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Exam 5: Inventories and Cost of Sales

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Question 1

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A company had the following ending inventory costs: $\begin{array} { | l | l | c | c | } \hline \text { Product } & \text { Units Available } & \text { Cost } & \text { Market } \\\hline \text { A } & 10 & \$ 5 & \$ 6 \\\hline \text { B } & 50 & 8 & 7 \\\hline \text { C } & 35 & 10 & 11 \\\hline\end{array}$ Instructions: (a) Calculate the lower of cost or market (LCM)value for the inventory as a whole. (b) Calculate the lower of cost or market (LCM)value for each individual item.

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(a)
\[\begin{array} { | l | c | c | c | ...

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Question 2

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Given the following information,determine the cost of goods sold at December 31 using the weighted-average periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

A) $282.15
B) $332.10
C) $284.70
D) $290.70
E) $210.30

F) D) and E)
G) None of the above

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C

Question 3

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A company made the following merchandise purchases and sales during the month of May: $\begin{array}{|l|l|l|l|}\hline\text { May 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \\\hline \text { May 5 purchased } & 270 & \text { units at } & \$ 17 \text { each } \\\hline \text { May 10 sold } & 400 & \text { units at } & \$ 50 \text { each } \\\hline \text { May 20 purchased } & 300 & \text { units at } & \$ 22 \text { each } \\\hline \text { May 25 sold } & 400 & \text { units at } & \$ 50 \text { each }\\\hline\end{array}$ There was no beginning inventory.If the company uses the weighted-average periodic method,what would be the cost of the ending inventory?

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:

The consistency concept requires a company to use the same accounting methods period after period,so that financial statements are comparable across periods.

The ____________________ ratio reflects how much inventory is available in terms of days' sales.

A company had inventory on November 1 of 5 units at a cost of $20 each.On November 2,they purchased 10 units at $22 each.On November 6 they purchased 6 units at $25 each.On November 5,8 units were sold for $55 each.Using the weighted-average perpetual inventory method,what was the value of the inventory on November 30?

A company's warehouse was destroyed by a tornado on March 15.The following information was salvaged from the ruins: Inventory,beginning: $28,000 Purchases for the period: $17,000 Sales for the period: $55,000 Sales returns for the period: $700 The company's average gross profit ratio is 35%.What is the estimated cost of the lost inventory?

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Acme-Jones Corporation uses a LIFO perpetual inventory system. August 2,25 units were purchased at $12 per unit. August 5,10 units were purchased at $13 per unit. August 15,12 units were sold at $25 per unit. August 18,15 units were purchased at $14 per unit. What was the amount of the cost of goods sold?

Goods in transit are automatically included in a company's inventory account.

A company uses the periodic inventory system and the following information is available.All purchases and sales are on credit. $\begin{array}{|r|l|r|r|r|r|}\hline&&&&&\text { Unit } \\& && \text { Unit } & \text { Total } & \text { Sales }\\&&\text { Units } & \text { Cost } & \text { Cost } & \text { Price }\\\hline 10 / 01 & \text { Inventory balance } & 30 & \$ 3 & \$ 90 \\\hline 10 / 06 & \text { Purchase } & 70 & 4 & 280 \\\hline 10 / 11 & \text { Purchase } & 45 & 5 & 225 \\\hline 10 / 16 & \text { Purchase } & 50 & 6 & 300 \\\hline & \text { Goods available } & 195 & & \$ 895 \\\hline\\\hline 10 / 12 & \text { Sale } & 100&&&10 \\\hline 10 / 20 & \text { Sale } & 60&&&11 \\\hline & \text { Goods sold } & 160 \\\hline & & \\\hline 10 / 31 & \text { Inventory balance } & \underline{35} \\\hline\end{array}$ 1.Prepare the general journal entries to record: The October 6 purchase. The October 12 sale. 2.Assuming the periodic inventory system is used,determine both the cost of the ending inventory and the cost of goods sold using the LIFO method for October.

Given the following information,determine the cost of goods sold at December 31 using the LIFO periodic inventory method: December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

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

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive,custom-made inventory.

The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each individual product.

The inventory valuation method that tends to smooth out erratic changes in costs is:

Given the following information,determine the cost of ending inventory at December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.

Days' sales in inventory is calculated as:

Errors in the period-end inventory balances only have an impact on the current period's records and financial statements.