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Exam 8: Inventories and the Cost of Goods Sold

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Question 31

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Periodic inventory systems Funky Fashions uses a periodic inventory system.The beginning inventory of a particular product,and the purchases during the current year,were as follows: At December 31,the ending inventory of this product consisted of 1,300 units. Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation:

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Question 32

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Which of the four inventory approaches is best suited to inventories of high-priced,low-volume items?

A) LIFO
B) FIFO
C) Average cost.
D) Specific identification

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Question 33

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Busch,Inc.is a successful company,but has a lower inventory turnover rate than the industry average.Of the following,the most likely explanation is that Busch:

In a perpetual inventory system,the flow of inventory cost is:

[The following information applies to the questions displayed below.] Harding Systems,Inc.uses a periodic inventory system.The purchases of a particular product during the year are shown below: At December 31 the ending inventory consisted of 1,500 units. -Compute the cost of the ending inventory based on the average-cost method of inventory valuation.(Round your final answer to the nearest dollar value. )

In a periodic inventory system,understating the amount of ending inventory will cause an understatement of gross profit in the current year.

The specific identification method is more appropriate than a cost flow assumption method:

[The following information applies to the questions displayed below.] Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250) .Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%. -Refer to the information above.What were the goods available for sale for the month?

[The following information applies to the questions displayed below.] Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250) .Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%. -Refer to the information above.What were the gross sales for the month?

[The following information applies to the questions displayed below.] Soriano Company had net sales of $300,000 for the month (after returns and allowances of $1,500 and sales discounts of $3,250) .Beginning inventory for the month was $60,000;purchases for the month were $175,000;and gross profit was 43%. -Refer to the information above.What was the cost of goods sold for the month?

Assume ending inventory is overstated at the end of Year 1 and correctly stated at the end of Year 2.Owners' equity will be correctly stated at the end of Year 2.

[The following information applies to the questions displayed below.] Beech Soda,Inc.uses a perpetual inventory system.The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 14,Beech Soda,Inc.sold 25 units of this product.The other 28 units remained in inventory at January 31. -Assuming that Beech Soda uses the FIFO cost flow assumption,the cost of goods sold to be recorded at January 14 is:

A physical inventory is usually taken during a period of high activity.

When prices are increasing,which inventory method will produce the highest cost of goods sold?

Colonial uses the retail method to estimate its monthly cost of goods sold and month-end inventory.At August 31,the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases) totaled $270,000.These goods had been priced for resale at $675,000.Sales in August totaled $450,000.The estimated inventory at August 31 is:

The inventory method used by a company will affect profitability by affecting the amount of income tax a company owes.

Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?

[The following information applies to the questions displayed below.] Castle TV,Inc.purchased 1,000 monitors on January 5 at a per-unit cost of $185,and another 1,000 units on January 31 at a per-unit cost of $230.In the period from February 1 through year-end,the company sold 1,800 units of this product.At year-end,200 units remained in inventory. -Assume that Castle TV,Inc.uses the LIFO flow assumption.The cost of the 200 units in the year-end inventory is:

A clothing store would logically have a higher inventory turnover rate than would a doughnut shop.

The primary reason a physical inventory is taken is to: