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Exam 7: Inventory and Cost of Goods Sold

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Question 41

Multiple Choice

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When the lower of cost and net realizable value (LC&NRV) rule requires an inventory adjustment:

A) the adjustment usually,but not always,reduces the book value of inventory.
B) the write down is usually reported as a selling expense or as part of cost of goods sold.
C) the inventory adjustment is recorded in a contra-revenue account called sales allowances.
D) all of the above.

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

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Question 42

Multiple Choice

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During 2008,Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.If inventory at the beginning of the year was $15,000,the ending inventory balance must have been:

A) $10,000.
B) $25,000.
C) $26,000.
D) $27,000.

E) A) and B)
F) All of the above

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Question 43

Multiple Choice

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If the Company uses the LIFO method,what is the cost of its ending inventory:

An increasing inventory turnover ratio indicates:

Inappropriate inventory levels reduce a company's net income,either by increasing cost or reducing revenue. BT: Knowledge

During a period of rising prices,LIFO results in a lower income tax expense than does FIFO. BT: Knowledge

Which of the following statements is true?

If the company uses the specific identification method,what is the cost of its ending inventory?

The lower the inventory turnover ratio,the more efficiently the company manages its inventory,all other things equal. BT: Comprehension

A $15,000 overstatement of the 2011 ending inventory was discovered after the financial statements for 2011 were prepared.How would that inventory error impact the 2011 financial status?

For a merchandiser,inventory turnover refers to how many times:

Which of the following statements is true with regards to all inventory costing methods?

What is the inventory turnover ratio?

Which of the following inventory method will give the highest ending inventory in a period of falling prices?

A merchandise company's beginning inventory plus merchandise purchases minus ending inventory equals:

A new textbook is published in the spring of 2009.Your campus bookstore buys 400 copies at $70 each in June,an additional 1,000 copies in August at $72 each,and 600 copies in December at $75 each.At the end of December 2009,the bookstore has sold 1,900 copies of the text. Find the cost of goods sold and the cost of ending inventory: a)under the weighted average cost method. b)under the FIFO method. c)under the LIFO method. Using your calculations as a guide,explain how different inventory costing methods affect the numerator and denominator of the inventory turnover ratio when unit costs are increasing.Conclude your explanation by identifying the method that produces the highest (and lowest)inventory turnover ratio.

When the weighted average inventory costing method is used,ending inventory and cost of goods sold are calculated using different costs per unit. BT: Knowledge

The LIFO inventory costing method assumes that the costs of the units most recently purchased are:

Alphabet Company buys different letters for resale.It buys A thru G on January 1 at $4 per letter,and sells A and E on January 15.On February 1,it buys H thru L at $6 per letter and sells D,H and J on February 9.It then buys M thru R on March 1 at $7 per letter and sells N on March 19.If the company uses the LIFO method on a perpetual basis,what is the cost of its ending inventory) ?

Fill in each blank with the appropriate term to complete each formula. $\begin{array}{lllll}\text { BI } & \text { Beginning inventory } & \text { EI } & \text { Ending inventory P } & \text { Purchases } \\\text { CGS } & \text { Cost of Goods Sold } & \text { AI } & \text { Average inventory } &\end{array}$ CGS}=______+_________-________ Average Inventory = (______+________)/2 Goods available for sale =______+______ Days to sell =365/(______/_____)