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Exam 5: Inventories and Cost of Sales

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Question 71

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Interim financial statements:

A) Are required by the Congress.
B) Are necessary to achieve full disclosure about a business's operations.
C) Are statements prepared for periods of less than one year.
D) Require the use of the perpetual method for inventories.
E) Cannot be prepared if the company follows the conservatism principle.

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Question 72

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Regardless of what inventory method or system is used,cost of goods available for sale must be allocated between ________ and ________.

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cost of goods sold; ...

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Question 73

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Identify the items that are included in merchandise inventory.(In your answer address the special situations of goods in transit,consigned goods,and damaged goods.)

According to IRS guidelines,companies may use FIFO for financial reporting and LIFO for tax reporting.

The ________ method of assigning costs to inventory and cost of goods sold exactly matches the costs of particular items with the revenues they generate and would be used when items can be easily traced to the purchase invoice cost.

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales: What is the amount of the cost of goods sold for this sale? (Round average cost per unit to 2 decimal places.)

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Regardless of the inventory costing system used,cost of goods available for sale must be allocated at the end of the period between

When purchase costs regularly rise,the ________ method of inventory valuation yields the highest gross profit and net income.

A company uses the retail inventory method and has the following information available concerning its most recent accounting period: 1.Use the retail inventory method to estimate the company's year-end inventory at cost. 2.A year-end physical count at retail prices yields a total inventory of $404,800.Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

The assignment of costs to the cost of goods sold and to ending inventory using FIFO is the same for both the perpetual and periodic inventory systems.

Lower of cost or market:

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Physical counts of inventory:

An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs.

Lucia Company reported cost of goods sold for Year 1 and Year 2 as follows: Lucia Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated by $6,000.Given this information,the correct cost of goods sold figure for Year 2 would be:

The lower of cost or market rule for inventory valuation is always applied to individual units separately rather than to major categories of inventory or to the entire inventory.

In applying the lower of cost or market method to LIFO inventory valuation,market is defined as:

When units are purchased at different costs over time,determining the cost per unit assigned to inventory items is simple.

Monarch Company uses a weighted-average perpetual inventory system,and has the following purchases and sales: -What is the value of cost of goods sold?