Chapter 06 – Inventories
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Page 51
120. 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
ANSWER:
c
RATIONALE:
Estimated cost of goods sold = Sales for January – Estimated gross profit = $140,000 –
($140,000 × 35%) = $140,000 – $49,000 = $91,000
Estimated inventory, January 31 = Merchandise available for sale – Estimated cost of
goods sold = ($145,000 + 53,000) – $91,000 = $107,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-APP – LO: 06-APP
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:20 PM
DATE MODIFIED:
10/16/2017 5:09 PM
121. Determine the total value of the merchandise using net realizable value.
Item
Doll
Horse
a.
$35
b.
$80
c.
$115
d.
$25
ANSWER:
b
RATIONALE:
Net Realizable Value = Estimated Selling Price – Direct Costs of Disposal
Net Realizable Value = [(10 units × $7) + (5 units × $9)] – [(10 units × $2) + (5 units ×
$3)] = [($70 + $45) – ($20 + $15)] = $80
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-07 – LO: 06–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
Chapter 06 – Inventories
ANSWER:
a
POINTS:
1
153. 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.
ANSWER:
Answers will vary but may include ink tags, alarm tags, bells that signal a customer is
entering the area to try on clothing, chains that hook through the sleeves of garments
and are locked onto clothing racks, scanners to screen customers as they leave the store
for unpaid merchandise, and greeters at the store’s entrance to keep customers from
bringing in bags that can be used to shoplift merchandise.
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-01 – LO: 06–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:20 PM
DATE MODIFIED:
10/16/2017 5:09 PM
154. List three different security measures taken to safeguard inventory.
ANSWER:
Answers will vary and may include
– storing inventory in areas that are restricted to only authorized employees
– using physical devices such as two-way mirrors, cameras, and security guards
– locking high-priced inventory in cabinets
– placing sensors at each of the exits that are set off by alarm tags
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-01 – LO: 06–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:20 PM
DATE MODIFIED:
10/16/2017 5:09 PM
155. 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
Chapter 06 – Inventories
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-02 – LO: 06–02
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 and (b) LIFO.
ANSWER:
Gross Profit
Ending Inventory
a.
First-in, first-out (FIFO)
$295 ($1,125 – $830)
$1,720 ($840 + $880)
b.
Last-in, first-out (LIFO)
$245 ($1,125 – $880)
$1,670 ($830 + $840)
c.
Average cost
$2,550/3 = $850 avg. cost
$275 ($1,125 – $850)
$1,700 ($850 × 2)
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.06-02 – LO: 06–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
TOPICS:
Example Exercise 7-1
DATE CREATED:
7/22/2017 6:20 PM
DATE MODIFIED:
10/16/2017 5:09 PM
156. Three identical units of merchandise were purchased during May, as follows:
Units
Cost
May 3
1
$130
10
1
136
19
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.
ANSWER:
Gross Profit
Ending Inventory
a.
First-in, first-out (FIFO)
$47 [$313 – ($130 + $136)]
$142
b.
Last-in, first-out (LIFO)
$35 [$313 – ($142 + $136)]
$130
c.
Average cost
$408/3 = $136 average cost
$41 [$313 – ($136 × 2
units)]
$136
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying