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Exam 5: Reporting and Analyzing Inventories

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Question 71

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Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.

A) True
B) False

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Question 72

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A company reported the following data related to its ending inventory: $\begin{array} { | l | l | c | c | } \hline \text { Product } & \text { Units Available } & \text { Cost } & \text { Market } \\\hline 849 & 100 & \$ 10 & \$ 11 \\\hline 842 & 75 & 16 & 14 \\\hline 847 & 60 & 14 & 13 \\\hline 860 & 40 & 16 & 20 \\\hline\end{array}$ Calculate the lower-of-cost-or-market on the: (a)Inventory as a whole and (b)inventory applied separately to each product.

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\[\begin{array} { | c | c | c | c | r | ...

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Question 73

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To avoid the time-consuming process of taking an inventory each year,the majority of companies use the gross profit method to estimate ending inventory.

A company had gross profit of $134,200 on net sales of $205,000.If ending inventory was $8,000 and average inventory was $7,080,what is the company's inventory turnover?

A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

Match each situation described below to inventory valuation method In all cases, assume a period of rising prices.

When units are purchased at different costs over time,it is simple to determine the cost per unit assigned to inventory.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Use the following information to estimate the third quarter ending inventory under the gross profit method.This company's gross profit ratio is 20%. Third quarter beginning inventory: $54,000 Net sales for third quarter: $85,000 Net purchases for third quarter: $21,000

A company made the following merchandise purchases and sales during the month of July: $\begin{array}{|l|l|l|l|}\hline \text { July 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \\\hline \text { July 5 purchased } & 270 & \text { units at } & \$ 20 \text { each } \\\hline \text { July 9 sold } & 500 & \text { units at } & \$ 55 \text { each } \\\hline \text { July 14 purchased } & 300 & \text { units at } & \$ 24 \text { each } \\\hline \text { July 20 sold } & 250 & \text { units at } & \$ 55 \text { each } \\\hline \text { July 30 purchased } & 250 & \text { units at } & \$ 30 \text { each }\\\hline\end{array}$ There was no beginning inventory.If the company uses the first-in,first-out perpetual inventory method what would be the cost of the ending inventory?

If the seller is responsible for paying freight charges,then ownership of inventory passes when goods arrive at their destination.

Match each definition to its term

The City Store reported the following amounts on their financial statements for 2009,2010 and 2011: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { For the year ended December 31 }$ $\begin{array} { | l | r | r | r | } \hline & 2009 &{ 2010 } & 2011 \\\hline \text { Cost of goods sold } & \$ 5,000 & \$ 87,000 & \$ 77,000 \\\hline \text { Net income } & 22,000 & 25,000 & 21,000 \\\hline \text { Total current assets } & 155,000 & 165,000 & 110,000 \\\hline \text { Equity } & 287,000 & 295,000 & 304,000 \\\hline\end{array}$ It was discovered early in 2012 that the ending inventory on December 31,2009 was overstated by $6,000 and the ending inventory on December 31,2010 was understated by $2,500.The ending inventory on December 31,2011 was correct.Ignoring income taxes,determine the correct amounts of cost of goods sold,net income,total current assets and equity for each of the years 2009,2010 and 2011.

Given the following information,determine the cost of ending inventory at December 31 using the weighted-average perpetual inventory method.Assume this is the first month of the company's operations. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 12: 2 units were sold.

Explain the difference between the retail inventory method and gross profit inventory method for valuing inventory.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

During January,a company that uses a perpetual inventory system had beginning inventory,purchases and sales as follows.What was the weighted average cost of the company's January 31 inventory?

During January,a company that uses a perpetual inventory system had beginning inventory,purchases and sales as follows.What was the FIFO cost of the company's January 31 inventory?

Three key variables determine the dollar value of inventory: (1)inventory quantity, (2)costs of inventory and (3)cost flow assumption.

Given the following information,determine the cost of ending inventory at December 31 using the Weighted Average perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit December 15: 20 units were purchased at $10.15 per unit December 22: 18 units were sold at $35 per unit