Under the lower of cost or market method, the total value of this company’s ending inventory is:
A) $1,112.50. B) $1,217.50. C) $1,180.00. D) $1,075.00. E) $1,137.50.
135)
A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3,
it purchases 20 units at $12 each. 12 units are sold on February 5. Using the FIFO periodic
inventory method, what is the cost of the 12 units that are sold?
A) $140 B) $128 C) $124 D) $120 E) $130
136)
A company has beginning inventory of 15 units at a cost of $12 each on October 1. On October 5,
it purchases 10 units at $13 per unit. On October 12 it purchases 20 units at $14 per unit. On
October 15, it sells 30 units. Using the FIFO periodic inventory method, what is the value of the
inventory at October 15 after the sale?
A) $380 B) $590 C) $140 D) $160 E) $210
137)
A company had beginning inventory of 10 units at a cost of $20 each on March 1. On March 2, it
purchased 10 units at $22 each. On March 6 it purchased 6 units at $25 each. On March 8, it sold
22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22
units sold?
A) $520 B) $570 C) $450 D) $470 E) $490
138)
A company uses the periodic inventory system and had the following activity during the current
monthly period.
November 1:
Beginning inventory
100 units @ $20
November 5:
Purchased
100 units @ $22
November 8:
Purchased
50 units @ $23
November 16:
Sold
200 units @ $45
November 19:
Purchased
50 units @ $25
Using the weighted-average inventory method, the company’s ending inventory would be:
A) $4,400 B) $2,250 C) $2,400 D) $2,200 E) $2,000
100 @ $20
11/5
100 @ $22
11/8
50 @ $23
11/19
139)
Health Defense sells first aid kits and uses the periodic inventory system to account for its
merchandise. The beginning balance of the inventory and its transactions during January were as
follows:
January 1: Beginning balance of 18 units at $13 each
January 12: Purchased 30 units at $14 each
January 19: Sold 24 units at a selling price of $30 each
January 20: Purchased 24 units at $17 each
January 27: Sold 27 units at a selling price of $30 each
If the ending inventory is reported at $357, what inventory method was used?
A)
Retail inventory method.
B)
Weighted average.
C)
Specific identification.
D)
FIFO.
E)
LIFO.
140)
A company’s warehouse contents were destroyed by a flood on September 12. The following
information was the only information that was salvaged:
1. Inventory, beginning: $28,000
2. Purchases for the period: $17,000
3. Sales for the period: $55,000
4. Sales returns for the period: $700
The company’s average gross profit ratio is 35%. What is the estimated cost of the lost inventory?
A) $25,995. B) $9,705. C) $44,000. D) $45,000. E) $29,250.
141)
A company reports the following information regarding its inventory.
Beginning inventory: cost is $80,000; retail is $130,000
Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory shows $135,000 worth of merchandise available at retail prices. What is the
cost of the ending inventory calculated using the retail inventory method?
A) $78,300. B) $73,125. C) $135,000. D) $72,900. E) $105,000.
142)
On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial
statements. The following information is available:
Beginning inventory, January 1: $4,000
Net sales: $80,000
Net purchases: $78,000
The company’s gross margin ratio is 25%. Using the gross profit method, the cost of goods sold
would be:
A) $19,500. B) $63,000. C) $60,000. D) $58,500. E) $20,000.
143)
On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial
statements. The following information is available:
Beginning inventory, January 1: $4,000
Net sales: $80,000
Net purchases: $78,000
The company’s gross margin ratio is 25%. Using the gross profit method, the estimated ending
inventory value would be:
A) $19,500. B) $60,000. C) $20,000. D) $82,000. E) $22,000.
144)
Big Box Store has operated with a 30% average gross profit ratio for a number of years. It had
$100,000 in sales during the second quarter of this year. If it began the quarter with $18,000 of
inventory at cost and purchased $72,000 of inventory during the quarter, its estimated ending
inventory by the gross profit method is:
A) $30,000. B) $20,000. C) $21,000. D) $18,000. E) $27,000.
145)
On January 31, a company needed to estimate its ending inventory to prepare its monthly financial
statements. The following information is currently available:
Inventory as of January 1: $120,500
Net sales for January: $400,000
Net purchases for January: $270,500
This company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit
method would be:
A) $9,000. B) $51,000. C) $10,425. D) $102,425. E) $51,425.
146)
Interim financial statements:
A)
Are statements prepared for periods of less than one year.
B)
Require the use of the perpetual method for inventories.
C)
Cannot be prepared if the company follows the conservatism principle.
D)
Are necessary to achieve full disclosure about a business’s operations.
E)
Are required by the Congress.
147)
Jefferson Company has sales of $300,000 and cost of goods available for sale of $270,000. If the
gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit
method would be:
A) $90,000 B) $120,000 C) $180,000 D) $60,000 E) $30,000
148)
Oxford Packing Company reported net sales in November of the current year of $1,000,000. At the
beginning of November, the company reported beginning inventory of $368,000. Cost of goods
purchased during November amounted to $217,500. The company reported ending inventory at the
end of November of $226,750.
The company’s gross profit rate for November of the current year was:
A) 81.2% B) 18.8% C) 58.6% D) 35.9% E) 64.1%
149)
On April 24 of the current year, The Memphis Pecan Company experienced a tornado that
destroyed the company’s entire inventory. At the beginning of April, the company reported
beginning inventory of $226,750. Inventory purchased during April (until the date of the tornado)
was $197,800. Sales for the month of April through April 24 were $642,500. Assuming the
company’s typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the
tornado.
A) $212,275 B) $103,300 C) $321,250 D) $217,950 E) $157,788
150)
Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is
$50,000, credit terms 2/10, n/30 that apply only to the $50,000; FOB shipping point freight charges
are $1,500; insurance during transit is $500; and import duties are $1,000. Avanti paid within the
discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales
commissions. Compute the cost that should be assigned to the inventory.
A) $50,000 B) $51,500 C) $52,000 D) $53,000 E) $53,200
151)
Hasham purchases inventory from overseas and incurs the following costs: the merchandise cost is
$80,000, credit terms 1/10, n/30, applicable only to the $80,000; FOB shipping point freight
charges are $2,500; insurance during transit is $300; and import duties are $1,500. Hasham paid
within the discount period. Compute the cost that should be assigned to the inventory.
A) $83,500 B) $81,700 C) $84,300 D) $79,200 E) $81,000
152)
Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory
by recording them as cost of goods sold when incurred. The principle that supports this is called:
A)
The cost principle.
B)
The lower of cost or market principle.
C)
The conservation constraint principle.
D)
The expense recognition principle.
E)
The materiality constraint.
153)
All of the following statements related to goods on consignment are true except:
A)
A consignee sells goods for the owner.
B)
Goods on consignment are goods provided by the owner, call the consignor.
C)
The consignor continues to own the consigned goods.
D)
The consignee reports the goods in its inventory until sold.
E)
The consignor reports the goods in its inventory until sold.
154)
When costs to purchase inventory regularly decline, which method of inventory costing will yield
the lowest gross profit and income?
A)
Gross margin.
B)
Weighted average.
C)
Specific identification.
D)
FIFO.
E)
LIFO.
155)
When costs to purchase inventory regularly decline, which method of inventory costing will yield
the lowest cost of goods sold?
A)
Weighted average.
B)
Specific identification.
C)
LIFO.
D)
Gross margin.
E)
FIFO.
156)
IFRS reporting currently does not allow which method of inventory costing?
A)
Lower of cost or market.
B)
Weighted average.
C)
Specific identification.
D)
FIFO.
E)
LIFO.
157)
All of the following statements regarding U.S. GAAP and IFRS are true except:
A)
Both U.S. GAAP and IFRS include broad and similar guidance for the items and costs
making up merchandise inventory.
B)
Both U.S. GAAP and IFRS require companies to write down inventory when its value falls
below the cost presently recorded.
C)
Both U.S. GAAP and IFRS allow reversals of write downs up to the original acquisition cost.
D)
For both U.S. GAAP and IFRS, merchandise inventory includes all items that a company
owns and holds for sale.
E)
With limited exceptions, neither U.S. GAAP nor IFRS allow inventory to be adjusted upward
beyond the original cost.
158)
Sandoval needs to determine its year-end inventory. The warehouse contains 20,000 units, of
which 3,000 were damaged by flood and are not sellable. Another 2,000 units were purchased from
Markor Company, FOB shipping point, and are currently in transit. The company also consigns
goods and has 4,000 units at a consignee’s location. How many units should Sandoval include in its
year-end inventory?
A) 21,000 B) 19,000 C) 23,000 D) 29,000 E) 26,000