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Exam 6: Merchandise Inventory

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Question 41

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Which of the following is the correct formula to calculate days' sales in inventory?

A) Days' sales in inventory = 365 days × Inventory turnover
B) Days' sales in inventory = 365 days + Inventory turnover
C) Days' sales in inventory = 365 days ÷ Inventory turnover
D) Days' sales in inventory = 365 days - Inventory turnover

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Question 42

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Thomas Company provided the following particulars for year 2015: $\begin{array} { | l | r | } \hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,800,000 \\\hline \text { Beginning Merchandise Inventory } & 325,000 \\\hline \text { Ending Merchandise Inventory } & 650,000 \\\hline\end{array}$ -Refer to the table above.Calculate the average number of days that inventory was held by Thomas Company during 2015. (Assume 365 days in a year. Round your intermediate calculations and final answer to two decimal places.)

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Question 43

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Sandra Company had 200 units of inventory on hand at the end of the year. These were recorded at a cost of $12 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Sandra Company for each finished product is $15. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Cost of Goods Sold will be:

If the historical cost of inventory is less than its current replacement cost, the business must write down the inventory cost.

The ending Merchandise Inventory for the current accounting period is understated by $2,700. What effect will this error have on Cost of Goods Sold and Net Income?

Which of the following assets must be reported at the lower-of-cost-or-market value?

A company decides to ignore a very small error in their inventory balance. This is an example of application of the:

Which of the following inventory valuation methods minimizes income tax payment during a period of rising inventory costs?

A company that uses the periodic inventory method provided the following information: 1) Beginning inventory $4,000 2) Purchases $120,000 3) Purchase discounts $2,400 4) Purchase returns and allowances $800 At the end of the period, the company does an inventory count and finds $18,000 worth of inventory on hand. What is the amount of Cost of goods sold?

A company uses weighted-average method of inventory valuation under periodic inventory system. The company began the year with a zero inventory balance. They had the following transactions during the year. 1) Purchased 65 units at $5 per unit 2) Purchased 100 units at $5 per unit 3) Sold 80 units at a price of $12.00 per unit 4) Purchased 55 units at $6 per unit 5) Sold 80 units at a price of $12.75 per unit At the end of the year, they counted the inventory and found 60 units remaining. Calculate the Cost of goods sold for the year. (Round your intermediate calculations to two decimal places)

Which of the following statements is true of a good merchandise inventory control system?

The cost of goods available for sale is equal to the:

Perez Company purchased 500 units of inventory at $25 per unit by payment of cash. Provide the journal entry to record the purchase of inventory. (Assume a perpetual inventory system)

The gross profit method is a way to estimate inventory on the basis of the cost of goods sold model.

The materiality concept states that a company must:

When a company uses the last-in, first-out (LIFO) method, the cost of goods sold correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.

Best Deals has six CD players in ending merchandise inventory on December 31. The players were purchased in November for $165. The price lists from suppliers indicate the current replacement cost of a CD player to be $162. What would be the amount reported as Inventory on the balance sheet?

Thomas Company provided the following particulars for year 2015: $\begin{array} { | l | r | } \hline \text { Cost of Goods Sold (Cost of sales) } & \$ 1,800,000 \\\hline \text { Beginning Merchandise Inventory } & 325,000 \\\hline \text { Ending Merchandise Inventory } & 650,000 \\\hline\end{array}$ -Refer to the table above.Calculate Thomas's inventory turnover ratio for the year. (Round your answer to two decimal places.)

The consistency principle states that businesses should report the same amount of ending merchandise inventory from period to period.

Rodriguez Company had the following balances and transactions during 2014, from January 1 to December 31: $\begin{array} { | l | l | } \hline \text { Beginning Merchandise Inventory } & 100 \text { units at } \$ 80 \\\hline \text { March } 10 & \text { Sold } 50 \text { units } \\\hline \text { June 10 } & \text { Purchased } 200 \text { units at } \$ 82 \\\hline \text { October 30 } & \text { Sold } 150 \text { units } \\\hline\end{array}$ What would the Ending Merchandise Inventory amount be as reported on the balance sheet at December 31, 2014 if the perpetual weighted-average costing method is used? (Round your intermediate calculations to two decimal places)