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Topic: Taking a Physical Inventory
110.
On Saturday, June 30, BD Pool Supplies sold merchandise to E. Luang on account. The
sales price was $6,400, and the cost of goods sold was $5,300. The sales revenue was
recorded immediately, but the entry recording the cost of goods sold was dated Monday,
July 2. As a result, net income for June was:
111.
Gross profit rate is equal to:
112.
Which of the following inventory valuation methods is only an estimate of actual costs?
113.
Companies with periodic inventory systems often use techniques such as the gross profit
method and the retail method to:
114.
The gross profit method of valuing inventory:
115.
For the last several years Conway Corporation has operated with a gross profit rate of
40%. On January 1 of the current year, the company had on hand inventory with a cost of
$600,000. Purchases of merchandise during January amounted to $150,000, and sales for
the month were $360,000. Using the gross profit method, what is the estimated inventory
at January 31?
116.
During the month of January, Sundown Corporation had sales of $300,000 and a cost of
goods available for sale of $600,000. The company consistently earns a gross profit rate of
45%. Using the gross profit method, the estimated inventory at January 31 amounts to:
117.
Colonial uses the retail method to estimate its monthly cost of goods sold and month-end
inventory. At August 31, the accounting records indicate the cost of goods available for
sale during the month (beginning inventory plus purchases) totaled $270,000. These goods
had been priced for resale at $675,000. Sales in August totaled $450,000. The estimated
inventory at August 31 is:
8-67
118.
Garden World uses the retail method to estimate its monthly cost of goods sold and
month-end inventory. At May 31, the accounting records indicate the cost of goods
available for sale during the month (beginning inventory plus purchases) totaled $540,000.
These goods had been priced for resale at $900,000. Sales in May totaled $480,000. The
estimated inventory at May 31 is:
Midwest Office Products uses the retail method to estimate ending inventory in its
monthly financial statements. The following information is available for the month ended
May 31:
119.
Refer to the information above. Determine the cost ratio that should be used in estimating
the May 31 inventory using the retail method. (Round your final answer percentage to one
decimal point)
120.
Refer to the information above. Estimate the cost of the May 31 inventory using the retail
method.
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121.
Refer to the information above. Estimate the cost of goods sold for May using the retail
method. (Round your final answer to the nearest dollar value.)
Soriano Company had net sales of $300,000 for the month (after returns and allowances of
$1,500 and sales discounts of $3,250). Beginning inventory for the month was $60,000;
purchases for the month were $175,000; and gross profit was 43%.
122.
Refer to the information above. What were the gross sales for the month?
123.
Refer to the information above. What were the goods available for sale for the month?
124.
Refer to the information above. What was the gross profit for the month?
125.
Refer to the information above. What was the cost of goods sold for the month?
126.
Refer to the information above. What was the ending inventory for the month?
127.
A company with a liquid inventory will have:
128.
The inventory turnover rate provides an indication of how quickly the average quantity of
inventory on hand:
129.
Busch, Inc. is a successful company, but has a lower inventory turnover rate than the
industry average. Of the following, the most likely explanation is that Busch:
130.
Short-term creditors are likely to view a higher-than-average inventory turnover rate as
indicating that:
131.
Which of the following types of businesses would you expect to have the highest inventory
turnover?
During the current year, Carl Equipment Stores had net sales of $600 million, a cost of
goods sold of $500 million, average accounts receivable of $75 million, and average
inventory of $50 million.
132.
Refer to the information above. Carl Equipment's inventory turnover rate is:
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133.
Refer to the information above. Assuming a 365-day year, the average number of days
required for Carl Equipment to sell its inventory is: (Round your final answer to one
decimal place.)
During the current year, Carlin Equipment Stores had net sales of $500 million, a cost of
goods sold of $400 million, average accounts receivable of $60 million, and average
inventory of $50 million.
134.
Refer to the information above. Carlin Equipment's inventory turnover rate is:
135.
Refer to the information above. Assuming a 365-day year, the average number of days
required for Carlin Equipment to sell its inventory is: (Round your final answer to one
decimal place)
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Essay Questions
8-79
136.
Accounting terminology
Listed below are eight technical accounting terms introduced in this chapter:
1. Just-in-time
2. Average-cost method
3. LIFO method
4. Gross profit method
5. Inventory shrinkage
6. FIFO method
7. Retail method
8. Inventory turnover
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided below each statement, indicate the accounting term described, or
answer "None" if the statement does not correctly describe any of the terms.
_______ a. The cost flow assumption in which the oldest units purchased are assumed to
have remained in inventory.
_______ b. A method of estimating the cost of goods sold and ending inventory based upon
cost relationships from prior periods.
_______ c. The practice of valuing inventory in the balance sheet at expected sales prices,
rather than at cost.
_______ d. An inventory cost flow assumption involving only one "cost layer."
_______ e. The inventory cost flow assumption likely to result in the highest reported
amount of gross profit during a period of rising prices.
_______ f. A technique for minimizing a company's investment in inventory, particularly
inventories of raw materials and finished goods.
_______ g. A measure of a company's ability to sell its inventory quickly.
