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Exam 7: Inventories

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Question 101

Multiple Choice

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Too much inventory on hand

A) ties up funds that could be used to improve operations
B) increases the cost to safeguard the assets
C) increases the losses due to price declines
D) All of these choices

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

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Question 102

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Generally,the lower the days' sales in inventory,the better.

A) True
B) False

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Question 103

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If the perpetual inventory system is used,the merchandise inventory account is debited for purchases of merchandise.

Applying the lower of cost or market to each item of inventory,what should the total inventory value be for the following items?​

​ Match each description to the appropriate cost flow assumption (a-c) . -Widely used for tax purposes

Determine the total value of the merchandise using net realizable value.

Brutus Corporation,a newly formed corporation,has the following transactions during May,its first month of operations.​May 1 Purchased 500 units @ $25.00 each.4 Purchased 300 units @ $24.00 each.6 Sold 400 units @ $38.00 each.8 Purchased 700 units @ $23.00 each.13 Sold 450 units @ $37.50 each.20 Purchased 250 units @ $25.25 each.22 Sold 275 units @ $36.00 each.27 Sold 300 units @ $37.00 each.28 Purchased 550 units @ $26.00 each.30 Sold 100 units @ $39.00 each.​Calculate total sales,cost of merchandise sold,gross profit,and ending inventory using each of the following inventory methods: 1.FIFO perpetual 2.FIFO periodic 3.LIFO perpetual 4.LIFO periodic 5.Average cost periodic (round average to nearest cent)

Beginning inventory,purchases,and sales data for widgets are as follows:​ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

Based on the following data,calculate the estimated cost of the merchandise inventory on March 31 using the retail method.

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

Use the information below to answer the following questions. Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. ​ ​ -Assuming that the company uses the perpetual inventory system,determine the gross profit for the month of May using the LIFO cost method.​

Based on the following information,compute (a)inventory turnover (b)average daily cost of merchandise sold using a 365-day year and (c)days' sales in inventory.​Cost of merchandise sold $195,640Inventory:Beginning 20,500Ending 18,628

Match each description to the appropriate inventory system (a or b) .​ -This system can be costly and time consuming if not computerized.

Match each description to the appropriate inventory system (a or b) .​ -Under this system,only revenue is recorded when sales are made.

In valuing merchandise for inventory purposes,net realizable value is the estimated selling price less any direct costs of disposal.

Assume that three identical units of merchandise are purchased during October,as follows:​​ Assume one unit is sold on October 31 for $28.Determine cost of merchandise sold,gross profit,and ending inventory under the FIFO method.

The three inventory costing methods will normally each yield different amounts of net income.

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

If a company uses a periodic inventory system,the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Use the information below to answer the following questions. Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. ​ ​ -Assuming that the company uses the perpetual inventory system,determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.