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Exam 6: Inventories

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Question 41

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Clarke Company uses the periodic inventory method and had the following inventory information available: A physical count of inventory on December 31 revealed that there were 350 units on hand. Instructions Answer the following independent questions and show computations supporting your answers. 1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $__________. 2. Assume that the company uses the Average-Cost method. The value of the ending inventory on December 31 is $__________. 3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $__________.

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Question 42

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FIFO and average-cost are the two most common cost flow assumptions made in costing inventories. The amounts assigned to the same inventory items on hand may be different under each cost flow assumption. If a company has no beginning inventory, explain the difference in ending inventory values under the FIFO and average-cost cost bases when the price of inventory items purchased during the period have been (1) increasing, (2) decreasing, and (3) remained constant.

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The FIFO method determines the ending in...

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Question 43

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A company purchased inventory as follows: The average unit cost for inventory is

Oakley Supply Company reports net income of $120,000 in 2014. The ending inventory did not include goods valued at $7,000 that Oakley had consigned to Roberta's Gift Shop. (1) What is the correct net income for 2014? (2) What impact will this error have on the statement of financial position at 12/31/14?

Eckert Company reported the following summarized annual data at the end of 2014: The income tax rate is 30%. The controller of the company is considering a switch from FIFO to average-cost. He has determined that on an average-cost basis, the ending inventory would have been $220,000. Instructions (a) Restate the summary information on an average-cost basis. (b) What effect, if any, would the proposed change have on Eckert's income tax expense, net income, and cash flows? (c) If you were an owner of this business, what would your reaction be to this proposed change?

Blosser Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Blosser's inventory at December 31?

If goods in transit are shipped FOB destination

Net realizable value refers to

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?

A new average cost is computed each time a purchase is made in the

Mishu Inc. uses the retail inventory method to value its merchandise inventory. The following information is available for 2014: What is Mishu's estimated ending inventory at cost?

Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2014 are as follows: An end of the month (1/31/14) inventory showed that 120 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

In a period of rising prices, the inventory reported in Leary Company's statement of financial position is close to the current cost of the inventory. Maris Company's inventory is below its current cost. Identify the inventory cost flow method being used by each company. Which company has probably been reporting the higher gross profit?

Under the LCNRV approach, the net realizable value is defined as

Henri Company uses the average-cost inventory method. Its 2014 ending inventory was €40,000, but it would have been €60,000 if FIFO had been used. Thus, if FIFO had been used, Henri's income before income taxes would have been

The moving-average cost flow assumption for a perpetual inventory system and the average-cost cost flow assumption for a periodic inventory system will allocate the same amounts to ending inventory and cost of goods sold.

Which of the following statements is correct with respect to inventories?

Holliday Company's inventory records show the following data: A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for ₤3 each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. Under the FIFO method, the December 31 inventory is valued at

Bosio Corporation's computation of cost of goods sold is: The average days to sell inventory for Bosio is

A problem with the specific identification method is that