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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

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Question 21

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Which of the following statements is correct when inventory unit costs are decreasing?

A) Inventory turnover will be the greatest when the average cost inventory method is used.
B) FIFO's gross profit will be the highest among the inventory costing methods.
C) Inventory turnover will be the largest when the LIFO inventory method is used.
D) Use of the LIFO method will result in lower cash flows due to a decreased cost of goods sold.

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Question 22

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The following income statement is complete except for a few missing titles (bold lines on the left),and amounts (dotted lines on the right). Prepare a complete income statement using the format and amounts provided.Fill in all items that are missing titles and amounts (ignore income taxes).

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Question 23

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The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

Rio Company uses the FIFO inventory costing method and has a perpetual inventory system.All purchases and sales were cash transactions.The records reflected the following for January,2019: Determine the following: A.2019 cost of goods available for sale B.2019 cost of goods sold C.2019 ending inventory D.The journal entries for January 6 and 10.

Which of the following statements is correct when inventory unit costs are decreasing?

In the year of an overstatement of ending inventory,cost of goods sold will be understated and net income will be overstated.

Quest Inc.provided the following disclosure note to the financial statements in its annual report: Inventories are stated at the lower of cost or market.The cost of inventories has been determined using last in first out (LIFO)method.Cost of goods sold under LIFO costing were $22.2 billion for 2019 and ending inventory under LIFO was $1.3 billion.Inventory in 2018 under LIFO costing was $1.2 billion.The LIFO Reserve account carried a credit balance of $0.8 billion in 2019 and $0.6 billion in 2018. Compute the following:

An overstatement of the 2018 ending inventory results in an overstatement of stockholders' equity as of the end of 2019.

Hollander Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and the 2019 ending inventory was overstated by $5,000.What would be the effect of this error in ending inventory?

Seattle,Co.began the year with 480 units of one of its most popular products.During the year Seattle purchased 1,000 units and sold 1,100 units for $750 each.What is the pre-tax effect of Seattle's LIFO liquidation?

On March 15,2019,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount. Which of the following journal entries is correct when Ryan Company pays for these goods on March 20,2019?

An understatement of the ending inventory in Year 1,if not corrected,will cause which of the following?

Lauer Corporation provided the following information about one of its laptop computers: During the year,Lauer sold 750 laptop computers. - What was cost of goods sold using the FIFO cost flow assumption?

Generally,inventory inspection costs are reported as operating expenses on the income statement.

The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

Coulter Company uses the LIFO inventory method.The following data were available for the month of January,2019: Compute the following: 1.Beginning inventory 2.Ending inventory 3.Cost of goods available for sale 4.Cost of goods sold 5.Gross profit

RJ Corporation has provided the following information about one of its inventory items: During the year,RJ sold 3,000 units. - What was ending inventory using the LIFO cost flow assumption?

Given a particular set of facts and assumptions,the following pairs of amounts were computed using FIFO and LIFO.For each pair of amounts,indicate which amount resulted from applying FIFO,and which amount resulted from applying LIFO.

QV-TV,Inc.provided the following items in its notes to the financial statements for the year-end 2019: Cost of goods sold was $22 billion under FIFO costing and the inventory value under FIFO costing was $2.1 billion.The LIFO Reserve for year-end 2018 was $0.6 billion and at year-end 2019 it had increased to $0.8 billion. - How much is the 2019 LIFO cost of goods sold?

Direct material costs are a component of the cost of the work in process inventory.