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Exam 6: Inventory and Cost of Goods Sold

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Question 71

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

A) Nichols.
B) Winters.
C) The ratios are the same for both companies.
D) Cannot determine with the information given.

E) None of the above
F) B) and D)

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Question 72

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What is a multiple-step income statement? What information does it provide beyond "bottom-line" net income?

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A multiple-step income statement reports...

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Question 73

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Davis Hardware Company uses a periodic inventory system. How should Davis record the return of inventory previously purchased on account for $200?

Which inventory method is better described as having an income statement focus and why is it considered as such?

The primary difference between the periodic and perpetual inventory systems is:

Good, Inc. sold inventory for $1,200 that was purchased for $700. Good records which of the following when it sells inventory using a periodic inventory system?

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Additional amount of inventory a company would report if it used FIFO instead of LIFO.

Inventory records for Marvin Company revealed the following: $\begin{array} { c l c r } \text { Date } & { \text { Transaction } } & \begin{array} { c } \text { Number } \\\text { of Units }\end{array} & \begin{array} { r } \text { Unit } \\\text { Cost }\end{array} \\\text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\text { Mar. 16 } & \text { Purchase } & 800 & 7.30 \\\text { Mar. 23 } & \text { Purchase } & 600 & 7.35\end{array}$ Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be (round weighted-average unit cost to four decimals if necessary) :

Suppose Company A places an order with Company B on May 12. On May 14, Company B ships the ordered goods to Company A with terms FOB destination. The goods arrive at Company A on May 17. Company A begins selling the goods to customers on May 19 and pays Company B on May 20. When would Company B record the sale of goods to Company A?

A periodic inventory system does not continually modify inventory amounts, but instead adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand.

Listed below are four terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Requires a debit to cost of goods sold when inventory is sold.

Consider the following information pertaining to OldWest's inventory: $\begin{array} { l c r c } \text { Product } & \text { Quantity } & \text { Cost } & \begin{array} { c } \text { Market } \\\text { Value }\end{array} \\\text { Revolvers } & 16 & \$ 120 & \$ 150 \\\text { Spurs } & 23 & 27 & 22 \\\text { Hats } & 12 & 56 & 40\end{array}$ At what amount should OldWest report its inventory?

Inventory records for Marvin Company revealed the following: $\begin{array} { c l c r } \text { Date } & { \text { Transaction } } & \begin{array} { c } \text { Number } \\\text { of Units }\end{array} & \begin{array} { r } \text { Unit } \\\text { Cost }\end{array} \\\text { Mar. 1 } & \text { Beginning inventory } & 1,000 & \$ 7.20 \\\text { Mar. 10 } & \text { Purchase } & 600 & 7.25 \\\text { Mar. 16 } & \text { Purchase } & 800 & 7.30 \\\text { Mar. 23 } & \text { Purchase } & 600 & 7.35\end{array}$ Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be (round weighted-average unit cost to four decimals if necessary) :

If A sells to B, and B obtains title while goods are in transit, the goods were shipped. If C sells to D, and C maintains title until the goods arrive at D's door then the goods were shipped.

The inventory turnover ratio equals cost of goods sold divided by average inventory.

If a company has beginning inventory of $15,000, purchases during the year of $75,000, and ending inventory of $20,000, cost of goods sold equals $70,000.

During 2012, a company sells 20 units of inventory. The company has the following inventory purchase transactions for 2012: Calculate ending inventory and cost of goods sold for 2012 assuming the company uses LIFO with a periodic inventory system.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Inventory costing method that matches each unit of inventory with its actual cost.

During periods of rising costs, FIFO generally results in a higher cost of goods sold.

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Products that have started the production process but are not yet complete at the end of the period.