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Exam 6: Inventories

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Question 71

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Three identical units of merchandise were purchased during May, as follows: ​ ​ Assume that two units are sold on May 23 for $313 total. Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.

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Question 72

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A company will most likely use an estimated method of determining inventory when

A) the company decides not to do a physical inventory
B) a natural disaster has destroyed most of the inventory
C) the company has not kept up with its inventory records
D) the company is preparing annual financial statements

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

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Question 73

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Assume that three identical units of merchandise were purchased during October, as follows: $\begin{array} { | l | c | l | c | c | } \hline & & & \text { Units } & \text { Cost } \\\hline \text { October } & 5 & \text { Purchase } & 1 & \$ 5 \\\hline & 12 & \text { Purchase } & 1 & 13 \\\hline & 28 & \text { Purchase } & \underline { 1 } & \underline { 15 } \\\hline \text { Total } & & & 3 & \$ 33 \\\hline\end{array}$ -One unit is sold on October 31 for $28. Using the table provided, what is the cost of goods sold under the LIFO method?

List three different security measures taken to safeguard inventory.

FIFO is the inventory costing method that follows the physical flow of the goods.

Cost flow is in the order in which costs were incurred when using

Under a periodic inventory system

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

All of the following are reasons to use an estimated method of costing inventory except ​

Which of the following will be the same amount regardless of the cost flow assumption adopted?

What is the amount of cost of goods sold for the year according to the average cost method?

Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory.

What is the ending inventory balance at the end of the year rounded to nearest dollar using the average cost method?

Which document establishes an initial record of the receipt of the inventory?​

Safeguarding inventory from damage or theft is a primary objective for the control of inventory. If you were running a clothing store, name three specific controls you would implement to guard inventory from theft.

Beginning inventory, purchases, and sales for an inventory item are as follows: ​ $\begin{array}{|l|l|}\hline \text { Beginning inventory } & 150 \text { units } @ \$ 755 \\\hline \text { Sale } & 120 \text { units } \\\hline \text { First purchase } & 400 \text { units } @ \$ 785 \\\hline \text { Sale } & 200 \text { units } \\\hline \text { Second purchase } & 300 \text { units }(\$ 805 \\\hline \text { Sale } & 290 \text { units } \\\hline\end{array}$ ​ The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to FIFO?

A physical inventory should be taken at the end of every month.

Under the periodic inventory system, the inventory account continuously discloses the amount of inventory on hand.

The inventory data for an item for November are: $\begin{array} { r l l } \text { Nov. } 1 & \text { Inventory } & 20 \text { units at } \$ 19 \\4 & \text { Sold } & 10 \text { units } \\10 & \text { Purchased } & 30 \text { units at } \$ 20 \\17 & \text { Sold } & 20 \text { units } \\30 & \text { Purchased } & 10 \text { units at } \$ 21\end{array}$ Using a perpetual system, what is the cost of the goods sold for November if the company uses LIFO?

Which document authorizes the purchase of the inventory from an approved vendor?​