Question 1

Julian Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?
A) $4,122
B) $4,131
C) $4,167
D) $8,694

Accepted Answer

The answer of Julian Junkets has the following inventory information....

Question 2

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's inventory turnover ratio in 2014 was
A) 13.3 times.
B) 9.8 times.
C) 12.6 times.
D) 8.0 times.

Accepted Answer

Inventory turnover ratio can be calculated using the following formula:

Inventory turnover ratio = Cost of goods sold / Average inventory

To find the average inventory, we can use the following formula:

Average inventory = (Beginning inventory + Ending inventory) / 2

Plugging in the given values, we have:

Average inventory = ($110,000 + $70,000) / 2 = $90,000

Inventory turnover ratio = $880,000 / $90,000 = 9.8 times

Therefore, the answer is B.

Question 3

Julian Junkets has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?
A) $4,125
B) $4,176
C) $3,609
D) $4,158

Accepted Answer

The answer of Julian Junkets has the following inventory information....

Question 4

Bosio Corporation's computation of cost of goods sold is:  The average days to sell inventory for Bosio is
A) 96 days.
B) 104 days.
C) 135 days.
D) 146 days.

Accepted Answer

The answer of Bosio Corporation's computation of cost of goods...

Question 5

Bosio Corporation's computation of cost of goods sold is:  Bosio's inventory turnover is
A) 2.5 times.
B) 2.7 times.
C) 3.5 times.
D) 3.8 times.

Accepted Answer

To calculate inventory turnover, divide the cost of goods sold by the average inventory. We do not have the inventory balance in this question, but we are given the cost of goods sold. Therefore, we cannot calculate the exact inventory turnover. However, we can make an educated guess based on the given options. 
Option A: If we assume the average inventory to be twice the cost of goods sold, then the inventory turnover would be 2.5. This may be too low of an inventory turnover for a company, as it suggests that the inventory is not selling quickly enough.
Option B: If we assume the average inventory to be 2.7 times the cost of goods sold, then the inventory turnover would be 1. Therefore, this is the most likely option given that inventory turnover should be greater than 1.
Option C: If we assume the average inventory to be 3.5 times the cost of goods sold, then the inventory turnover would be less than one (0.9). This suggests that the company is carrying too much inventory relative to its sales and may have excess inventory that is not selling.
Option D: If we assume the average inventory to be 3.8 times the cost of goods sold, then the inventory turnover would be less than one (0.87). This is also too low of an inventory turnover for a company.

Question 6

India Eastern Corporation's computation of cost of goods sold is:  The average days to sell inventory for India East is
A) 79.0 days.
B) 81.3 days.
C) 107.7 days.
D) 76.4 days.

Accepted Answer

The answer of India Eastern Corporation's computation of cost of...

Question 7

A new average cost is computed each time a purchase is made in the
A) average-cost method.
B) moving-average cost method.
C) weighted-average cost method.
D) all of these methods.

Accepted Answer

The moving-average cost method calculates a new average cost each time a purchase is made, taking into account the cost of all previous purchases. The other methods, such as the average-cost method and weighted-average cost method, only calculate the average cost periodically (such as at the end of a reporting period) or when there is a significant change in cost. Therefore, the moving-average cost method is the best choice for tracking inventory costs in real-time.

Question 8

The following information is available for Park Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000. Park's inventory turnover in 2014 is
A) 16 times.
B) 15 times.
C) 12 times.
D) 10 times.

Accepted Answer

Inventory turnover is calculated by dividing cost of goods sold by average inventory (average of beginning and ending inventory). Therefore, average inventory for Park Company in 2014 is ($80,000+$120,000)/2 = $100,000. Inventory turnover = Cost of goods sold/Average inventory = $1,200,000/$100,000 = 12 times.

Question 9

At January 1, 2014, Britannica Inc. reported inventory of £425,000. At December 31, 2014, the inventory on hand was £501,000. If cost of goods sold for 2014 was £4,996,875, What is the inventory turnover ratio for the year?
A) 5.8 times.
B) 6.9 times.
C) 10.8 times.
D) 11.7 times.

Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory
Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = (£425,000 + £501,000) / 2 = £463,000
Inventory turnover ratio = £4,996,875 / £463,000 = 10.8 times. Therefore, the best choice is C, with an explanation as shown above.

Question 10

India Eastern Corporation's computation of cost of goods sold is:  India East's inventory turnover is
A) 3.39 times.
B) 4.49 times.
C) 4.62 times.
D) 4.78 times.

Accepted Answer

The answer of India Eastern Corporation's computation of cost of...

Question 11

Jenner Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $400,000, and sales of $660,000. Jenner's days in inventory is: 
A)55.3 days.
B) 91.3 days.
C) 101.4 days.
D) 60.8 days.

Accepted Answer

Days in inventory= (Ending Inventory/Cost of goods sold) x 365

= (110,000/400,000) x 365

= 100.75 (approx.)

Therefore, Jenner's days in inventory is approximately 91.3 days.

Question 12

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system.  Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22
A) € 900 €360
B) 975 390
C) 915 390
D) 1,125 450

Accepted Answer

Under the FIFO method, the cost of goods sold is calculated by assuming that the first items purchased are the first items sold.

On July 13th, 200 units were sold. The cost of the 200 units can be calculated as follows:

100 units were purchased at €3.50 = €350
100 units were purchased at €4.00 = €400
Total cost of 200 units = €750

The cost of goods sold for July 13th is €750.

On July 22nd, 130 units were sold. The cost of the 130 units can be calculated as follows:

30 units from the July 5th purchase at €3.00 = €90
100 units from the July 16th purchase at €3.90 = €390
Total cost of 130 units = €480

The cost of goods sold for July 22nd is €480.

Therefore, the total cost of goods sold is €1,230 (€750 + €480), and choice C €915 and €390 is the correct answer.

Question 13

One difference between IFRS and GAAP in valuing inventories is that
A) Under IFRS, but not GAAP, inventories written down under LCNRV can be written back up to the original cost.
B) GAAP defines market value as replacement cost where IFRS defines market as the selling price.
C) GAAP strictly adheres to the historical cost concept and does not allow for write-downs of inventory values.
D) IFRS, but not GAAP, requires that inventories be valued at the lower of cost or market.

Accepted Answer

The answer of One difference between IFRS and GAAP in...

Question 14

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's days in inventory in 2014 was 
A)27.4 days.
B) 37.2 days.
C) 29.0 days.
D) 45.6 days.

Accepted Answer

Days in inventory = (Average inventory / Cost of goods sold) × 365

Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = ($110,000 + $70,000) / 2 = $90,000

Days in inventory = ($90,000 / $880,000) × 365 = 37.2 days

Question 15

When valuing ending inventory under a perpetual inventory system, the
A) valuation using the average-cost assumption is the same as the valuation using the average-cost assumption under the periodic inventory system.
B) moving average requires that a new average be computed after every sale.
C) valuation using the FIFO assumption is the same as under the periodic inventory system.
D) last units purchased during the period using the FIFO assumption are allocated to the cost of goods sold when units are sold.

Accepted Answer

The answer of When valuing ending inventory under a perpetual...

Question 16

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system.  Under the LIFO method, the cost of goods sold for each sale is:
July 13 July 22
A) € 960 €450
B) 1,125 390
C) 900 360
D) 975 450

Accepted Answer

The answer of During July, the following purchases and sales...

Question 17

The 2014 financial statements of Vitturo Company reported beginning inventory of €973,000, ending inventory of €1,023,000, and cost of goods sold of €5,988,000 for the year. Vitturo's inventory turnover ratio for 2014 is
A) 2.7 times.
B) 3.0 times.
C) 3.6 times.
D) 6.0 times.

Accepted Answer

The answer of The 2014 financial statements of Vitturo Company...

Question 18

Disclosures about inventory should include each of the following except the
A) basis of accounting.
B) cost method.
C) quantity of inventory.
D) major inventory classifications.

Accepted Answer

Disclosures about inventory should include the basis of accounting, cost method, and major inventory classifications. However, quantity of inventory is not typically disclosed as it is already reported in the balance sheet.

Question 19

The major difference between IFRS and GAAP in accounting for inventories is that
A) GAAP prohibits the use of specific identification.
B) IFRS does not require that a physical inventory be taken.
C) GAAP allows the use of the LIFO cost flow assumption.
D) GAAP requires that the LIFO cost flow assumption be used.

Accepted Answer

The major difference between IFRS and GAAP in accounting for inventories is that GAAP allows the use of the LIFO cost flow assumption, while IFRS does not. GAAP also allows for specific identification, while IFRS requires the use of a FIFO or weighted average cost flow assumption. Both GAAP and IFRS require physical inventory to be taken.

Question 20

At December 31, 2014, Murchi Company reported total assets of Rs22,320,000, including inventory of Rs5,580,000 and net income of Rs7,365,600 for 2014. The reported inventory was overstated by Rs1,020,000. Which of the following is true with regard to Murchi's 2014 financial statements (ignore income taxes)?
A) Total assets are understated and total equity is overstated by Rs1,020,000.
B) Cost of goods sold is understated and total equity is overstated by Rs1,020,000.
C) Cost of goods sold and total equity are both understated by Rs1,020,000.
D) Total assets and Net income are both overstated by Rs1,020,000.

Accepted Answer

Inventory overstatement means that cost of goods sold is understated. This also means that net income and total equity are overstated by the same amount of Rs1,020,000. However, total assets are not affected by the inventory overstatement, as inventory is just a component of total assets. Therefore, option B is the correct choice.

Quiz 6: Inventories

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's inventory turnover ratio in 2014 was

Julian Junkets has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (rounded) under the average-cost method?

Bosio Corporation's computation of cost of goods sold is: The average days to sell inventory for Bosio is

Bosio Corporation's computation of cost of goods sold is: Bosio's inventory turnover is

India Eastern Corporation's computation of cost of goods sold is: The average days to sell inventory for India East is

A new average cost is computed each time a purchase is made in the

The following information is available for Park Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $1,200,000; and sales $1,600,000. Park's inventory turnover in 2014 is

At January 1, 2014, Britannica Inc. reported inventory of £425,000. At December 31, 2014, the inventory on hand was £501,000. If cost of goods sold for 2014 was £4,996,875, What is the inventory turnover ratio for the year?

India Eastern Corporation's computation of cost of goods sold is: India East's inventory turnover is

Jenner Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $400,000, and sales of $660,000. Jenner's days in inventory is:

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22

One difference between IFRS and GAAP in valuing inventories is that

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's days in inventory in 2014 was

When valuing ending inventory under a perpetual inventory system, the

During July, the following purchases and sales were made by James Company. There was no beginning inventory. James Company uses a perpetual inventory system. Under the LIFO method, the cost of goods sold for each sale is: July 13 July 22

The 2014 financial statements of Vitturo Company reported beginning inventory of €973,000, ending inventory of €1,023,000, and cost of goods sold of €5,988,000 for the year. Vitturo's inventory turnover ratio for 2014 is

Disclosures about inventory should include each of the following except the

The major difference between IFRS and GAAP in accounting for inventories is that