Quiz 10: Short-Term Operating Assets: Inventory

A perpetual inventory system always provides current information about inventory levels.

A periodic inventory system is used by most companies today due to the proliferation of computers.

Beginning inventory + Net Purchases = Cost of Goods Sold.

The work-in-process inventory is found on the books of a merchandising concern.

The flow of a manufacturer's product costs through the inventory accounts is ________. A) Work-in-Process Inventory, Cost of Goods Sold, and Finished Goods Inventory B) Raw Materials Inventory, Cost of Goods Sold, and Finished Goods Inventory C) Raw Materials Inventory, Finished Goods Inventory, and Work-in-Process Inventory D) Raw Materials Inventory, Work-in-Process Inventory, and Finished Goods Inventory

Firms using the periodic inventory system record purchases of inventory with a ________. A) credit to Purchases B) debit to Purchases C) debit to Inventory D) credit to Inventory

Which statement is not correct about perpetual inventory systems? A) The balance in the Inventory account is always up-to-date. B) A physical inventory count is not required. C) Current information is available for cost of goods sold. D) The Inventory account is updated for each purchase and sale.

Charles Company's balance sheet reports Raw Materials Inventory, $570,000; Finished Goods Inventory, $695,000; and total inventories at $1,901,000. What is the value of Work-in-Process Inventory? A) $1,776,000 B) $1,331,000 C) $636,000 D) $1,206,000

Richard Company's financial records report beginning inventory of $535,000; ending inventory of $697,000; and cost of goods sold of $1,396,000. What is the amount of purchases? A) $1,558,000 B) $2,093,000 C) $1,232,000 D) $861,000

Destiny Industries reports beginning inventory of $254,000, purchases of $559,000, and ending inventory of $198,000. What is the cost of goods sold? A) $813,000 B) $503,000 C) $615,000 D) $1,011,000

Donaldson Corporation uses a periodic inventory system. On January 1, inventory is $253,000. On April 5, Donaldson sells inventory with a selling price of $75,000 on account. The cost of the inventory sold is $50,000. The journal entry (entries) to record the sale is (are) ________. A) debit Cash and credit Sales Revenue B) debit Accounts Receivable and credit Sales Revenue; debit Cost of Goods Sold and credit Inventory C) debit Cash and Cost of Goods Sold and credit Sales Revenue and Inventory D) debit Accounts Receivable and credit Sales Revenue

Dombrose Company uses a perpetual inventory system. On January 1, inventory is $253,000. On April 5, Dombrose sells inventory with a selling price of $75,000 on account. The cost of the inventory sold is $50,000. The journal entry (entries) to record the sale is (are) ________. A) debit Cash and Cost of Goods Sold and credit Sales Revenue and Inventory B) debit Accounts Receivable and credit Sales Revenue; debit Cost of Goods Sold and credit Inventory C) debit Accounts Receivable and credit Sales Revenue D) debit Cash and credit Sales Revenue

The Peggy Ahlers Company uses the perpetual inventory system and the FIFO method. At the end of the fiscal year, December 31, 2015, the company conducted a physical count of the inventory on hand at all warehouses and stores. The FIFO cost of the physical count is $1,005,400. According to the records, ending inventory using FIFO is $1,122,000. Which journal entry is required at December 31, 2015? A) No journal entry is required. B) Debit Inventory $116,600 and credit Allowance to Reduce Inventory $116,600. C) Debit Cost of Goods Sold $116,600 and credit Allowance to Reduce Inventory $116,600. D) Debit Loss on Inventory Shortage $116,600 and credit Inventory $116,600.

A large company uses a perpetual inventory system and a sophisticated computerized system to account for its inventory over time. At the end of the accounting period, the company performs a physical count of the inventory on hand and hires hundreds of workers to carry out this task. Required: 1. Why does the company perform a physical count of inventory? 2. After the physical count of inventory is completed, describe the required journal entry and provide an example.

The total cost in dollars of ending inventory is equal to the number of units on hand multiplied by the cost per unit.

Freight-out costs are included as part of inventory costs.

Freight-in costs are treated as a selling expense.

When goods are shipped f.o.b. shipping point, title passes when the goods reach the buyer's dock.

Purchase returns and purchase discounts are added to purchases to calculate net purchases.

Purchase returns and purchase discounts are subtracted from purchases to calculate net purchases.

Jamison Company sells goods to Matthews Company. When Jamison ships goods to Matthews with terms f.o.b. shipping point, ________. A) Jamison Company reports the goods in its inventory when the goods are in transit to Matthews Company B) the title passes from Jamison Company to Matthews Company when the goods are received by Matthews Company C) the title passes from Jamison Company to Matthews Company when the goods leave Jamison Company D) Matthews Company does not include the goods in its inventory while the goods are in transit

Inventory costs do not include ________. A) freight-out costs B) freight-in costs C) packaging costs D) handling costs

Christian Company uses the gross method of recording purchase discounts on inventory and the perpetual inventory system. When Christian Company makes payment for the inventory within the discount period, the bookkeeper will ________. A) debit Accounts Payable, credit Inventory and credit Cash B) debit Accounts Payable and credit Inventory C) debit Inventory and credit Cash D) debit Accounts Payable and credit Purchases

Yankee Company uses the net method of recording purchase discounts on inventory and the perpetual inventory system. Yankee Company records a payment within the discount period. Which journal entry is prepared? A) Debit Accounts Payable and credit Cash for the gross amount of the purchase. B) Debit Accounts Payable and credit Cash for the net amount of the purchase. C) Debit Accounts Payable, credit Cash and credit Inventory. D) Debit Accounts Payable, credit Cash and credit Interest Revenue.

Smith-Miller Enterprises has inventory of $667,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $128,000 was sold f.o.b. destination and the second shipment of $80,000 was sold f.o.b. shipping point. What amount of inventory should Smith-Miller report on its balance sheet as of December 31? A) $667,000 B) $875,000 C) $795,000 D) $747,000

Beck Company has inventory of $743,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $217,000 was sold f.o.b. destination and the second shipment of $110,000 was sold f.o.b. shipping point. Beck Company also has consigned goods of $73,000 awaiting sale with Meyer Company. What amount of inventory should Beck Company report on its balance sheet as of December 31? A) $743,000 B) $926,000 C) $1,070,000 D) $1,143,000

Meyer Co. has the following information available: What amount of inventory should the company report on the balance sheet? A) $65,750 B) $63,250 C) $59,750 D) $57,250

On June 1, Addison Company purchased $9,000 of inventory on account from Garrison Company. Garrison offers a 5% discount if payment is received within 15 days. Addison records the purchase using the gross method and the perpetual inventory system. The journal entry on June 1 by Addison Company includes ________. A) a debit to Inventory for $8,550 B) a credit to Accounts Payable for $8,550 C) a debit to Inventory for $9,000 D) a credit to Cash for $9,000

On June 1, Atkinson Company purchased $7,000 of inventory on account from Donnie Company. Donnie Company offers a 5% discount if payment is received within 15 days. Atkinson Company records the purchase using the gross method and the perpetual inventory system. Atkinson Company makes the payment for the inventory on June 10. The journal entry on June 10 by Atkinson Company includes ________. A) a debit to Cash for $7,000 B) a credit to Cash for $6,650 C) a debit to Inventory for $350 D) a credit to Interest Expense for $350

On June 1, Kennedy Company purchased $8,000 of inventory on account from Sterner Company. Sterner Company offers a 5% discount if payment is received within 15 days. Kennedy Company records the purchase using the net method and the perpetual inventory system. The journal entry on June 1 by Kennedy Company includes ________. A) a debit to Inventory for $8,000 B) a credit to Accounts Payable for $8,000 C) a credit to Cash for $7,600 D) a debit to Inventory for $7,600

On June 1, Johnson Company purchased $8,000 of inventory on account from Schmid Company on June 1. Schmid Company offers a 4% discount if payment is received within 15 days. Johnson Company records the purchase using the net method and the perpetual inventory system. Johnson Company paid for the inventory on June 30. The journal entry on June 30 by Johnson Company includes ________. A) a debit to Accounts Payable for $7,680 B) a debit to Accounts Payable for $8,000 C) a credit to Interest Expense for $320 D) a credit to Cash for $7,680

On August 10, Charles Company purchased 75 refrigerators for $650 each from Appliances Wholesalers. The purchase was on account with terms of 3/10, n/30. Charles Company paid for 50 of the refrigerators on August 18 and the remaining refrigerators on August 30. Charles Company uses the gross method for purchase discounts and the perpetual inventory system to record the transactions. On August 30, Charles Company recorded ________. A) a debit to Accounts Payable and a credit to Cash B) a debit to Cash and a credit to Accounts Payable C) a debit to Accounts Payable and a credit to Inventory D) a debit to Cash and a credit to Inventory

Walker Company provides the following information: What is the cost of goods available for sale? A) $639,800 B) $658,800 C) $769,800 D) $672,000

Chet Company provides the following information: What is the cost of goods sold? A) $657,200 B) $529,200 C) $671,000 D) $537,200

The Wysocki Company has undertaken a physical count of inventory on hand on December 31, 2015. The cost of the inventory on hand is $445,993. Additional information follows: 1. Wysocki Company received goods costing $32,000 on January 2, 2019. The goods were shipped f.o.b. shipping point, and left the seller's business on December 30, 2018. 2. Wysocki Company received goods costing $40,000 on January 3, 2019. The goods were shipped f.o.b. destination, and left the seller's business on December 30, 2018. 3. Wysocki Company sold goods costing $20,000 on December 29, 2018. The goods were picked up by the common carrier on December 29 and shipped f.o.b. destination. The goods arrived on January 2, 2019. The retail price of the goods was $30,000. 4. Wysocki Company sold goods costing $30,000 on December 31, 2018. The goods were picked up by the common carrier on December 31 and shipped f.o.b. shipping point. The goods were not included in Wysocki's physical count at December 31, 2018. The goods arrived on January 4, 2019. The retail price of the goods was $60,000. Wysocki paid the shipping costs of $433 on December 31. 5. Wysocki Company was the consignee for some goods from Walmart. The goods cost Walmart $100,000 and had a retail price of $300,000. These goods were included in Wysocki's physical count on December 31, 2018 at the retail price. 6. Wysocki Company had some goods on consignment at Walmart. The goods cost $50,000 and had a retail price of $100,000. These goods were not included in Wysocki's physical count at December 31, 2018 because the goods were not on the company's premises. 7. Wysocki Company sold goods costing $22,000 on December 31, 2018. The goods were not picked up by the common carrier until January 2, 2019. The retail price of the goods was $42,000; the wholesale price was $33,000. The goods were included in the physical count at December 31, 2018. The terms of the sale were f.o.b. shipping point. Required: 1. For each item listed above, indicate the amount and sign of the adjustment to the inventory balance at December 31, 2018. If no adjustment is required, for an item, enter 0. 2. Determine the correct amount of inventory for Wysocki Company at December 31, 2018.

The following transactions occurred for MM's Jewelry Store during the month: a. On May 1, the owner purchased 100 rings on account at $6,000 each. Credit terms were 2/10, net 30. b. On May 2, the owner returned one ring. c. On May 3, the owner sold three of the rings on account at $8,000 each to one customer. The credit terms were 2/10, net 30. d. On May 9, the owner paid the debt due. e. On May 15, the customer from May 3 paid for the rings. Required: Prepare the journal entries for the above transactions. 1. The store uses the perpetual inventory system and the gross method to record purchase discounts. Explanations are not required. 2. The store uses the periodic inventory system and the net method to record purchase discounts. Explanations are not required.

The specific identification inventory method is used by companies that sell high-dollar products.

The first-in, first-out inventory method assigns the most recent costs to the cost of goods sold.

The moving-average method of determining inventory is used with the perpetual system of inventory.

The inventory allocation method that assigns the most recent costs to ending inventory and the oldest costs to cost of goods sold is the ________. A) specific identification method B) LIFO method C) moving-average method D) FIFO method

The inventory allocation method used for companies that maintain base stocks of inventory items is the ________. A) LIFO method B) specific identification method C) FIFO method D) moving-average method

A company using LIFO for tax purposes ________. A) can use either LIFO or FIFO for financial reporting B) must use LIFO for financial reporting C) will have more taxes to pay with LIFO than FIFO in a period of rising inventory costs and stable inventory levels D) will report higher net income with LIFO than FIFO in a period of rising inventory costs and stable inventory levels

IFRS does not allow the LIFO inventory method because ________. A) of the increased taxes owed under the LIFO method B) the majority of companies do not actually sell the oldest items first C) it is viewed as unrealistic and lacks representational faithfulness of inventory flows D) the FIFO method more accurately reflects the cost of inventory

When inventory costs are falling, and inventory levels are stable, the LIFO method will generally result in ________. A) a higher gross profit than under FIFO B) a lower gross profit than under FIFO C) a lower inventory value than under FIFO D) a higher cost of goods sold than under FIFO

When comparing the FIFO and LIFO inventory methods, ________. A) LIFO reports the most up-to-date inventory cost on the balance sheet B) FIFO results in the most realistic net income figure C) FIFO matches old inventory costs against revenue D) LIFO matches old inventory costs against revenue

Wetzel Company has the following data available: If Wetzel Company uses a perpetual moving-average inventory system, the cost of the ending inventory on December 31 is ________. (Round average cost per unit to four decimal places and all other numbers to two decimal places.) A) $12,131.30 B) $4,718.70 C) $16,850.00 D) $5,250.00

Potter Company has the following data available: If Potter Company uses a perpetual moving-average inventory system, the cost of goods sold for the year is ________. (Round average cost per unit to four decimal places and all other numbers to two decimal places.) A) $4,718.70 B) $12,087.88 C) $16,100.00 D) $11,381.30

Gordon Company has the following data available: If Gordon Company uses a perpetual FIFO inventory system, the cost of ending inventory on December 31 is ________. A) $18,200 B) $12,740 C) $3,080 D) $4,400

Sampe Company has the following data available: If Sampe Company uses a perpetual FIFO inventory system, the cost of goods sold for the year is ________. A) $13,950 B) $12,350 C) $12,600 D) $10,000

Bombard Company has the following data available: If Bombard Company uses a perpetual LIFO inventory system, the cost of goods sold for the year is ________. A) $3,500 B) $5,520 C) $16,850 D) $13,350

Vaclav Company has the following data available: If Vaclav Company uses a perpetual moving-average inventory system, the cost of ending inventory on October 31 is ________. (Round average cost per unit to four decimal places and all other numbers to two decimal places.) A) $34,357.48 B) $16,319.81 C) $50,580.19 D) $66,900.00

Maki Company has the following data available: If Maki Company uses a perpetual FIFO inventory system, the cost of ending inventory on October 31 is ________. A) $15,200 B) $14,250 C) $51,575 D) $52,525

Sikich Company has the following data available: If Sikich Company uses a perpetual FIFO inventory system, the cost of goods sold for the month is ________. A) $57,350 B) $9,075 C) $41,250 D) $10,175

Jones Company has the following data available: If Jones Company uses a perpetual LIFO inventory system, the cost of ending inventory on October 31 is ________. A) $14,800 B) $18,500 C) $15,000 D) $66,900

Excalibur Company uses the perpetual inventory method. Excalibur Company has the following data available for the month of January: What is the Cost of Goods Sold for the month of January using LIFO? A) $778 B) $810 C) $762 D) $766

The Exclusive Company uses the perpetual inventory system. The Exclusive Company has the following data available for the month of January: What is the cost of ending inventory on January 31 using LIFO? A) $846 B) $968 C) $920 D) $730

Which inventory costing method most closely approximates current cost for each of the following line items on the financial statements? A) B) C) D)

The ABC Enterprise Company uses the perpetual inventory system. The company has the following data available for the month of April: What is the cost of ending inventory on April 30 using moving average? A) $354 B) $336 C) $342 D) $310

Assume inventory costs are increasing over time and inventory levels are stable. Which inventory method results in a higher net income and a higher ending inventory? A) FIFO B) average cost C) LIFO D) conventional retail

Flynn Company uses LIFO for tax purposes and external reporting purposes. For internal reporting purposes, Flynn Company uses FIFO. Required: List a few reasons why a company uses different inventory costing methods for different purposes.

1. What is the LIFO conformity rule? 2. Why is LIFO used by so many companies? 3. What is the disadvantage of LIFO?

Carbondale Company had the following data available for the last six months: Operating expenses are $2,000 per month. The income tax rate is 30%. Required: 1. Compute Cost of Goods Sold for the six months ending June 30 using: a. FIFO perpetual b. LIFO perpetual 2. How much will the company save in income taxes if they use LIFO instead of FIFO?

The Petrowski Company uses the perpetual inventory system. The Petrowski Company has the following data available for the month of January: Determine the Cost of Goods Sold for January using the following methods: a. FIFO b. LIFO c. Moving-average (Round per unit costs and all other dollar amounts to two decimal places.)

The Butters Company uses the FIFO perpetual inventory system. The company has the following data available for the month of January: The selling price per unit is $1,000. Selling and administrative expenses for the month total $100,000. Interest expense for the month is $10,000. The tax rate is 30%. Required: Prepare the income statement for the month ending January 31, 2019 using a multiple-step format.

The Geewhiz Company uses the perpetual inventory system. The Geewhiz Company has the following data available for the month of January: Determine the cost of the ending inventory using the following methods: a. FIFO b. LIFO c. Moving-average (Round per unit costs to four decimal places and all other dollar amounts to two decimal places.)

The balance in the LIFO reserve account is the difference between the beginning inventory and ending inventory measured using FIFO.

If costs are declining, using LIFO will result in lower cost of goods sold and a higher net income as compared to FIFO and moving-average methods.

Dollar-value LIFO computes inventory on a pool of inventory on the basis of units.

The LIFO reserve is disclosed in the footnotes to the financial statements.

The LIFO effect is ________. A) the change from the LIFO inventory value to the FIFO inventory value B) the difference between the ending inventory measured using LIFO and FIFO C) the change in the LIFO reserve account during the year and the impact on cost of goods sold D) the difference between the beginning inventory measured using LIFO and FIFO

Goodee Bakery is considering a change in its inventory valuation method. Goodee Bakery currently uses the FIFO method and is considering a change to the LIFO method. Goodee Bakery started the year on January 1 with inventory at a FIFO cost of $23,500 and a LIFO cost of $21,000. The ending inventory on December 31 is $25,600 at FIFO cost and $21,300 at LIFO cost. The LIFO effect is ________. A) $4,300 B) $2,500 C) $6,800 D) $1,800

Sweet Treats is considering a change in its inventory valuation method. Sweet Treats currently uses the FIFO method and is considering a change to the LIFO method. Sweet Treats started the year on January 1 with inventory at a FIFO cost of $35,000 and a LIFO cost of $26,750. The ending inventory on December 31 is $29,980 at FIFO cost and $25,810 at LIFO cost. Cost of goods sold under the LIFO basis is $74,600 for the current year. The LIFO effect is ________. A) $8,250 B) $4,170 C) $12,420 D) $4,080

Basking Company adopted the dollar-value LIFO method in 2018. At December 31, 2018, ending inventory was $104,000, with a price index of 1.00, using dollar-value LIFO. At December 31, 2019, the ending inventory using FIFO is $122,000 and the price index is 1.18. Round all dollar amounts to the nearest dollar. Basking Company's ending inventory at December 31, 2019 on a dollar-value LIFO basis is ________. A) $104,000 B) $103,390 C) $103,280 D) $122,000

Savage Company adopted the dollar-value LIFO method in 2014. At December 31, 2014, ending inventory was $102,000, with a price index of 1.00, using dollar-value LIFO. At December 31, 2015, the ending inventory using FIFO is $131,000 and the price index is 1.20. What is the LIFO Reserve on December 31, 2015? (Round all dollar amounts to the nearest dollar.) A) $7,167 B) $20,400 C) $21,833 D) $29,000

Michael Jones Company has adopted the dollar-value LIFO method in 2018. At December 31, 2018, the ending inventory at dollar-value LIFO is $103,000, with a price index of 1.00. At December 31, 2019, the ending inventory using FIFO is $125,000. The price index is 1.3 in 2019. Round all dollar amounts to the nearest dollar. What is the ending inventory using dollar-value LIFO at December 31, 2019? A) $103,000 B) $199,154 C) $96,154 D) $125,000

A company begins the year with a zero balance in the LIFO Reserve account. Based on an analysis of LIFO and FIFO, the company determines the LIFO Reserve should be $20,000 at the end of the year? Which journal entry is needed? A) Debit Cost of Goods Sold for $20,000 and Credit LIFO Reserve for $20,000. B) Debit LIFO Reserve for $20,000 and Credit Cost of Goods Sold for $20,000. C) Debit Cost of Goods Sold for $20,000 and Credit Inventory for $20,000. D) Debit Inventory for $20,000 and Credit Gain on Inventory for $20,000.

What are the advantages of using dollar-value LIFO

What is a LIFO liquidation? In a period of rising costs, why is a LIFO liquidation feared?

Information about the New Pace Company is presented below: Required: Compute the ending inventory for 2015 through 2020 using the dollar-value LIFO method. Round to the nearest dollar.

When following U.S. GAAP, the market value of inventory is always equal to the net realizable value.

A company uses FIFO. The inventory is reported at the lower of cost or the net realizable value.

When writing down the inventory to market value, the direct method reports a loss as a separate line item on the income statement.

When following U.S. GAAP, the lower-of-cost-or-market rule for inventory requires a firm to report ________. A) the inventory at the higher amount of cost or market on the balance sheet B) the difference between the cost basis and the market-based measure of inventory as a gain on the income statement C) the inventory at cost if the market value of inventory is higher than its cost basis D) the inventory at cost if the market value of inventory is lower than its cost basis

When following U.S. GAAP, which of the following statements is not correct regarding the LCM rule for inventory? A) The individual-item approach to LCM is the most conservative because it results in the largest write-down. B) U.S. GAAP specifies a preference for using the individual-item approach. C) Firms can apply the LCM rule for inventory to the aggregate inventory, product lines, or individual items in inventory. D) U.S. GAAP does not specify a preference for the different methods of applying the lower-of-cost-or-market rule.

When following U.S. GAAP, which of the following statements is not correct regarding inventory write-downs using the lower-of-cost-or-market rule? A) If the write-down is significant, the direct method is preferred because the loss is disclosed separately from the cost of goods sold. B) Firms can use one of two methods to write down inventory to market: the direct method or the indirect method. C) The direct method writes off a loss to the inventory account and records that loss in the cost of goods sold on the income statement. D) The indirect method reports the loss as a separate line item on the income statement within income from continuing operations.

Following IFRS, which of the following statements is not correct? A) Firms determine the lower-of-cost-or-market value of inventory using individual-items or groups of items. B) IFRS inventory write-downs can be reversed later if the net realizable value of inventory increases. C) The net realizable value of inventory is calculated as the estimated selling price plus the estimated costs of completion and sale. D) IFRS-reporting firms determine if a write-down for inventory is needed by comparing the historical cost and the net realizable value of inventory.

Following IFRS, reversal of an inventory write-down ________. A) occurs when there is clear evidence of a decrease in net realizable value B) takes place when selling prices decrease following a write-down C) is limited to the amount of the original write-down D) will increase inventory but decrease reported income

At December 31, the Postotnik Company has ending inventory with a historical cost of $630,000. Assume the company uses the perpetual inventory system. The current replacement cost of the inventory is $608,000. The net realizable value is $650,000. The normal profit on this inventory is $50,000. Before any adjustments at the end of the period, the cost of goods sold has a balance of $900,000. Following IFRS, which journal entry is required on December 31 to adjust the ending balance of inventory if the direct method is used? A) No journal entry is required. B) Debit Cost of Goods Sold $20,000 and credit Inventory $20,000. C) Debit Inventory $20,000 and credit Cost of Goods Sold $20,000. D) Debit Cost of Goods Sold $22,000 and credit Inventory $22,000.

At December 31, the Selig Company has ending inventory with a historical cost of $634,000. Assume the company uses the FIFO perpetual inventory system. The net realizable value is $612,000. The normal profit on this inventory is $50,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. Following U.S. GAAP, which journal entry is required on December 31 to adjust the ending balance of inventory if the direct method is used? A) Debit Cost of Goods Sold for $28,000 and credit Inventory for $28,000. B) Debit Inventory for $28,000 and credit Cost of Goods Sold for $28,000. C) Debit Cost of Goods Sold for $22,000 and credit Inventory for $22,000. D) Debit Inventory for $22,000 and credit Cost of Goods Sold for $22,000.

At December 31, the Wendy Company has ending inventory with a historical cost of $631,000 valued using FIFO. Assume the company uses the perpetual inventory system. The net realizable value of the inventory is $614,000. The normal profit on this inventory is $50,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. Following U.S. GAAP, which journal entry is required on December 31 to adjust the ending balance of inventory if the indirect method is used? A) Debit Cost of Goods Sold for $33,000 and credit Inventory for $33,000. B) Debit Inventory for $33,000 and credit Cost of Goods Sold for $33,000. C) Debit Cost of Goods Sold for $17,000 and credit Inventory for $17,000. D) Debit Loss on Inventory Writedown for $17,000 and credit Allowance to Reduce Inventory to Market for $17,000.

When following U.S. GAAP, firms can use two methods to write down inventory to market, if needed. Required: 1. What are the two methods called? 2. If there is a loss, describe the journal entry for both methods. 3. If there is a significant loss, which method is preferred? Why is this the case?

Cohen Company follows U.S. GAAP and uses the lower-of-cost-or-market rule for inventory. At December 31, 2018, the following data is available: Cohen Company's balance sheet at December 31, 2018 reports the following: Required: Determine the correct balance for inventory at December 31, 2018.

At the end of the year, Katerinos Company is applying the lower-of-cost-or-market rule to inventory. The company uses the perpetual inventory system. The company has the following data before year-end adjustments: Required: 1. Following U.S. GAAP, prepare the required journal entry at year-end. The company uses the direct method when applying the lower-of-cost-or-market rule.

A markdown is the amount that the firm decreases the selling price below the initial markup.

If the cost-to-retail ratio increases under the conventional retail method, the cost assigned to the retail value of ending inventory will decrease.

Under the conventional retail inventory method net markups and net markdowns are both used to determine the cost to retail percentage.

The retail inventory method that estimates the lower-of-cost-or-market of ending inventory is the ________. A) basic retail inventory method B) gross profit inventory method C) LCM extract method D) conventional retail inventory method

A company uses the conventional retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markup cancellations in the calculation of the cost-to-retail ratio? A) B) C) D)

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markup cancellations in the calculation of the cost-to-retail ratio? A) B) C) D)

A company uses the conventional retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio? A) B) C) D)

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio? A) B) C) D)

The following information is available for the past month for a retail store: What is the ending inventory at cost using the conventional retail method? (Round cost-to-retail ratios to four decimal places.) A) $28,570 B) $164,186 C) $78,000 D) $68,186

The following information is available for the past month for a retail store: What is the ending inventory at cost using the basic retail method? (Round cost-to-retail ratios to four decimal places.) A) $23,527 B) $29,473 C) $53,000 D) $16,000

The following information is available for the past month for a retail store: What is the ending inventory at cost using the basic retail method? (Round cost-to-retail ratios to four decimal places.) A) $23,780 B) $28,220 C) $52,000 D) $15,000

The following information is available for the past year for a retail store: What is the cost-to-retail ratio to estimate the cost of ending inventory using the conventional retail method? (Round cost-to-retail ratios to four decimal places.) A) 50.7% B) 76.19% C) 54.55% D) 59.02%

Explain the difference between the basic retail method and the conventional retail method.

The following information is available for the month of June for a retail store: Required: Calculate the ending inventory at cost using the conventional retail method. Round ratios to four decimal places. (For example, 0.40127 = 0.4013)

A department store wants to estimate the cost of ending inventory using the conventional retail method. Round ratios to four decimal places. For example, 0.43677 equals 0.4368. The following data is available: Required: Using the conventional retail method, estimate the cost of ending inventory.

The following information is available for the month of June for a retail store: Required: Calculate the ending inventory at cost using the basic retail method. Round ratios to four decimal places. (For example, 0.40127 = 0.4013)

The first step in applying the gross profit method of determining inventory is to take a physical count of the goods.

To calculate inventory using the gross profit method, one must know the gross profit percentage.

The gross profit method may not be used for budgeting purposes.

The gross profit method is often used to estimate the cost of ending inventory. The gross profit method should not be used to ________. A) determine the cost of ending inventory during an interim period without performing a physical count B) determine the cost of ending inventory for an annual financial statement C) determine the cost of inventory that has been stolen or destroyed D) develop budgets

Lorna Company has the following data available: The estimated cost of the ending inventory using the gross profit method is ________. A) $310,000 B) $540,000 C) $360,000 D) $670,000

Jesse Company has the following data for January: What is the company's estimated cost of goods sold for January using the gross profit method? A) $161,200 B) $266,400 C) $368,400 D) $177,600

A fire destroyed the warehouse of Reed Enterprises, on August 31, 2017. The books and records of Reed showed the following information on that date. The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. A) $610,000 B) $1,530,000 C) $920,000 D) $1,490,000

A fire destroyed the inventory of Barber Company. The following information is available: Required: 1. Prepare a schedule to compute the amount of inventory lost in the fire using the gross profit method. 2. Prepare the required journal entry after the fire.

A fire destroyed the inventory of Zabo Company. The following information is available: Required: 1. Prepare a schedule to compute the amount of inventory lost in the fire using the gross profit method. 2. Prepare the required journal entry after the fire.

Inventory disclosures require information about any inventory financing arrangements.

LIFO Reserve = FIFO Inventory Balance - LIFO Inventory Balance.

If the LIFO Reserve increases during the year, Cost of Goods Sold will higher under LIFO than FIFO.

Following U.S. GAAP, required inventory disclosures in financial statements do not include ________. A) carrying amounts by type of inventory, such as raw materials inventory and finished goods inventory B) inventory financing agreements C) reversals of inventory write-downs D) the costing methods used such as FIFO or LIFO

How do inventory disclosures following IFRS differ from those following U.S. GAAP? A) Firms using IFRS are required to report the amount of reversals of inventory write-downs. B) Firms using IFRS disclose the amount of write-downs recognized as expenses or losses. C) Firms using IFRS do not disclose the market value of inventory. D) Firms using IFRS do not disclose inventory financing agreements.

When costs are increasing, and inventory levels are stable, a company will report ________. A) lower cost of goods sold under LIFO than FIFO B) lower inventory under FIFO than LIFO C) higher net income under LIFO than FIFO D) lower net income under LIFO than FIFO

An increase in the LIFO reserve is recorded as ________. A) a credit to Cost of Goods Sold B) a debit to Cost of Goods Sold C) debit to the LIFO Reserve D) credit to the Inventory account

The income taxes saved by using LIFO instead of FIFO are equal to ________. A) the tax rate times the change in the ending inventory from last year to the current year B) the tax rate times the cost to retail ratio C) the tax rate times the LIFO reserve D) the tax rate times the change in the LIFO reserve

If the LIFO reserve increases during the year, and inventory costs are increasing, ________. A) cost of goods sold will be higher under FIFO than LIFO B) cost of goods sold will be higher under LIFO than FIFO C) the journal entry will debit LIFO Reserve D) the journal entry will credit Cost of Goods Sold

The inventory turnover ratio equals ________. A) cost of goods sold divided by average inventory B) sales revenue divided by average inventory C) sales revenue divided by cost of goods sold D) 365 divided by average inventory

Smith Company uses the LIFO retail inventory method for inventory costing. Smith Company has beginning inventory with a cost of $60,000 and a retail value of $180,000. During the year, the company purchases goods with a cost basis of $20,000 and a retail basis of $70,000. Sales are $70,000 at retail. Net markups are $5,000 and net markdowns are $5,000. Under the LIFO retail inventory method, which cost-to-retail ratios are used to determine the cost of ending inventory? A) beginning inventory 33.3%; new layer 28.57% B) beginning inventory 33.3%; new layer 35.71% C) beginning inventory 33.3%; new layer 33.3% D) beginning inventory 33.3%; new layer 21.43%

The Henry Store has the following data for inventory: The store uses the dollar-value LIFO retail method. The price index for the year is 1.08. The price index that pertains to the beginning inventory is 1.00. Round all ratios to four decimal places. What is the cost of the ending inventory at January 31? (Round any percentages to two decimal places, X.XX%, and your final answer to the nearest dollar.) A) $300,000 B) $302,833 C) $453,704 D) $490,000

The Jensen Store has the following data for inventory: The store uses the dollar-value LIFO retail method. The price index for the year is 1.08. The price index that pertains to the beginning inventory is 1.00. What is the retail value of the ending inventory at January 31? A) $400,000 B) $600,000 C) $910,000 D) $830,000

The Siempre Store has the following data for inventory: The store uses the LIFO retail method. Round all ratios to four decimal places. What is the cost of the ending inventory at March 31? (Round your final answer to the nearest dollar.) A) $500,000 B) $840,000 C) $185,000 D) $405,000

Farm Tools Inc. (FTI) uses the LIFO retail inventory method for inventory costing. It has beginning inventory at a cost of $20,000 with a retail value of $50,000. During the year, FTI purchased inventory with a cost basis of $120,000 and a retail basis of $200,000. It had net markups of $6,000 and net markdowns of $12,000. FTI has net sales of $150,000. What is the cost of FTI's ending inventory using the LIFO retail inventory method? (Use two decimal places for percentages. Round final answer to nearest dollar.)

Ferret Company uses the LIFO retail inventory method for inventory costing. Ferret Company has beginning inventory with a cost of $10,000 and a retail value of $40,000. During the year, the company purchases goods with a cost basis of $80,000 and a retail basis of $100,000. It has net markups of $5,000 and net markdowns of $5,000. Sales are $50,000 at retail. Required: What is the cost of the ending inventory using the LIFO retail inventory method? Round all ratios to four decimal places. Round all numbers to two decimal places.

Andra Company uses the dollar-value LIFO retail inventory method for inventory costing. Andra Company has beginning inventory with a cost of $10,000 and a retail value of $40,000. During the year, the company purchases goods with a cost basis of $80,000 and a retail basis of $100,000. It has net markups of $10,000 and net markdowns of $5,000. Sales are $50,000 at retail. The price index for the current year is 1.04. Andra Company adopted the dollar-value LIFO method at the end of the prior year, which is the base year with a price index of 1.00. Required: What is the cost of the ending inventory using the dollar-value LIFO retail inventory method? Round all ratios to four decimal places. Round all numbers to two decimal places.