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Exam 6: Inventories

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Question 21

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The following information was available for Pete Company at December 31, 2015: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete's inventory turnover in 2015 was

A) 10.9 times.
B) 12.3 times.
C) 14.1 times.
D) 16.9 times.

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Question 22

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Romanoff Industries had the following inventory transactions occur during 2015: $\begin{array}{llll}&&\text { Units }&\text { Cost/unit }\\2 / 1 / 15 & \text { Purchase } & 54 & \$ 45 \\3 / 14 / 15 & \text { Purchase } & 93 & \$ 47 \\5 / 1 / 15 & \text { Purchase } & 66 & \$ 49\end{array}$ The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using FIFO? (rounded to whole dollars)

A) $3,318
B) $3,552
C) $6,948
D) $7,182

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Question 23

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The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000. The amounts reflected in the current end of the period balance sheet are $\begin{array} { cc } &\underline { \text { Assets } } &\underline{ \text { Stockholders' Equity } }\\\end{array}$ A) $\begin{array} { cc } \text { Overstated } & \text { Overstated } \\\end{array}$ B) $\begin{array} { cc } \text {Correct } &&& \text { Correct } \\\end{array}$ C) $\begin{array} { cc } \text { Understated } & \text { Understated } \\\end{array}$ D) $\begin{array} { cc } \text { Overstated } && \text { Correct }\end{array}$

Eneri Company's inventory records show the following data: $\begin{array}{lcrr}&\text { Units }&\text { Unit Cost }\\\text { Inventory, January 1 } & 10,000 & \$ 9.20 \\\text { Purchases: } \text { June 18 } & 9,000 & 8.00 \\ \text { November 8 } & 6,000 & 7.00\end{array}$ A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. Under the FIFO method, the December 31 inventory is valued at

The major IFRS requirements related to accounting for and reporting inventories are

GAAP's definition for inventory and provision of guidelines for inventory accounting, as compared to IFRS are: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Guideliness for Definitions for Inventory $\quad$ inventory accounting a. essentially similar $\quad$$\quad$$\quad$ more detailed b. essentially different $\quad$$\quad$ more detailed c. essentially similar $\quad$$\quad$$\quad$ less detailed d. essentially different $\quad$$\quad$ less detailed

Goods out on consignment should be included in the inventory of the consignor.

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows: $\begin{array} { l c c r } & \text { Units } & \text { Per unit price } & \text { Total } \\\text { Balance, } 1 / 1 / 15 & 200 & \$ 5.00 & \$ 1,000 \\\text { Purchase, } 1 / 15 / 15 & 100 & 5.30 & 530 \\\text { Purchase, } 1 / 28 / 15 & 100 & 5.50 & 550\end{array}$ An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale.

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

IFRS defines market for lower-of-cost-or market as

In a period of inflation, the cost flow method that results in the lowest income taxes is the

The following information was available for Pete Company at December 31, 2015: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete's days in inventory in 2015 was

The lower-of-cost-or-market (LCM) basis may be used with all of the following methods except

Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and sales during the month of January were as follows: $\begin{array}{lll}\underline{\text { Date}}&\underline{\text { Purchases }}&\underline{\text { Sales}}\\\text { Jan. } 14 & & 375 @ \$ 14 \\\quad\quad17 & 250 @ \$ 10& \\\quad\quad25 & 250 @ \$ 11& \\\quad\quad29 & &260 @ \$ 16 \end{array}$ Partridge does not maintain perpetual inventory records. According to a physical count, 365 units were on hand at January 31. The cost of the inventory at January 31, under the FIFO method is:

Indrisano's Used Cars uses the specific identification method of costing inventory. During March, Indrisano purchased three cars for $12,000, $14,400, and $19,200, respectively. During March, two cars are sold for a total of $34,600. Indrisano determines that at March 31, the $14,400 car is still on hand. What is Indrisano's gross profit for March?

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date, each computer has a current replacement cost of $400. What value should Switzer, Inc., have for the computers at the end of the year?

Under the LCM approach, the market value is defined as