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Exam 5: Reporting and Analyzing Inventories

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Question 21

True/False

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A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

A) True
B) False

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Question 22

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The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

A) Weighted average inventory method,
B) First-in,first-out method,
C) Last-in,first-out method,
D) Specific identification method,
E) Retail inventory method,

F) B) and E)
G) B) and D)

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Question 23

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The City Store reported the following amounts on their financial statements for 2012,2013,and 2014: It was discovered early in 2015 that the ending inventory on December 31,2012,was overstated by $6,000 and the ending inventory on December 31,2013,was understated by $2,500.The ending inventory on December 31,2014,was correct.Ignoring income taxes,determine the correct amounts of cost of goods sold,net income,total current assets,and equity for each of the years 2012,2013,and 2014.

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

Bert and John Jacobs founded a T-shirt company,Life is good.How did they prioritize inventory management as their company grew?

If the _______________ is responsible for paying the freight,ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

A company had 270 units of inventory at a cost of $154 each on March 1.On March 5,the company purchased 470 units of inventory for $174 each.On March 10,the company purchased 170 units for $214 each.On March 20,540 units were sold.Given this information,determine the cost of the 540 units sold using the weighted average periodic inventory method.(Do not round your intermediate calculations; round the final answer to nearest dollar amount.)

What is the effect of an error in the ending inventory balance on the income statement?

A corporation has provided the following information about one of its products: During the year,470 units were sold.What is ending inventory using the weighted average periodic inventory method? (Round the weighted average cost per unit to two decimal points; round the ending inventory to the nearest whole dollar.)

The choice of an inventory valuation method can have a major impact on gross profit and cost of sales.

What costs are assigned to merchandise inventory?

Given the following information,determine the cost of ending inventory at December 31 using the weighted average perpetual inventory method.Assume this is the first month of the company's operations. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 12: 2 units were sold.

LIFO assumes that inventory costs flow in the order they were incurred.

The dollar value assigned to goods purchased will differ under the different inventory valuation methods of specific identification,FIFO,LIFO,and weighted average.

A company made the following merchandise purchases and sales during the month of May: There was no beginning inventory.If the company uses the FIFO periodic inventory method,what would be the cost of the ending inventory?

The four methods of inventory valuation are SIFO,FIFO,LIFO,and average cost.

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

One of the most important decisions in accounting for inventory is determining the unit costs assigned to each inventory item.

Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

Neither GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.