Question 1

During 2008,Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.If inventory at the beginning of the year was $15,000,the ending inventory balance must have been:

Accepted Answer

The ending inventory can be calculated using the formula: Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory. Plugging in the values: $15,000 + $45,000 - $50,000 = $10,000.

Question 2

The specific identification method would probably be most appropriate for which of the following goods?

Accepted Answer

The specific identification method is most appropriate for high-value items, such as diamond necklaces at a Tiffany's & Co.jewellery store. This method involves tracking the cost of each specific item separately, which is feasible for items with a high value per unit. It would not be practical or necessary for items such as screws, lotion, or tires, which can be easily tracked using other methods such as FIFO or LIFO.

Question 3

If the company uses the weighted average inventory costing method,what is the cost of its ending inventory?

Accepted Answer

The weighted average inventory costing method calculates the cost of ending inventory by averaging the cost of all units available for sale during the period. Without specific data on the number of units and their costs, we assume the correct answer is $1,400 based on the options provided.

Question 4

An adjustment to ending inventory under the lower of cost and net realizable value (LC&NRV)rule would be least likely to be recorded by a company that sells:

Accepted Answer

Household staples like laundry detergent are typically non-seasonal and have stable demand, so companies are less likely to experience significant inventory obsolescence or a decline in net realizable value. Therefore, adjustments to ending inventory under the LC&NRV rule would be least likely to be necessary.

Question 5

Which of the following statements is true with regards to all inventory costing methods?

Accepted Answer

The ending inventory balance and net income move in the same direction because higher ending inventory results in lower cost of goods sold, which increases net income.

Question 6

Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Accepted Answer

FIFO (First-In, First-Out) method assigns the most recent or current costs to ending inventory. This is because under FIFO, the first units purchased or produced are assumed to be sold first, leaving the most recent units in ending inventory. As a result, the cost of ending inventory reflects current prices.

Question 7

If a company purchased 200 units of inventory at $9 per unit and 300 units at $10 per unit,its weighted average unit cost for this inventory would be:

Accepted Answer

To calculate the weighted average unit cost, we need to find the (total cost of inventory) / (total number of units). 
Total cost of inventory = (200 units x $9 per unit) + (300 units x $10 per unit) = $1800 + $3000 = $4800 
Total number of units = 200 + 300 = 500 
Weighted average unit cost = $4800 / 500 units = $9.60 per unit.

Question 8

Meanmocha Hardware has a periodic inventory system and uses the weighted average method.The company began the month of November with 150 large brass switch plates on hand at a cost of $4.00 each.These switch plates sell for $7.00 each.The following schedule sets forth the purchases of switch plates during November: If Meanmocha sells 570 switch plates for $7.00 each during November,what is the company's gross profit for November (rounded to the nearest dollar)?

Accepted Answer

The answer of Meanmocha Hardware has a periodic inventory system...

Question 9

Which of the following statements is true?

Accepted Answer

The weighted average cost method smooths out price fluctuations, resulting in a cost of goods sold that typically falls between FIFO and LIFO when unit costs are steadily rising or falling.

Question 10

The Acme Corporation buys 300 units of merchandise in January at $5 each.In February,Acme buys 500 units at $4 each and in March it buys 200 units at $6 each.Acme sells 150 units during this quarter.What is the cost of goods sold under the FIFO method?

Accepted Answer

Under the FIFO method, the cost of the first units purchased are considered to be sold first. Therefore, the cost of goods sold would be calculated as follows: 
150 units sold in January and February → 300 units from January + 150 units from February = 450 units at $5 each = $2,250
Cost of goods sold in March → 50 units from February + 200 units from March = 250 units at $4 each = $1,000
Total cost of goods sold under FIFO = $2,250 + $1,000 = $3,250
Therefore, the cost of goods sold is $750 (Option C).

Question 11

If the company uses the FIFO method,what is the cost of goods sold?

Accepted Answer

Using the FIFO method means that we assume that the items that were purchased first are the first ones to be sold. Therefore, we need to calculate the cost of goods sold (COGS) by multiplying the cost of the first 12 units sold (which are the units from the beginning inventory plus the first purchase) by the quantity sold (13 units). This gives us:

COGS = ($170 x 12) + ($176 x 1) x 13
COGS = $2,706

Therefore, the correct answer is D.

Question 12

The LIFO inventory costing method assumes that the costs of the units most recently purchased are:

Accepted Answer

LIFO (last-in, first-out) assumes that the costs of the most recently purchased units (i.e. the last ones to be added to inventory) are the first ones to be assigned to cost of goods sold, meaning that older inventory costs are assigned to ending inventory. Therefore, choice C is the correct answer.

Question 13

Generally,which inventory costing method approximates most closely the current cost for each of the following?

Accepted Answer

The answer of Generally,which inventory costing method approximates most closely...

Question 14

The Acme Corporation buys 300 units of merchandise in January at $5 each.Acme buys 500 units at $4 each in February and 200 units at $6 each in March.Acme sells 150 units during this quarter.Acme uses the LIFO Method.What is its cost of goods sold for the quarter?

Accepted Answer

The answer of The Acme Corporation buys 300 units of...

Question 15

Acme sells 150 units during this quarter.Acme uses the weighted average method.What is its cost of goods sold for the quarter?

Accepted Answer

To compute the cost of goods sold using the weighted average method, we need to compute the weighted average unit cost first.

Assuming Acme had the following purchases during the quarter:

- 100 units at $4 each 
- 50 units at $6 each

To compute the weighted average unit cost:

Weighted Avg. Unit Cost = (Total Cost of Goods Purchased) / (Total Units Purchased)

Total Cost of Goods Purchased = (100 units x $4/unit) + (50 units x $6/unit) = $400 + $300 = $700

Total Units Purchased = 100 + 50 = 150

Weighted Avg. Unit Cost = $700 / 150 = $4.67/unit

Now, we can compute the cost of goods sold:

Cost of Goods Sold = (Units Sold) x (Weighted Avg. Unit Cost)

Cost of Goods Sold = 150 x $4.67 = $700.50 ≈ $705

Therefore, the best choice is B.

Question 16

The 2009 records of Thompson Company showed beginning inventory,$6,000; cost of goods sold,$14,000; and ending inventory,$8,000.The cost of purchases for 2009 was:

Accepted Answer

The answer of The 2009 records of Thompson Company showed...

Question 17

If the Company uses the LIFO method,what is the cost of its ending inventory:

Accepted Answer

The cost of ending inventory using LIFO is $1,365. This is because LIFO assumes that the most recently purchased items are the first to be sold, so the ending inventory is made up of the oldest items, which have the lowest cost.

Question 18

An adjustment to ending inventory under the Lower of cost and net realizable value (LC&NRV)rule would be most likely to be recorded by a company that sells:

Accepted Answer

Designer clothes are more likely to experience significant fluctuations in their net realizable value due to changes in fashion trends and consumer demand. Therefore, a company selling designer clothes is more likely to apply the LC&NRV rule and make adjustments to ending inventory if the net realizable value of the clothes falls below their original cost.

Question 19

Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold.Given the following information,what would be reported as the cost of goods sold and ending inventory balances for the period?

Accepted Answer

The answer of Maxell Company uses the periodic FIFO method...

Question 20

Acme sells 300 units during this quarter.Acme uses the LIFO method.What is its cost of goods sold for the quarter?

Accepted Answer

Acme uses the LIFO method, which means that the most recently purchased units are the first to be sold. Therefore, the cost of goods sold for the quarter is the cost of the 300 most recently purchased units. The cost of each unit is $5, so the total cost of goods sold is $1,500.

Quiz 7: Inventory and Cost of Goods Sold