Question 1

Refer to the following data: ​
Net sales, first month
$13,000
Normal gross profit as a percentage of sales
45%
Inventory, start of period
$8,000
Net purchases, first month
$7,000
​
Using the gross profit method of inventory estimation, the amount of normal gross profit would be

Accepted Answer

The gross profit is 45% of sales, so the normal gross profit is $13,000 x 45% = $5,850.

Question 2

Match the terms with the definitions.
-Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold.

Accepted Answer

The perpetual inventory system tracks inventory levels and cost of goods sold on a continual basis, updating them with each transaction. This is in contrast to a periodic inventory system, where updates are only made periodically (such as at the end of each month or quarter).

Question 3

Match the terms with the definitions.
-The principle that states that a business should use the same accounting methods from period to period. This improves the comparability of the financial statements over time.

Accepted Answer

The principle that states that a business should use the same accounting methods from period to period is consistency.

Question 4

Over the past several years, Landmark Supplies has averaged a gross profit of 34%. At the end of 20--, the income statement of the company included the information shown below:  ​
Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31, 20--. Instead, they had merely estimated the inventory.
Required:
Under the gross profit method of inventory estimation, determine the following items to check the accuracy of the employees' estimates.

Accepted Answer

The answer of Over the past several years, Landmark Supplies...

Question 5

Smart Tech's beginning inventory and purchases for the month of August were as follows:  ​
Required:
Calculate the total amount to be assigned to cost of goods sold and ending inventory for August 31, using each of the following methods. 
a.
First-in, first-out (FIFO)
b.
Last-in, first-out (LIFO)
c.
Weighted-average cost (round the unit price)

Accepted Answer

The answer of Smart Tech's beginning inventory and purchases for...

Question 6

The April 1 inventory of Inotech Inc. had a cost of $35,505 and had a retail value of $79,000. During April, merchandise was purchased for $125,000 and marked to sell for $262,500. April sales totaled $201,000.
​
Required:
Calculate the following items using the retail method of inventory estimation.

Accepted Answer

The answer of The April 1 inventory of Inotech Inc....

Question 7

Refer to the following data: $\begin{array}{lr}
\text { Net sales, first month } & \$ 13,000 \
\text { Normal gross profit as a percentage of sales } & 45 \% \
\text { Inventory, start of period } & \$ 8,000 \
\text { Net purchases, first month } & \$ 7,000
\end{array}$ ? Using the gross profit method of inventory estimation, the cost of goods sold would be

Accepted Answer

The answer of Refer to the following data: \(\begin{array}{lr}
\text {...

Question 8

Assume the beginning inventory as of January 1 consisted of 500 units that were purchased for $8.25 each. During the month, three new purchases were made. The first purchase consisted of 700 units costing $8.50 each, the second purchase had 800 units costing $9.00 each, and the third purchase had 600 units costing $9.50 each. At the end of the month, ending inventory shows 700 units. Compute the cost of goods sold and the ending inventory for the company using each of the following methods. Also determine the gross margin if the total sales revenue is $43,000.
a.
Specific identification: Of the units sold, 300 were from the beginning inventory, 600 from the first purchase, 700 from the second purchase, and 300 from the third purchase.
b.
First-in, first-out (FIFO)
c.
Weighted-average (round the unit price)
d.
Last-in, first-out (LIFO)

Accepted Answer

The answer of Assume the beginning inventory as of January...

Question 9

Assume the market price per unit (cost to replace) of the R. &. K. Company's inventory on December 31, was $16. Calculate the total amount to be assigned to the ending inventory on December 31, under each of the following methods:
a.
FIFO lower-of-cost-or-market
b.
Weighted-average lower-of-cost-or-market

Accepted Answer

The answer of Assume the market price per unit (cost...

Question 10

Match the terms with the definitions.
-A method of estimating inventory in which a business's normal gross profit percentage is used to estimate the cost of goods sold and ending inventory.

Accepted Answer

The gross profit method is a technique used to estimate the cost of goods sold and ending inventory by applying the business's normal gross profit percentage.

Question 11

Match the terms with the definitions.
-An inventory valuation method under which inventory is valued at cost or replacement cost, whichever is lower.

Accepted Answer

The lower-of-cost-or-market method is an inventory valuation method where inventory is valued at the lower of its original cost or its current market replacement cost.

Question 12

Match the terms with the definitions.
-The accounting practice that states that we should never anticipate gains, but always anticipate and account for losses.

Accepted Answer

Conservatism is the accounting practice that states that we should never anticipate gains, but always anticipate and account for losses.

Question 13

Match the terms with the definitions.
-The owner of the merchandise that is held by another business.

Accepted Answer

The owner of merchandise held by another business is the consignor.

Question 14

Assigning of the lower-of-cost-or-market to the items that comprise the inventory of merchandise at the end of the account period is an application of which of the following concepts?

Accepted Answer

The lower-of-cost-or-market concept is a conservative accounting principle that states inventory should be reported at the lower of its cost or market value, whichever is lower. This is done to avoid overstating the value of inventory and to properly reflect any declines in value due to market conditions or obsolescence.

Question 15

Match the terms with the definitions.
-The company holding the merchandise of another business to be sold.

Accepted Answer

The consignee is the company or individual that holds the merchandise of another business to be sold.

Question 16

Delmar Industries uses the perpetual inventory method in accounting for inventory. Prepare the necessary adjusting entry for each of the following independent cases using the cost of goods sold account.

Accepted Answer

The answer of Delmar Industries uses the perpetual inventory method...

Question 17

Match the terms with the definitions.
-The cost to replace inventory at the prevailing purchase price.

Accepted Answer

Market value refers to the cost to replace inventory at the prevailing purchase price.

Question 18

Match the terms with the definitions.
-A method of allocating merchandise cost which assumes that the first goods purchased were the first goods sold and, therefore, that the latest goods purchased remain in inventory.

Accepted Answer

The first-in, first-out (FIFO) method assumes that the first goods purchased are the first to be sold, leaving the latest goods purchased in inventory.

Question 19

Match the terms with the definitions.
-A method of allocating merchandise cost which assumes that the sales in the period were made from the most recently purchased goods. Therefore, the earliest goods purchased remain in inventory.

Accepted Answer

The last-in, first-out (LIFO) method assumes that the most recently purchased goods are sold first, leaving the earliest purchased goods in inventory.

Question 20

Match the terms with the definitions.
-A fiscal year that starts and ends at the time the stock of goods is normally at its lowest level.

Accepted Answer

A natural business year is a fiscal year that aligns with the period when a business's inventory is at its lowest, typically reflecting the natural cycle of the business.

Quiz 13: Accounting for Merchandise Inventory

Refer to the following data: Net sales, first month $13,000 Normal gross profit as a percentage of sales 45% Inventory, start of period $8,000 Net purchases, first month $7,000 Using the gross profit method of inventory estimation, the amount of normal gross profit would be

Match the terms with the definitions. -Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold.

Match the terms with the definitions. -The principle that states that a business should use the same accounting methods from period to period. This improves the comparability of the financial statements over time.

The April 1 inventory of Inotech Inc. had a cost of $35,505 and had a retail value of $79,000. During April, merchandise was purchased for $125,000 and marked to sell for $262,500. April sales totaled $201,000. Required: Calculate the following items using the retail method of inventory estimation.

Match the terms with the definitions. -A method of estimating inventory in which a business's normal gross profit percentage is used to estimate the cost of goods sold and ending inventory.

Match the terms with the definitions. -An inventory valuation method under which inventory is valued at cost or replacement cost, whichever is lower.

Match the terms with the definitions. -The accounting practice that states that we should never anticipate gains, but always anticipate and account for losses.

Match the terms with the definitions. -The owner of the merchandise that is held by another business.

Assigning of the lower-of-cost-or-market to the items that comprise the inventory of merchandise at the end of the account period is an application of which of the following concepts?

Match the terms with the definitions. -The company holding the merchandise of another business to be sold.

Delmar Industries uses the perpetual inventory method in accounting for inventory. Prepare the necessary adjusting entry for each of the following independent cases using the cost of goods sold account.

Match the terms with the definitions. -The cost to replace inventory at the prevailing purchase price.

Match the terms with the definitions. -A method of allocating merchandise cost which assumes that the first goods purchased were the first goods sold and, therefore, that the latest goods purchased remain in inventory.

Match the terms with the definitions. -A method of allocating merchandise cost which assumes that the sales in the period were made from the most recently purchased goods. Therefore, the earliest goods purchased remain in inventory.

Match the terms with the definitions. -A fiscal year that starts and ends at the time the stock of goods is normally at its lowest level.

Quiz 13: Accounting for Merchandise Inventory

Refer to the following data: ​ Net sales, first month $13,000 Normal gross profit as a percentage of sales 45% Inventory, start of period $8,000 Net purchases, first month $7,000 ​ Using the gross profit method of inventory estimation, the amount of normal gross profit would be

Match the terms with the definitions. -Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold.

Match the terms with the definitions. -The principle that states that a business should use the same accounting methods from period to period. This improves the comparability of the financial statements over time.

Match the terms with the definitions. -A method of estimating inventory in which a business's normal gross profit percentage is used to estimate the cost of goods sold and ending inventory.

Match the terms with the definitions. -An inventory valuation method under which inventory is valued at cost or replacement cost, whichever is lower.

Match the terms with the definitions. -The accounting practice that states that we should never anticipate gains, but always anticipate and account for losses.

Match the terms with the definitions. -The owner of the merchandise that is held by another business.

Assigning of the lower-of-cost-or-market to the items that comprise the inventory of merchandise at the end of the account period is an application of which of the following concepts?

Match the terms with the definitions. -The company holding the merchandise of another business to be sold.

Delmar Industries uses the perpetual inventory method in accounting for inventory. Prepare the necessary adjusting entry for each of the following independent cases using the cost of goods sold account.

Match the terms with the definitions. -The cost to replace inventory at the prevailing purchase price.

Match the terms with the definitions. -A method of allocating merchandise cost which assumes that the first goods purchased were the first goods sold and, therefore, that the latest goods purchased remain in inventory.

Match the terms with the definitions. -A method of allocating merchandise cost which assumes that the sales in the period were made from the most recently purchased goods. Therefore, the earliest goods purchased remain in inventory.

Match the terms with the definitions. -A fiscal year that starts and ends at the time the stock of goods is normally at its lowest level.

Refer to the following data: Net sales, first month $13,000 Normal gross profit as a percentage of sales 45% Inventory, start of period $8,000 Net purchases, first month $7,000 Using the gross profit method of inventory estimation, the amount of normal gross profit would be