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1. One of the two internal control
procedures over inventory is to properly report inventory on the financial statements.
a. True
b. False
2. A purchase order establishes an
initial record of the receipt of the inventory.
a. True
b. False
3. A perpetual inventory system is
an effective means of control over inventory.
a. True
b. False
4.
A
subsidiary inventory ledger can be an aid in maintaining inventory levels at
their proper levels.
a. True
b. False
5. Safeguarding inventory and
proper reporting of the inventory in the financial statements are the reasons
for controlling the inventory.
a. True
b. False
6. Inventory controls start when
the merchandise is shelved in the store area.
a. True
b. False
7.
A
physical inventory should be taken at the end of every month.
a. True
b. False
8. The specific identification
inventory method should be used when the inventory consists of identical,
low-cost units that are purchased and
sold frequently.
a. True
b. False
9. The choice of an inventory
costing method has no significant impact on the financial statements.
a. True
b. False
10. Of the three widely used
inventory costing methods (FIFO, LIFO, and average cost), the LIFO method of
costing inventory assumes costs are
charged based on the most recent purchases first.
a. True
b. False
11. When using the FIFO inventory
costing method, the most recent costs are assigned to the cost of merchandise
sold.
a. True
b. False
12. FIFO is the inventory costing
method that follows the physical flow of the goods.
a. True
b. False
13.
Under
the LIFO inventory costing method, the most recent costs are assigned to ending
inventory.
a. True
b. False
14. The weighted average inventory
cost flow method is the least used of the inventory costing methods.
a. True
b. False
15. If the perpetual inventory
system is used, the merchandise inventory account is debited for purchases of merchandise.
a. True
b. False
16. Under the periodic inventory
system, the merchandise inventory account continuously discloses the amount of inventory on hand.
a. True
b. False
17. Under the periodic inventory
system, a physical inventory is taken to determine the cost of the inventory on
hand and the cost of the merchandise
sold.
a. True
b. False
18. The three inventory costing
methods will normally each yield different amounts of net income.
a. True
b. False
19.
The
average cost method will always yield results between FIFO and LIFO.
a. True
b. False
20. During periods of increasing
costs, the use of the FIFO method of costing inventory will result in a greater
amount of net income than would result
from the use of the LIFO cost method.
a. True
b. False
21. During periods of increasing
costs, the use of the FIFO method of costing inventory will yield an inventory
amount for the balance sheet that is
higher than LIFO would produce.
a. True
b. False
22.
During
periods of rapidly rising costs, the use of the LIFO method results in illusory
or inventory profits.
a. True
b. False
23. During periods of decreasing
costs, the use of the LIFO method of costing inventory will result in a lower
amount of net income than would result
from the use of the FIFO method.
a. True
b. False
24. During periods of increasing
costs, an advantage of the LIFO inventory cost method is that it matches more
recent costs against current revenues.
a. True
b. False
25. In valuing merchandise for
inventory purposes, net realizable value is the estimated selling price less
any direct costs of disposal.
a. True
b. False
26. Unsold consigned merchandise
should be included in the consignee's inventory.
a. True
b. False
27. If ending inventory for the year
is understated, net income for the year is overstated.
a. True
b. False
28. If ending inventory for the year
is overstated, owner's equity reported on the balance sheet at the end of the
year is understated.
a. True
b. False
29. The lower of cost or market is a
method of inventory valuation.
a. True
b. False
30. "Market" as used in
the phrase "lower of cost or market" for valuing inventory, refers to
the price at which the inventory is
being offered for sale by its owner.
a. True
b. False
31. A consignor who has goods out on
consignment with an agent should include the goods in ending inventory even though they are not in the possession of the
consignor.
a. True
b. False
32. The use of the
lower-of-cost-or-market method of inventory valuation increases net income for
the period in which the inventory
replacement price declined.
a. True
b. False
33. The lower-of-cost-or-market
method of determining the value of ending inventory can be applied on an item
by item, by major classification of
inventory, or by the total inventory.
a. True
b. False
34. When merchandise inventory is
shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the
inventory should be shown.
a. True
b. False
35. It's not unusual for large companies
to use different inventory costing methods for different segments of its inventory.
a. True
b. False
36. Direct disposal costs do not
include special advertising or sales commissions.
a. True
b. False
37.
Inventory
errors, if not discovered, will self-correct within two years.
a. True
b. False
38. Generally, the lower the number
of days' sales in inventory, the better.
a. True
b. False
39.
One
negative
effect of carrying too much inventory is risk that customers will change
their buying habits.
a. True
b. False
40. Average inventory is computed by
adding the inventory at the beginning of the period to the inventory at the end
of the period and dividing by two.
a. True
b. False
41. Inventory turnover measures the
length of time it takes to acquire, sell, and replace the inventory.
a. True
b. False
42. In the retail inventory method,
the cost to retail ratio is equal to the cost of merchandise sold divided by
the retail price of the merchandise
sold.
a. True
b. False
43.
Use
of the retail inventory method requires taking a physical count of inventory.
a. True
b. False
44. If a fire destroys the
merchandise inventory, the gross profit method can be used to estimate the cost
of merchandise destroyed.
a. True
b. False
45. If a company uses a periodic
inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.
a. True
b. False
46.
Under
a perpetual inventory system, the amount of each type of merchandise on hand is
available in the
a. customer's ledger
b. creditor's ledger
c. inventory ledger
d. purchase ledger
47. Which document authorizes the
purchase of the inventory from an approved vendor?
a. the purchase order
b. the petty cash voucher
c. the receiving report
d. the vendor's invoice
48. The primary objectives of
control over inventory are
a. safeguarding the inventory from
damage and maintaining constant observation of the inventory
b. reporting inventory in the
financial statements
c. maintaining constant observation
of the inventory and reporting inventory in the financial statements
d. safeguarding inventory from damage
and reporting inventory in the financial statements
49.
Taking
a physical count of inventory
a. is not necessary when a periodic
inventory system is used
b. should be done near year-end
c. has no internal control
relevance
d. is not necessary when a
perpetual inventory system is used
50. Control of inventory should
begin as soon as the inventory is received.
Which of the following internal control steps is not done to meet this goal?
a. check the invoice to the
receiving report
b. check the invoice to the
purchase order
c. check the invoice with the
person who specifically purchased the item
d. check the invoice extensions and
totals
51.
All
of the following are documents used for inventory control except
a. a petty cash voucher
b. a vendor's invoice
c. a receiving report
d. a purchase order
52.
Which
document establishes an initial record of the receipt of the inventory?
a. receiving report
b. vendor's invoice
c. purchase order
d. petty cash voucher
53.
Which
of the following is not an example for safeguarding inventory?
a. Storing inventory in restricted
areas.
b. Physical devices such as two-way
mirrors, cameras, and alarms.
c. Matching receiving documents,
purchase orders, and vendor’s invoice.
d. Returning inventory that is
defective or broken.
54. Which of the following methods
is appropriate for a business whose inventory consists of a relatively small
number of unique, high-cost items?
a. FIFO
b. LIFO
c. average
d. specific identification
55.
Ending
inventory is made up of the oldest purchases when a company uses
a. first-in, first-out
b. last-in, first-out
c. average cost
d. retail method
56. When merchandise sold is assumed
to be in the order in which the purchases were made, the company is using
a. first-in, last-out
b. last-in, first-out
c. first-in, first-out
d. average cost
57. The two most widely used methods
for determining the cost of inventory are
a. FIFO and LIFO
b. FIFO and average cost
c. LIFO and average cost
d. gross profit and average cost
58.
Cost
flow is in the order in which costs were incurred when using
a. average cost
b. last-in, first-out
c. first-in, first-out
d. weighted average
59. Cost flow is in the reverse
order in which costs were incurred when using
a. weighted average
b. last-in, first-out
c. first-in, first-out
d. average cost
60. The inventory method that
assigns the most recent costs to cost of merchandise sold is
a. FIFO
b. LIFO
c. weighted average
d. specific identification
61.
The
inventory costing method that reports the most current prices in ending
inventory is
a. FIFO
b. specific identification
c. LIFO
d. average cost
62. The inventory costing method
that reports the earliest costs in ending inventory is
a. FIFO
b. LIFO
c. weighted average
d. specific identification
63. Which of the following companies
would be more likely to use the specific identification inventory costing
method?
a. Gordon’s Jewelers
b. Lowe’s
c. Best Buy
d. Walmart
Addison, Inc. uses a perpetual inventory system. The following is information about one
inventory item for the month of
September:
|
Sep. 1
|
Inventory
|
20
units at $20
|
|
4
|
Sold
|
10 units
|
|
10
|
Purchased
|
30 units at $25
|
|
17
|
Sold
|
20 units
|
|
30
|
Purchased
|
10 units at $30
|
64.
If
Addison uses FIFO, the cost of the ending merchandise inventory on September 30
is
a. $800
b. $650
c. $750
d. $700
65. If Addison uses LIFO, the cost
of the ending merchandise inventory on September 30 is
a. $800
b. $650
c. $750
d. $700
66.
When
using a perpetual inventory system, the journal entry to record the cost of
merchandise sold is:
a. debit Cost of Merchandise Sold;
credit Sales
b. debit Cost of Merchandise Sold;
credit Merchandise Inventory
c. debit Merchandise Inventory;
credit Cost of Merchandise Sold
d. No journal entry is made to
record the cost of merchandise sold.
67. Under the inventory method, accounting records maintain
a continuously updated inventory value.
a. retail
b. periodic
c. physical
d. perpetual
68.
The
inventory data for an item for November are:
|
Nov. 1
|
Inventory
|
20
units at $19
|
|
4
|
Sold
|
10 units
|
|
10
|
Purchased
|
30 units at $20
|
|
17
|
Sold
|
20 units
|
|
30
|
Purchased
|
10 units at $21
|
|
|
|
|
Using a perpetual system, what is the cost of the
merchandise sold for November if the company uses LIFO?
a. $610
b. $600
c. $590
d. $580
69. The inventory data for an item
for November are:
|
Nov.
1
|
Inventory
|
20
units at $19
|
|
4
|
Sold
|
10 units
|
|
10
|
Purchased
|
30 units at $20
|
|
17
|
Sold
|
20 units
|
|
30
|
Purchased
|
10 units at $21
|
|
|
|
|
Using a perpetual system, what is the cost of the
merchandise sold for November if the company uses FIFO? a. $610
b. $600
c. $590
d. $580
Use the information below to answer the following questions.
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory
records during May. The company had no beginning inventory on May
1.
|
Date
|
Blankets
|
Units
|
Cost
|
|
May 3
|
Purchase
|
5
|
$20
|
|
10
|
Sale
|
3
|
|
|
17
|
Purchase
|
10
|
$24
|
|
20
|
Sale
|
6
|
|
|
23
|
Sale
|
3
|
|
|
30
|
Purchase
|
10
|
$30
|
70. Assuming that the company uses
the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory
cost method.
a. $136
b. $144
c. $180
d. $120
71. Assuming that the company uses
the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory
cost method.
a. $120
b. $180
c. $136
d. $144
72. Assuming that the company uses
the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost
method.
a. $364
b. $372
c. $324
d. $320
73. Assuming that the company uses
the perpetual inventory system, determine the gross profit for the sale of May
23 using the FIFO inventory cost
method.
a. $108
b. $120
c. $72
d. $180
74. Assuming that the company uses
the perpetual inventory system, determine the ending inventory for the month of May using the LIFO inventory cost method.
a. $324
b. $372
c. $320
d. $364
75. Assuming that the company uses
the perpetual inventory system, determine the Gross Profit for the month of May using the LIFO cost method.
a. $348
b. $452
c. $444
d. $356
The following units of an
inventory item were available for sale during the year:
Beginning inventory 10 units
at $55
First purchase 25
units at $60
Second purchase 30
units at $65
Third purchase 15
units at $70
The firm uses the periodic
inventory system. During the year, 60
units of the item were sold.
76. The value of ending inventory
using FIFO is
a. $1,250
b. $1,350
c. $1,375
d. $1,150
77.
The
value of ending inventory using LIFO is
a. $1,250
b. $1,350
c. $1,375
d. $1,150
78. The value of ending inventory
rounded to nearest dollar using average cost is:
a. $1,353
b. $1,263
c. $1,375
d. $1,150
The following lots of a
particular commodity were available for sale during the year:
Beginning inventory 10 units
at $30
First purchase 25
units at $32
Second purchase 30
units at $34
Third purchase 10
units at $35
79. The firm uses the periodic
system and there are 20 units of the commodity on hand at the end of the year.
What is the amount of inventory at the
end of the year according to the LIFO method?
a. $655
b. $620
c. $690
d. $659
80. The firm uses the periodic
system and there are 20 units of the commodity on hand at the end of the year.
What is the amount of inventory at the
end of the year according to the FIFO method?
a. $655
b. $620
c. $690
d. $659
81. The firm uses the periodic
system and there are 20 units of the commodity on hand at the end of the year.
What is the amount of inventory at the
end of the year rounded to nearest dollar according to the average cost method?
a. $655
b. $620
c. $690
d. $659
The following lots of a
particular commodity were available for sale during the year:
Beginning inventory 5 units at $61
First
purchase 15 units at $63
Second
purchase 10 units at $74
Third
purchase 10 units at $77
The firm uses the periodic
system and there are 20 units of the commodity on hand at the end of the year.
82. What is the amount of cost of goods
sold for the year according to the average cost method?
a. $1,380
b. $1,375
c. $1,510
d. $1,250
83. What is the amount of cost of merchandise
sold for the year according to the FIFO method? a. $1,380
b. $1,375
c. $1,510
d. $1,250
84. What is the amount of cost of
merchandise sold for the year according to the LIFO method? a. $1,380
b. $1,375
c. $1,510
d. $1,250
85. Under a periodic inventory
system
a.
accounting
records continuously disclose the amount of inventory
b.
a
separate account for each type of merchandise is maintained in a subsidiary
ledger
c.
a
physical inventory is taken at the end of the period
d.
merchandise
inventory is debited when goods are returned to vendors
86. What is the amount of the
inventory at the end of the year using the FIFO method?
a. $1,685
b. $1,575
c. $1,805
d. $3,585
87. What is the amount of the
inventory at the end of the year using the LIFO method?
a. $1,685
b. $1,575
c. $1,805
d. $3,815
88. What is the amount of the
inventory at the end of the year rounded to nearest dollar using the average
cost method?
a. $1,685
b. $1,575
c. $1,805
d. $3,705
89. If Beginning Inventory (BI) +
Purchases (P) – Ending
Inventory (EI) = Cost of Merchandise Sold (COMS), an equivalent equation can be
written as
a.
BI
+ P = COMS – EI
b.
BI
–
P = COMS + EI
c.
BI
+ P = COMS + EI
d.
EI
+ P = COMS – BI
90. During a period of consistently
rising prices, the method of inventory that will result in reporting the
greatest cost of merchandise sold is
a.
FIFO
b.
LIFO
c.
average
cost
d.
weighted
average
91.
During
times of rising prices, which of the following is not an accurate statement?
a. Average costing will yield
results that are between those of FIFO and LIFO.
b. LIFO will result in a higher
cost of merchandise sold than FIFO.
c. FIFO will result in a higher net
income than LIFO.
d. LIFO will result in higher
income taxes than FIFO.
92. If the revenues are correctly
reported and the gross profit of a company is understated, what is the effect
on owner’s equity?
a. understated
b. overstated
c. correctly stated
d. none of these
93. If merchandise inventory is
being valued at cost and the price level is steadily rising, the method of
costing that will yield the highest
net income is
a. periodic
b. LIFO
c. FIFO
d. average cost
94. If merchandise inventory is
being valued at cost and the purchase price is steadily falling, which method
of costing will yield the largest net
income?
a. average cost
b. LIFO
c. FIFO
d. weighted average
95. Which of the following will be
the same amount regardless of the cost flow assumption adopted?
a. number of items ordered
b. gross profit
c. cost of goods sold
d. ending merchandise inventory
96. FIFO reports higher gross profit
and net income than the LIFO method when
a. prices are increasing
b. prices are decreasing
c. prices remain stable
d. prices are reduced by 50%
97. During a period of falling
prices, which of the following inventory methods generally results in the
lowest balance sheet amount for
inventory?
a. average cost method
b. LIFO method
c. FIFO method
d. cannot tell without more
information
98. Damaged merchandise that can be
sold only at prices below cost should be valued at
a. net realizable value
b. LIFO
c. FIFO
d. average cost
99. If a manufacturer ships
merchandise to a retailer on consignment, the unsold merchandise should be
included in the inventory of the
a. consignee
b. retailer
c. manufacturer
d. shipper
100. Merchandise inventory at the end
of the year was inadvertently overstated.
Which of the following statements correctly
states the effect of the error on net income, assets, and owner's equity?
a. net income is overstated, assets
are overstated, and owner's equity is understated
b. net income is overstated, assets
are overstated, and owner's equity is overstated
c. net income is understated,
assets are understated, and owner's equity is understated
d. net income is understated,
assets are understated, and owner's equity is overstated
101. Merchandise inventory at the end
of the year was understated. Which of
the following statements correctly states the
effect of the error?
a. net income is understated
b. net income is overstated
c. cost of merchandise sold is
understated
d. merchandise inventory reported
on the balance sheet is overstated
102. Merchandise inventory at the end
of the year is overstated. Which of the following statements correctly states
the effect of the error?
a. owner's equity is overstated
b. cost of merchandise sold is
overstated
c. gross profit is understated
d. net income is understated
103. If the cost of an item of
inventory is $60 and the current replacement cost is $75, the amount included
in inventory according to the lower of
cost or market is
a. $15
b. $60
c. $75
d. $135
104. Kristin’s Boutiques has
identified the following items for possible inclusion in its December 31
inventory. Which of the following would not be
included in the year-end inventory?
a.
Merchandise
purchased FOB shipping point was picked up by the freight company but had still
not arrived at
Kristin’s Boutique as of
December 31.
b.
Kristin
has in its warehouse merchandise on consignment from Abby Co.
c.
Kristin
has sent merchandise to various retailers on a consignment basis.
d.
Kristin
has merchandise on hand which has been returned by customers because of wrong
size.
105. During the taking of its
physical inventory on December 31, 2014, Barry’s Bike Shop incorrectly counted
its inventory as $350,000 instead of
the correct amount of $280,000. The
effect on the balance sheet and income statement
would be
a. assets overstated by $70,000;
retained earnings understated by $70,000;
and net income statement understated
by $70,000
b. assets overstated by $70,000;
retained earnings understated by $70,000;
and no effect on the income statement
c. assets, retained earnings, and
net income all overstated by $70,000
d. assets and retained earnings
overstated by $70,000; and net income understated by $70,000
106. If a company mistakenly counts
more items during a physical inventory than actually exist, how will the error
affect their bottom line?
a. no change to net income
b. net income will be overstated
c. net income will be understated
d. only gross profit will be
affected
107. If a company mistakenly counts
less items during a physical inventory than actually exist, how will the error
affect the cost of merchandise sold?
a. understated
b. overstated
c. no change
d. only inventory will be affected
108. Too much inventory on hand
a. ties up funds that could be used
to improve operations
b. increases the cost to safeguard
the assets
c. increases the losses due to
price declines
d. all of these
109. Which of the following is used
to analyze the efficiency and effectiveness of inventory management?
a. inventory turnover only
b. number of days’ sales in
inventory only
c. both inventory turnover and
number of days’ sales in inventory
d. neither inventory turnover or
number of days’ sales in inventory
110. Which of the following measures
the relationship between cost of merchandise sold and the amount of inventory carried during the period?
a. inventory turnover
b. fixed asset turnover
c. retail method of inventory
costing
d. gross profit method of inventory
costing
111. Which of the following measures
the length of time it takes to acquire, sell, and replace inventory?
a. inventory turnover
b. number of days’ sales in
inventory
c. retail method of inventory
costing
d. gross profit method of inventory
costing
112.Excess inventory results in all
of the following except
a. tied-up funds that could be used
to improve operations
b. lost sales
c. increased storage expense
d. increased risk of loss due to
damage
113.
The
number of days' sales in inventory measures
a. the length of time it takes to
acquire, sell, and replace the inventory
b. the length of time it takes to
acquire and receive payment for the inventory
c. the number of days inventory is
on hand prior to sale
d. the number of days inventory
takes to arrive after ordering
114. For the year ended December 31,
Depot Max’s cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Compute Depot Max’s inventory turnover for
the year.
a. 8.7
b. 7.8
c. 8.3
d. 44.0
115. For the year ended December 31,
Depot Max’s cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max’s number of days' sales in
inventory is closest to
a. 42
b. 46
c. 8
d. 44
116.
The
method of estimating inventory that uses records of the selling prices of the
merchandise is called
a. retail method
b. gross profit method
c. inventory turnover method
d. average cost method
117. On the basis of the following
data, what is the estimated cost of the merchandise inventory on May 31 using
the retail method?
|
|
Cost
|
Retail
|
|
|
May 1
|
Merchandise inventory
|
$125,000
|
$166,667
|
|
May 1-31
|
Purchases
|
235,000
|
313,333
|
|
May 1-31
|
Sales
|
|
230,000
|
a. $250,000
b. $360,000
c. $172,500
d. $187,500
118. If the estimated rate of gross
profit is 30%, what is the estimated cost of the merchandise inventory on
September 30, based on the following
data?
|
Sep.
1
|
Merchandise
inventory (at cost)
|
$125,000
|
|
Sep.
1-30
|
Purchases,
net (at cost)
|
300,000
|
|
Sep.
1-30
|
Sales,
net
|
150,000
|
|
a.$320,000 b.$192,500 c.$275,000 d.$105,000
|
|
|
119.
All
of the following are reasons to use an estimated method of costing inventory except
a. Perpetual inventory records are
not maintained.
b. Purchase records are not
maintained.
c. A disaster has destroyed the
inventory records and the inventory.
d. Interim financial statements are
required but physical inventory is only taken at the end of the financial accounting period.
120. Garrison Company uses the retail
method of inventory costing. It started
the year with an inventory that had a retail
cost of $45,000. During the year,
Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory,
Garrison calculated the inventory at retail to be $80,000. The mark
up is 100% of cost. Determine the ending
inventory at its estimated cost.
a. $160,000
b. $80,000
c. $40,000
d. $45,000
121. A company will most likely use
an estimated method of determining inventory when
a. the company decides not to do a
physical inventory
b. a natural disaster has destroyed
most of the inventory
c. the company has not kept up with
its inventory records
d. the company is preparing annual
financial statements
122. Stevens Company started the year
with an inventory cost of $145,000.
During the month of January, Stevens purchased
inventory that cost $53,000. January
sales totaled $140,000. Estimated gross
profit is 35%. The estimated ending inventory as of January 31
is
a. $58,000
b. $91,000
c. $107,000
d. $69,300
123. Determine the total value of the
merchandise using net realizable value.
|
Item
|
Quantity
|
Selling
Price
|
Commission
|
|
Doll
|
10
|
$7
|
$2
|
|
Horse
|
5
|
9
|
3
|
a. $35 b. $80 c. $115 d.
$25
124. If a company values inventory at
the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the
lower-of-cost-or-market method to inventory as a whole.
|
Item
|
Inventory Quantity
|
Unit Cost Price
|
Unit Market Price
|
|
Product
C
|
420
|
$ 6
|
$ 5
|
|
Product
D
|
370
|
12
|
14
|
a. $6,960
b. $7,700
c. $6,540
d. $7,280
125. Safeguarding inventory from
damage or theft is a primary objective for the control of inventory. If you were
running a clothing store, name three specific controls you would
implement to guard inventory from theft.
126.
List
three different security measures taken to safeguard inventory.
127. Three identical units of
merchandise were purchased during March, as shown:
|
|
Steele
Plate
|
Units
|
Cost
|
|
Mar. 3
|
Purchase
|
1
|
$ 830
|
|
10
|
Purchase
|
1
|
840
|
|
19
|
Purchase
|
1
|
880
|
|
Total
|
|
3
|
$2,550
|
Assume that one unit is sold on March 23 for $1,125.
Determine the gross profit for March and ending inventory on March 31 using (a) FIFO, (b) LIFO, and (c)
average cost methods.
128.
Three
identical units of merchandise were purchased during May, as follows:
|
|
Magnesium
XP
|
Units
|
Cost
|
|
May 3
|
Purchase
|
1
|
$130
|
|
10
|
Purchase
|
1
|
136
|
|
19
|
Purchase
|
1
|
142
|
|
Total
|
|
3
|
$408
|
Assume that two units are sold on May 23 for $313 total.
Determine the gross profit for May and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost methods.
129.
Assume
that three identical units of merchandise were purchased during October, as
follows:
|
|
|
|
Units
|
Cost
|
|
October
|
5
|
Purchase
|
1
|
$ 5
|
|
|
12
|
Purchase
|
1
|
13
|
|
|
28
|
Purchase
|
1
|
15
|
|
Total
|
|
|
3
|
$33
|
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross
profit, and ending inventory under the
LIFO method.
130.
Assume
that three identical units of merchandise were purchased during October, as
follows:
|
|
|
|
Units
|
Cost
|
|
October
|
5
|
Purchase
|
1
|
$ 5
|
|
|
12
|
Purchase
|
1
|
13
|
|
|
28
|
Purchase
|
1
|
15
|
|
Total
|
|
|
3
|
$33
|
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross
profit, and ending inventory under the
average cost method.
131.
Assume
that three identical units of merchandise are purchased during October, as
follows:
|
|
|
|
Units
|
Cost
|
|
October
|
5
|
Purchase
|
1
|
$ 5
|
|
|
12
|
Purchase
|
1
|
13
|
|
|
28
|
Purchase
|
1
|
15
|
|
Total
|
|
|
3
|
$33
|
Assume one unit is sold on October 31 for $28. Determine cost of merchandise sold, gross
profit, and ending inventory under the
FIFO method.
132.
Three
identical units of merchandise were purchased during July, as follows:
|
Date
|
Product Basic H
|
Units
|
Cost
|
|
July 3
|
Purchase
|
1
|
$ 35
|
|
10
|
Purchase
|
1
|
36
|
|
24
|
Purchase
|
1
|
37
|
|
|
Total
|
3
|
$108
|
|
|
|
|
|
|
|
Average cost per unit
|
|
$ 36
|
Assume one unit sells on July 28
for $45.
Determine the gross profit, cost of merchandise sold, and
ending inventory on July 31 using (a) first-in, first-out, (b) last-in, first-out, and (c) average cost
flow methods.
133.
Beginning
inventory, purchases, and sales for an inventory item are as follows:
|
Sep. 1
|
Beginning
inventory
|
24 units
|
@
|
$15
|
|
5
|
Sale
|
17 units
|
|
|
|
17
|
Purchase
|
10 units
|
@
|
$20
|
|
30
|
Sale
|
8 units
|
|
|
Assuming a perpetual inventory system and the first-in,
first-out method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the
inventory on September 30.
134. Beginning inventory, purchases,
and sales for an inventory item are as follows:
|
Beginning
inventory
|
150
units @ $755
|
|
Sale
|
120
units
|
|
First
purchase
|
400
units @ $785
|
|
Sale
|
200
units
|
|
Second
purchase
|
300
units @ $805
|
|
Sale
|
290
units
|
The firm uses the perpetual inventory system and there are
240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to FIFO?
135.
Beginning
inventory, purchases, and sales for an inventory item are as follows:
|
Beginning
inventory
|
150
units @ $755
|
|
Sale
|
120
units
|
|
First
purchase
|
400
units @ $785
|
|
Sale
|
200
units
|
|
Second
purchase
|
300
units @ $805
|
|
Sale
|
290
units
|
The firm uses the perpetual inventory system and there are
240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to LIFO?
136. Beginning inventory, purchases,
and sales for an inventory item are as follows:
|
Sep. 1
|
Beginning
inventory
|
24
units
|
@
|
$10
|
|
5
|
Sale
|
17 units
|
|
|
|
17
|
Purchase
|
10 units
|
@
|
$15
|
|
30
|
Sale
|
8 units
|
|
|
Assuming a perpetual inventory system and the last-in, first-out
method, determine (a) the cost of the merchandise sold for the September 30 sale and (b) the inventory on September
30.
137. Using a LIFO perpetual cost
flow, calculate the value of the ending inventory and the cost of merchandise
sold for the month of November of
Beamer Company using the data below.
|
Nov. 1
|
Purchased
|
600 units
|
$80 each
|
|
4
|
Sold
|
200 units
|
|
|
11
|
Purchased
|
350 units
|
$82 each
|
|
12
|
Sold
|
275 units
|
|
|
22
|
Purchased
|
175 units
|
$84 each
|
|
23
|
Sold
|
155 units
|
|
Calculate the following:
(a) Inventory valuation at the end
of November
(b) Calculate the cost of
merchandise sold for November
138. Complete the following table
using the perpetual FIFO method of inventory flow.
|
Inventory Valuation—Perpetual FIFO
|
|
|
|||||
|
Date
|
Purchased Units
|
Unit
Cost |
Units
Sold |
Unit
Cost |
Inventory Units Balance
|
Unit
Costs |
Inventory Dollar
Balance |
|
July
2
|
600
|
$12
|
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
5
|
200
|
$13
|
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
7
|
|
|
300
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
10
|
325
|
$14
|
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
12
|
|
|
300
150 |
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
18
|
250
|
$13
|
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
22
|
|
|
50
205 |
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
25
|
|
|
120
180 |
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
28
|
330
|
$15
|
|
|
|
|
|
|
Bal.
|
|
|
|
|
|
|
|
|
July
31
|
|
|
70
5 |
|
|
|
|
|
|
Ending
Balance |
|
|
FIFO INVENTORY VALUATION:
|
|
||
139. Beginning inventory, purchases,
and sales data for tennis rackets are as follows:
|
|
April 3
|
Inventory
|
|
12 units
|
@
|
$45
|
|
|
11
|
Purchase
|
|
13 units
|
@
|
$47
|
|
|
14
|
Sale
|
|
18 units
|
|
|
|
|
21
|
Purchase
|
|
9 units
|
@
|
$60
|
|
|
25
|
Sale
|
|
10 units
|
|
|
Complete the inventory cost card assuming the business
maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory
using FIFO.
|
|
Purchases
|
Cost
of Merchandise Sold
|
Inventory
|
||||||
|
Date
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
|
|
|
|
|
|
|
|
|
|
140.
Beginning
inventory, purchases, and sales data for tennis rackets are as follows:
|
|
April 3
|
Inventory
|
|
12
units
|
@
|
$45
|
|
|
11
|
Purchase
|
|
13
units
|
@
|
$47
|
|
|
14
|
Sale
|
|
18
units
|
|
|
|
|
21
|
Purchase
|
|
9
units
|
@
|
$60
|
|
|
25
|
Sale
|
|
10
units
|
|
|
Complete the inventory cost card assuming the business
maintains a perpetual inventory system and calculates the cost of merchandise sold and ending
inventory using LIFO.
|
|
Purchases
|
Cost
of Merchandise Sold
|
Inventory
|
||||||
|
Date
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
|
|
|
|
|
|
|
|
|
|
141.
Beginning
inventory, purchases, and sales data for widgets are as follows:
|
|
April 3
|
Inventory
|
|
15 units
|
@
|
$30
|
|
|
11
|
Purchase
|
|
12 units
|
@
|
$27
|
|
|
14
|
Sale
|
|
18 units
|
|
|
|
|
21
|
Purchase
|
|
7 units
|
@
|
$25
|
|
|
25
|
Sale
|
|
10 units
|
|
|
Complete the inventory cost card assuming the business
maintains a perpetual inventory system and calculates the cost of merchandise sold and ending
inventory using FIFO.
|
|
Purchases
|
Cost
of Merchandise Sold
|
Inventory
|
||||||
|
Date
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
|
|
|
|
|
|
|
|
|
|
142.
Beginning
inventory, purchases, and sales data for widgets are as follows:
|
|
April 3
|
Inventory
|
|
15
units
|
@
|
$30
|
|
|
11
|
Purchase
|
|
12
units
|
@
|
$27
|
|
|
14
|
Sale
|
|
18
units
|
|
|
|
|
21
|
Purchase
|
|
7
units
|
@
|
$25
|
|
|
25
|
Sale
|
|
10
units
|
|
|
Complete the inventory cost card assuming the business
maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory
using LIFO.
|
|
Purchases
|
Cost
of Merchandise Sold
|
Inventory
|
||||||
|
Date
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
Qty.
|
Unit Cost
|
Total Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
|
|
|
|
|
|
|
|
|
|
143.
The
units of an item available for sale during the year were as follows:
|
January 10
|
Inventory
|
27
units @ $90
|
|
February 27
|
Purchase
|
54
units @ $98
|
|
July 11
|
Purchase
|
63
units @ $106
|
|
November 13
|
Purchase
|
36
units @ $115
|
There are 50 units of the item in the physical inventory at
December 31. The periodic inventory
system is used. Determine the ending
inventory cost by (a) the first-in, first-out method, (b) the last-in,
first-out method, and (c) the average
cost method. Show your work.
144.
The
units of an item available for sale during the year were as follows:
|
January 11
|
Inventory
|
60
units @ $145
|
|
February 27
|
Purchase
|
90
units @ $150
|
|
November
21
|
Purchase
|
75
units @ $154
|
There are 48 units of the item in the physical inventory at
December 31. The periodic inventory
system is used. Determine the
inventory cost by (a) the first-in, first-out method, (b) the last-in,
first-out method, and (c) the average
cost method. Show your work.
145. The units of
Manganese Plus available for sale during the year were as follows:
|
Mar. 1
|
Inventory
|
16
units
|
@
$30
|
$ 480
|
|
June 16
|
Purchase
|
30
units
|
@
$35
|
1,050
|
|
Nov.
28
|
Purchase
|
45 units
|
@
$39
|
1,755
|
|
|
|
91 units
|
|
$3,285
|
There are 15 units of the
product in the physical inventory at November 30. The periodic inventory system is used.
Determine the inventory cost by (a) FIFO, (b) LIFO, and (c) average cost
methods.
146. Complete the chart,
indicating whether LIFO or FIFO would give the highest and lowest amounts for
each item, assuming a period of
increasing costs.
162. The units of an item available for sale during the year were as follows:
Jan. 1
Inventory 25
units at $45
Mar. 4
Purchase 15
units at $50
June 7
Purchase 35
units at $58
Nov. 15
Purchase 20
units at $65
There are 30 units of the item in the physical inventory at
December 31. The periodic inventory
system is used. Determine the ending inventory cost using
FIFO.
163. The units of an item available
for sale during the year were as follows:
|
Jan. 1
|
Inventory
|
10
units at $25
|
|
Apr. 4
|
Purchase
|
15 units at $24
|
|
May. 20
|
Purchase
|
20 units at $28
|
|
Oct. 30
|
Purchase
|
18 units at $30
|
There are 19 units of the item in the physical inventory at December
31. The periodic inventory system is used.
Determine the ending inventory cost using LIFO.
164. The beginning inventory and
purchases of an item for the period were as follows:
Beginning inventory 6
units at $70 each
First purchase 10
units at $75 each
Second purchase 18
units at $80 each
Third purchase 10
units at $90 each
The company uses the periodic system, and there were 15
units in the inventory at the end of the period. Determine the cost of the 15 units in the
inventory by each of the following methods, presenting details of your computations: (a) first-in, first-out;
(b) last-in, first-out; (c) average cost. Do not round your intermediate calculations. Round your final answer to
two decimal places.
165. Beginning inventory, purchases
and sales data for T-shirts are as follows:
|
April 3
|
Inventory
|
24
units
|
@
|
$10
|
|
11
|
Purchase
|
26
units
|
@
|
$12
|
|
14
|
Sale
|
36
units
|
|
|
|
21
|
Purchase
|
18
units
|
@
|
$15
|
|
25
|
Sale
|
20
units
|
|
|
Assuming the business maintains a periodic inventory system;
calculate the cost of merchandise sold and ending inventory under the following assumptions:
a. FIFO
b.
LIFO
c. Average cost (round cost of
merchandise sold and ending inventory to the nearest dollar)
166. The units of Product Green-2
available for sale during the year were as follows:
|
April
|
1
|
Inventory
|
15
units
|
@
|
$30
|
|
June
|
16
|
Purchase
|
29
units
|
@
|
$33
|
|
Sep.
|
28
|
Purchase
|
45
units
|
@
|
$35
|
There are 17 units of the product in the physical inventory
at September 30. The periodic inventory
system is used. Determine the cost of merchandise sold by (a)
FIFO, (b) LIFO, and (c) average cost methods.
167. Brutus Corporation, a newly
formed corporation, has the following transactions during May, its first month
of operations.
May 1 Purchased 500 units @ $25.00 each
4 Purchased 300
units @ $24.00 each
6 Sold 400 units @
$38.00 each
8 Purchased 700
units @ $23.00 each
13 Sold 450 units @
$37.50 each
20 Purchased 250
units @ $25.25 each
22 Sold 275 units @
$36.00 each
27
Sold
300 units @ $37.00 each
28
Purchased
550 units @ $26.00 each
30 Sold 100 units @
$39.00 each
Calculate total sales, cost of merchandise sold, gross
profit, and ending inventory using each of the following inventory methods:
1. FIFO perpetual
2. FIFO periodic
3. LIFO perpetual
4. LIFO periodic
5. Average cost periodic (round
average to nearest cent)
168. Basic inventory data for April
30 are presented below for a business that employs the lower-of-cost-or-market basis of inventory valuation to each
category.
|
Commodity
|
Inventory
Quantity
|
Cost per
Unit
|
Market Value
per Unit
|
Cost
|
Total Market
|
LCM
|
|
A
|
35
|
$ 52
|
$ 55
|
_______
|
_______
|
_______
|
|
B
|
20
|
155
|
150
|
_______
|
_______
|
_______
|
|
C
|
25
|
82
|
85
|
_______
|
_______
|
_______
|
|
D
|
40
|
58
|
55
|
_______
|
_______
|
_______
|
(a)
Complete
the table.
(b)
Determine
the amount of reduction in the inventory at April 30 attributable to market decline.
169. Hampton Co. took a physical
count of its inventory on December 31.
In addition, it had to decide whether or not the following items should be added to this count.
(a)
Merchandise
on hand had been sold earlier in the year but had been returned by customers for various warranty repairs.
(b)
Hampton
Co. sent merchandise on a consignment basis on December 31 just prior to the physical count.
(c)
On
December 22, Hampton Co. ordered merchandise on FOB destination terms. The merchandise
was shipped by the supplier on December 30 but had not been received by December 31.
(d)
On
December 27, Hampton Co. ordered merchandise on FOB shipping point terms. The merchandise
was shipped on December 29 but had not been received by December 31.
(e)
Merchandise
sold FOB shipping point on December 31 was picked up by the freight company just before closing on December 31.
(f)
Merchandise
shipped to a customer FOB destination was picked up by the freight company on December 28 but had not arrived at its
destination as of December 31.
Answer "yes" or "no" to indicate which
items should and should not be added to the December 31 inventory count.
170. 1. Explain the effect of the
following on the financial statements:
Goods held on consignment were included in the ending
inventory count.
Goods purchased FOB shipping
point were in transit on the last day of the year. The goods were not counted as part of ending inventory.
Goods sold FOB shipping point
were in transit on the last day of the year. These
goods were not counted as part of ending inventory.
2. What happens if
inventory errors are not found and corrected?
171. On the basis of the following
data for Sanford Industries as of December 31, determine the value of the inventory at the lower of cost or market. Also, show
how the merchandise inventory would appear on the balance sheet (assume that the cost was determined by the
FIFO method). Apply lower of cost or market to each inventory item.
|
Commodity
|
Inventory
Quantity
|
Cost per Unit
|
Market Value per
Unit
|
|
Size 4
|
9
|
$17
|
$19
|
|
Size 5
|
10
|
17
|
14
|
|
Size 6
|
14
|
20
|
22
|
|
Size 7
|
12
|
13
|
15
|
172. Based on the following
information: compute (a) inventory turnover; (b) average daily cost of
merchandise sold; and (c) number of days' sales in
inventory for the current year. Use a
365-day year. (d) If an inventory turnover of
12 is average for the industry, how is this company doing?
|
Item
Cost
of merchandise sold
|
|
Prior Year Current Year
$172,900 $215,000
|
|
Inventory
|
|
18,000
12,000
|
173. The following data were taken
from Castle, Inc.
Cost of merchandise sold $894,000
Inventory, end of year 78,000
Inventory, beginning of the year 92,000
Determine the inventory turnover ratio and the number of
days’ sales in inventory for Castle Inc.
Round to two
decimal places.
174. Based on the following
information, compute (a) inventory turnover; (b) average daily cost of
merchandise sold using a 365 day year; and (c) number of days’ sales in
inventory.
|
Cost
of merchandise sold
|
$195,640
|
|
Inventory:
|
|
|
Beginning
|
20,500
|
|
Ending
|
18,628
|
175. During August, the first month
of the fiscal year, sales totaled $875,000 and the cost of merchandise
available for sale totaled
$850,000. Estimate the cost of the
merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.
176. On the basis of the following
data, estimate the cost of the merchandise inventory at March 31 by the retail
method.
|
|
Cost
|
Retail
|
|
|
March
1
|
Merchandise
inventory
|
$250,000
|
$ 350,000
|
|
March 1–31
|
Purchases
(net)
|
850,000
|
1,650,000
|
|
March 1–31
|
Sales
|
|
845,000
|
177. On the basis of the following
data, determine the estimated cost of the inventory as of March 31 by the
retail method, presenting details of
the computation in good order.
|
|
Cost
|
Retail
|
||
|
Mar.
|
1
|
Merchandise
inventory
|
$310,000
|
$ 550,000
|
|
|
1–31
|
Purchases
(net)
|
307,250
|
515,000
|
|
|
1–31
|
Sales
|
|
400,000
|
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