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Exam 6: Inventories

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Question 81

Multiple Choice

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Inventory items on an assembly line in various stages of production are classified as

A) Finished goods.
B) Work in process.
C) Raw materials.
D) Merchandise inventory.

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Question 82

Multiple Choice

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As a result of a thorough physical inventory, Horace Company determined that it had inventory worth $320,000 at December 31, 2015. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $47,000 on its sales floor that belong to Horace but are being sold on consignment by Herschel. The selling price of these goods is $75,000. Horace purchased $22,000 of goods that were shipped on December 27, FOB destination, that will be received by Horace on January 3. Determine the correct amount of inventory that Horace should report.

A) $320,000.
B) $340,000.
C) $367,000.
D) $387,000.

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Question 83

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Romanoff Industries had the following inventory transactions occur during 2015: $\begin{array} { l l c c } & & \text { Units } & \text { Cost/unit } \\2 / 1 / 15 & \text { Purchase } & 54 & \$ 45 \\3 / 14 / 15 & \text { Purchase } & 93 & \$ 47 \\5 / 1 / 15 & \text { Purchase } & 66 & \$ 49\end{array}$ 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 after-tax income using FIFO? (rounded to whole dollars)

A company may use more than one inventory costing method concurrently.

Inventories are reported in the current assets section of the balance sheet immediately below receivables.

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

A company just starting business made the following four inventory purchases in June: $\begin{array}{lrlr}\text { June } & 1 & 150 \text { units } & \$ 390 \\\text { June } & 10 & 200 \text { units } & 585 \\\text { June } & 15 & 200 \text { units } & 630 \\\text { June } & 28 & 150 \text { units } & 510\\&&&\$2,115\end{array}$ A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

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

The only acceptable cost flow assumptions under IFRS are

In a period of rising prices, the costs allocated to ending inventory may be understated in the

Sawyer Company uses the perpetual inventory system and the moving-average method to value inventories. On August 1, there were 10,000 units valued at $30,000 in the beginning inventory. On August 10, 20,000 units were purchased for $6 per unit. On August 15, 24,000 units were sold for $12 per unit. The amount charged to cost of goods sold on August 15 was

At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 800 units at $7 600 units at $8 The company sold 1,000 units during the month for $12 per unit. Kibbee uses the average cost method. Kibbee's gross profit for the month of May is

Which of the following should be included in the physical inventory of a company?

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except

The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale.

GAAP defines market for lower-of-cost-or market essentially as

The accountant at Cedric Company has determined that income before income taxes amounted to $7,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $315 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

The specific identification method of inventory costing

Alfalfa Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: $\begin{array}{rrr}&&\text { Market }\\\text { Product } & \text { Cost } & \text { value }\\\text { A } & \$ 112,000 & \$ 120,000 \\\text { B } & 80,000 & 76,000 \\\text { C } & 155,000 & 162,000\end{array}$ If Alfalfa applies the LCM basis, the value of the inventory reported on the balance sheet would be