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Exam 6: Merchandise Inventory

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Question 51

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In a period of rising costs, the first-in, first-out (FIFO)method results in higher cost of goods sold and lower gross profit than the last-in, first-out (LIFO)method.

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B) False

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Question 52

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Octave Company had the following cost and retail pricing on its merchandise inventory. The net sales revenue for the time period was $65,000. Compute the estimated cost of ending merchandise inventory by the retail method.

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Question 53

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A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December If the company uses the last-in, first-out inventory costing method, what is the amount of cost of goods sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)

Which of the following is the correct formula to calculate average merchandise inventory?

The consistency principle states that a business should use the same accounting methods from period to period.

If the current replacement cost of inventory is less than its historical cost, the business must adjust the inventory value.

A company is uncertain whether a complex transaction should be recorded as an asset or an expense. Under the conservatism principle, they should choose to treat it as an asset.

Inventory turnover measures the number of times a company sells its average level of merchandise inventory during a period.

A high rate of inventory turnover indicates difficulty in selling inventory.

When inventory costs are declining, which of the following inventory costing methods will result in the highest cost of goods sold?

Best Deals has six CD players in ending merchandise inventory on December 31. The players were purchased in November for $165. The price lists from suppliers indicate the current replacement cost of a CD player to be $162. What would be the amount reported as Inventory on the balance sheet?

The materiality concept states that a company must:

The consistency principle states that businesses should report the same amount of ending merchandise inventory from period to period.

Inventory turnover measures:

Gross profit is calculated by dividing sales revenue by cost of goods sold.

Sandra Company had 200 units of inventory on hand at the end of the year. These were recorded at a cost of $12 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Sandra Company for each finished product is $15. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Cost of Goods Sold will be:

Ending inventory equals the cost of goods available for sale less beginning inventory.

Which of the following inventory valuation methods should be used for unique or high dollar items?

Given the same purchase and sales data, the three major costing methods for inventory will result in three different amounts for cost of goods sold. Assume the cost of inventory is rising.

Thomas Company provided the following particulars for year 2015: Calculate Thomas's inventory turnover ratio for the year. (Round your answer to two decimal places.)