Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
79. Which of the following statements is correct regarding either the perpetual or periodic
inventory systems?
80. When a company uses the periodic inventory system, which of the following is true?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
81. Carrie Company sold merchandise with an invoice price of $1,000 to Underwood, Inc.,
with terms of 2/10, n/30. Which of the following is the correct entry to record the payment by
Underwood Inc., within the 10 days if the company uses the periodic inventory system and
the gross method to record purchases?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
82. Iris Company has provided the following information regarding two of its items of
inventory at year-end:
• There are 100 units of Item A having a cost of $20 per unit and a replacement cost of $18
per unit.
• There are 50 units of Item B having a cost of $50 per unit and a replacement cost of $55 per
unit.
How much is the ending inventory using lower of cost or market on an item-by-item basis?
83. Carr Corporation has provided the following information for its most recent month of
operation: sales $8,000; beginning inventory $1,000; ending inventory $2,000 and gross profit
$5,000. How much were Carr’s inventory purchases during the period?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
84. Carp Corporation has provided the following information for its most recent month of
operation: sales $16,000; ending inventory $4,000, purchases $8,000 and gross profit $10,000.
How much was Carp’s beginning inventory?
85. Cassie Corporation has provided the following information for its most recent month of
operation: sales $32,000, beginning inventory $8,000, purchases $16,000 and gross profit
$20,000. How much was Cassie’s ending inventory?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
86. Which of the following would not be included in Latimer Company’s ending inventory?
87. Atomic Company incorrectly recorded a December 2009 credit purchase of inventory
during January 2010. Assuming that the December 31, 2009 ending inventory was correctly
determined, what is the effect of this error on the financial statements for the year ended
December 31, 2009?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
88. Atomic Company incorrectly recorded a December 2009 credit purchase of inventory
during January 2010. Assuming that the December 31, 2009 ending inventory was correctly
determined, what is the effect of this error on the financial statements for the year ended
December 31, 2010?
89. Which of the following statements is incorrect?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
90. Which of the following costs does not become a part of cost of goods manufactured?
91. Which of the following would not be a component of the year-end inventory balance?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
92. Which of the following statements is correct?
93. Which of the following businesses would not be as likely to use the specific identification
method of inventory valuation?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
94. Which of the following statements is incorrect?
95. Which of the following statements is incorrect when inventory prices are increasing?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
96. Which of the following statements is correct when inventory prices are decreasing?
97. Which of the following statements is correct when inventory prices are increasing?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
98. Which of the following statements is correct when inventory prices are decreasing?
99. Which of the following statements is correct with respect to the determination of operating
cash flows?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
100. What is the net adjustment to net income with respect to the determination of operating
cash flows when inventory increases $100,000 and accounts payable increases $20,000?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
101. McMillan Company uses the periodic inventory system. It has compiled the following
information in order to prepare the financial statements at December 31, 2010:
Calculate each of the following: Cost of goods available for sale, cost of goods sold and gross
margin.
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
102. The records of Jimmy Company show 2010 purchases of $90,000. An actual count
revealed a 2010 ending inventory of $8,000. The 2010 beginning inventory was $5,000. What
was cost of goods sold for 2010?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
7-55
103. The following income statement is complete except for a few captions with bold lines on
the left, and amounts with dotted lines on the right. You are to fill in the most likely captions
and amounts (ignore income taxes):
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
104. How much were inventory purchases when cost of goods sold was $250,000, beginning
inventory was $20,000, and ending inventory was $25,000?
105. How much was ending inventory when sales revenue was $500,000, purchases were
$310,000, beginning inventory was $22,000, and gross margin was $200,000?
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
106. Compute the missing amounts for the income statement for each independent case.
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
107. Coulter Company uses the LIFO inventory method under the periodic inventory system.
The following data were available for the month of January, 2010:
Compute the following:
1. Beginning inventory
2. Ending inventory
3. Cost of goods available for sale
4. Cost of goods sold
5. Gross margin
Chapter 07 – Reporting and Interpreting Cost of Goods Sold and Inventory
108. William Company uses the periodic inventory system and has provided the following
data:
Requirement 1:
Calculate the following using both FIFO and LIFO inventory methods.
Requirement 2:
Conceptually, how does pretax income using FIFO (in times of rising prices) compare to
LIFO pretax income? Explain your answer.