21) Eagle Auto Supplies reported the following income statement for the year ended December 31,2018.
Eagle Auto Supplies
Income Statement
Year Ended December 31, 2018
Sales Revenue
$426,500
Cost of Goods Sold:
Beginning Merchandise Inventory
$ 36,000
Net Cost of Purchases
273,800
Cost of Goods Available for Sale
309,800
Less: Ending Merchandise Inventory
41,400
Cost of Goods Sold
268,400
Gross Profit
158,100
Operating Expenses
122,600
Net Income
$ 35,500
Compute inventory turnover rate for the year. (Round to two decimal places.)
Compute days’ sales in inventory for the year. (Round to two decimal places.)
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6.7 Learning Objective 6-7
1) Accounting is simpler in a periodic inventory system because the company keeps a daily running
record of inventory on hand.
2) The periodic inventory system works well for small businesses in which the inventory is not large in
size or dollar amounts.
3) For all four inventory costing methods, cost of goods sold is always equal to the sum of beginning
inventory plus net purchases.
4) The periodic inventory system ________.
A) is more difficult to maintain than a perpetual inventory system
B) works well for businesses in which the inventory is large in size or dollar amount
C) involves the use of inventory costing methods
D) cannot be used with a specific identification costing method
5) Under the periodic inventory system, which of the following amounts will always stay the same
regardless of the inventory valuation method used?
A) ending merchandise inventory
B) cost of goods sold
C) gross profit
D) net purchases
6) Which of the following statements regarding a periodic inventory system is incorrect?
A) A periodic inventory system is simpler than a perpetual inventory system.
B) A periodic inventory system works well for small businesses in which inventory costs can be
controlled by visual inspection.
C) The only way to determine the ending merchandise inventory and cost of goods sold in a periodic
inventory system is to take a physical inventory.
D) The various inventory costing methods are not used in a periodic inventory system.
7) Using the FIFO method of inventory valuation will always produce the same results for cost of goods
sold and ending inventory whether a company uses perpetual or periodic inventory costing methods.
8) The amounts obtained for cost of goods sold and ending merchandise inventory are not the same for
FIFO perpetual and FIFO periodic.
9) Samson, Inc. had the following balances and transactions during 2019:
Beginning Merchandise Inventory
25 units at $93
March 10
Sold 22 units
June 10
Purchased 75 units at $98
October 30
Sold 70 units
What is the balance of the company‘s Merchandise Inventory, as disclosed in the December 31, 2019
balance sheet as per the periodic FIFO inventory costing method?
A) $465
B) $490
C) $2,325
D) $784
10) A company that uses the periodic inventory system provided the following information:
1. Beginning inventory $4,000
2. Purchases $150,000
3. Purchase discounts $2,300
4. Purchase returns and allowances $700
At the end of the period, the physical count of inventory reveals that $17,000 worth of inventory is on
hand. What is the amount of cost of goods sold?
A) $134,000
B) $151,000
C) $168,000
D) $147,000
11) A company that uses the periodic inventory provides the following information:
1. Beginning Inventory $12,000
2. Net Purchases $93,000
At the end of the period, the physical count of inventory reveals that $14,000 of inventory is on hand.
What is the amount of cost of goods sold?
A) $93,000
B) $119,000
C) $91,000
D) $79,000
12) “The amounts obtained for cost of goods sold and ending merchandise inventory are always the same
for FIFO perpetual and FIFO periodic.” Is this statement true? Why or why not?
13) The periodic inventory records of Hawk Dental Supply indicate the following for the month of April:
Apr. 1
Beginning merchandise inventory
15 units @ $32 each
7
Purchase
7 units @ $34 each
18
Purchase
12 units @ $37 each
26
Purchase
10 units @ $40 each
As of April 30, Hawk counts 8 units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Hawk using the FIFO inventory
method.
$480
18
$444
26
$400