500\\ \text { Ending inventory Dec 31 } &109,800\\ \text { Total purchases recorded during 2020} &130,000\\\end{array}$ Instructions Record the journal entry (entries) that are required to bring Omaha's inventory accounts and cost of goods sold up to date for 2020.

Use the following information for the following questions: Windsor Ltd. uses FIFO to cost its inventory. The following information is available for Windsor's inventory of product # 205: Beginning inventory: $\quad 240$ units $@ \$ 5.28$ per unit March 1: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Purchase of 500 units $@ \$ 5.00$ per unit April 10: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Sale of 200 units $@ \$ 10.20$ per unit -Assuming Windsor uses the perpetual inventory system, the entry to account for the March 1 purchase is

Tehran Ltd. uses FIFO to cost its inventory. The following information is available for Tehran's inventory of product # 101: Beginning inventory: $\quad 120$ units $@ \$ 3.14$ per unit March 1: $\quad$ $\quad$ $\quad$ $\quad$ Purchase of 250 units @ $\$3.50$ per unit April 10: $\quad$ $\quad$ $\quad$ $\quad$ Sale of 100 units @ $\$ 5.10$ per unit Assuming Tehran uses the perpetual inventory system, the second entry to account for the April 10 sale is

The 2020 financial statements of Barclay Ltd. reported beginning inventory of $130,000, ending inventory of $140,000, and cost of goods sold of $650,000 for the year. To one decimal, Barclay's inventory turnover ratio for 2020 is

Gross profit method An inventory taken the morning after a large theft (March 12) discloses $27,500 of goods on hand. The following additional data is available from the books: Imventory on hend, March 1 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 42,000$ Purchases received, Mareh 1-11 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 36,000 5alez (Eoods delivered to customer-) $\quad 67,500$ Past records indicate that sales are made at 50% above cost. Instructions Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit method and determine the amount of the theft loss. Show appropriate titles for all amounts in your presentation.

Use the following information for the following questions: Transactions for Durham Ltd. for the month of June were: -The ending inventory on a FIFO basis is

If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is

Bearer plants Explain how bearer plants are accounted for and why.

Conversion costs include

Inventory presentation and disclosure under IFRS Briefly describe the additional disclosures required for inventories under IFRS (as compared to ASPE).

If the unavoidable costs of completing a purchase commitment are higher than the expected benefits from receiving the contracted goods or services, IFRS requires a loss provision to be recognized. This is known as a(n)

Accounting for biological and agricultural assets Using the information from question 8-148, prepare the journal entry for the honey harvested by Woods during April 2020. Assume Woods sells the honey harvested at the local market and receives $3,100. Prepare the summary entry to record the sale of the honey for cash.

Which of the following statements regarding presentation and disclosure of inventories is INCORRECT?

Florida Ltd.'s accounts payable balance at December 31, 2020, was $300,000 before any necessary year-end adjustments relating to the following: 1) Goods were in transit from a vendor to Florida on December 31, 2020. The invoice price was $20,000, and the goods were shipped FOB shipping point on December 29, 2020. The goods were received on January 4, 2021. 2) Goods shipped to Florida, FOB shipping point on December 20, 2020, from a vendor were lost in transit. The invoice price was $12,500. On January 5, 2021, Florida filed a $12,500 claim against the common carrier. At December 31, 2020, what amount should Florida report as total accounts payable?

Inventory cut-off At December 31, 2020, Dakota Corp.'s perpetual inventory showed as $43,100 in the general ledger. Towards the end of 2020, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows: 1. Units shipped to a customer January 2, 2021, costing $6,000, were included in inventory at December 31, 2020. The sale was recorded in 2021. 2. Units costing $25,000 received December 30, 2020, were recorded as received on January 2, 2021. 3. Units received during 2020, costing $4,300 were recorded twice in the general ledger. 4. Units shipped to a customer December 28, 2020, FOB shipping point, which cost $14,000, were not received by the customer until January 2021. The units were included in the ending inventory. 5. Units on hand that cost $5,600 were never recorded on the books. Instructions Calculate the correct inventory at December 31, 2020.