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Exam 17: Merchandise Inventory

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Question 31

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In periods of rising prices, the inventory valuation procedure that results in the highest ending inventory value is

A) the FIFO method.
B) the LIFO method.
C) the average cost method.
D) the lower of cost or net realizable value method.

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

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Question 32

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If a business builds and sells custom yachts, the logical method for computing the cost of goods sold is

A) LIFO.
B) average cost method.
C) specific identification method.
D) FIFO.

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

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Question 33

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The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $140,000 and the net sales were $100,000 up to the date of the fire. The accountant also determined that the company's normal gross profit rate is 40 percent of net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be

The gross profit ratio is calculated by dividing Gross Profit by Net Sales.

Specific identification is an inventory costing method used to value inventory where the merchandise identified as sold or on hand is typically a high-priced or one-of-a-kind item.

In periods of falling prices, the inventory valuation procedure that results in the highest net income is

The weighted average cost of an inventory item is calculated by

A firm that sells a single product had a beginning inventory of 5,000 units with a total cost of $35,000. Early in the year, 12,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 4,000 units?

In order to apply the matching concept, inventory costing methods, once selected, cannot be changed to an alternative method.

The------------ method of inventory costing must be used for financial accounting purposes if it is chosen for federal income tax purposes.

The following information concerns several of the inventory items at DC's. Determine the amount of inventory to be reported on the financial statements using the lower of cos or net realizable value method of valuation under each of the following options. 1. Lower of cost or net realizable value for each item separately 2. Lower of total cost or total net realizable value 3. Lower of total cost or total net realizable value by department

The merchandise available for sale was $90,000 and was marked to sell at a retail price of $125,000. Sales during the period totaled $80,000. If the retail method is used, the estimated cost of the ending inventory is

The company's gross profit ratio is 40%. With beginning inventory of $64,000, additional purchases of $27,000 and net sales for the quarter of $102,000, the controller estimated ending inventory values at:

The inventory on October 1 of the David Charles Company had a recorded cost of $19,500. Its retail value was $39,000. During the month of October, purchases in the amount of $30,320 (including freight of $320)were made and priced at retail for $67,000. Sales for the month of October amounted to $74,000. What is the October cost of goods sold and the ending inventory at cost and at retail?

To safeguard its inventory, organizations implement various types of controls. List some general internal controls that may be in place in a business.

A firm uses a periodic inventory system sells a single product that had a beginning inventory of 5,000 units with a total cost of $35,000. Early in the year, 12,000 units were purchased at $9 each and 4,000 units were on hand at the end of the year. Using LIFO, what is the amount of Cost of Goods Sold?

Under the retail inventory method, if the gross profit ratio is 40% and ending inventory at retail is $45,000, then estimated ending inventory is $27,000.

The lower the ending inventory valuation, the--------- the reported net income.

Under the retail inventory method, if the cost-to-retail ratio is 60% and ending inventory at retail is $105,000, then estimated ending inventory is $42,000.

If other items remain the same, the larger the ending inventory valuation, the