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Reporting and Analyzing Inventory
6-21
90. Sassy Saxophones has the following inventory data:
July 1 Beginning inventory 50 units at $120
5 Purchases 300 units at $112
14 Sale 200 units
21 Purchases 150 units at $115
30 Sale 140 units
Assuming that a periodic inventory system is used, what is the amount allocated to ending
inventory on a LIFO basis?
a. $18,320
b. $18,370
c. $38,480
d. $38,530
91. Clear Clarinets has the following inventory data:
July 1 Beginning inventory 50 units at $120
5 Purchases 300 units at $112
14 Sale 200 units
21 Purchases 150 units at $115
30 Sale 140 units
Assuming that a periodic inventory system is used, what is the amount allocated to ending
inventory on a FIFO basis?
a. $18,220
b. $18,370
c. $38,480
d. $38,530
92. Which of the following items will increase inventoriable costs for the buyer of goods?
a. Purchase returns and allowances granted by the seller
b. Purchase discounts taken by the purchaser
c. Freight charges paid by the seller
d. Freight charges paid by the purchaser
93. Of the following companies, which one would not likely employ the specific identification
method for inventory costing?
a. Music store specializing in organ sales
b. Farm implement dealership
c. Antique shop
d. Hardware store
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-22
94. A problem with the specific identification method is that
a. inventories can be reported at actual costs.
b. management can manipulate income.
c. matching is not achieved.
d. the lower of cost or market basis cannot be applied.
95. The selection of an appropriate inventory cost flow assumption for an individual company
is made by
a. the external auditors.
b. the SEC.
c. the internal auditors.
d. management.
96. Which of the following is not a common cost flow assumption used in costing inventory?
a. First-in, first-out
b. Middle-in, first-out
c. Last-in, first-out
d. Average cost
97. The accounting principle that requires that the cost flow assumption be consistent with the
physical movement of goods is
a. called the matching principle.
b. called the consistency principle.
c. nonexistent; that is, there is no such accounting requirement.
d. called the physical flow assumption.
98. Which of the following statements is true regarding inventory cost flow assumptions?
a. A company may use more than one costing method concurrently.
b. A company must comply with the method specified by industry standards.
c. A company must use the same method for domestic and foreign operations.
d. A company may never change its inventory costing method once it has chosen a
method.
99. Which of the following statements is correct with respect to inventories?
a. The FIFO method assumes that the costs of the earliest goods acquired are the last to
be sold.
b. It is generally good business management to sell the most recently acquired goods
first.
c. Under FIFO, the ending inventory is based on the latest units purchased.
d. FIFO seldom coincides with the actual physical flow of inventory.
Reporting and Analyzing Inventory
6-23
100. Given equal circumstances, which inventory method would probably be the most time
consuming?
a. FIFO
b. LIFO
c. Average cost
d. Specific identification.
101. Serene Stereos has the following inventory data:
Nov. 1 Inventory 30 units @ $6.00 each
8 Purchase 120 units @ $6.45 each
17 Purchase 60 units @ $6.30 each
25 Purchase 90 units @ $6.60 each
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Cost of goods sold under FIFO is
a. $657
b. $1,269
c. $632
d. $1,295
102. Automobile Audio has the following inventory data:
Nov. 1 Inventory 30 units @ $6.00 each
8 Purchase 120 units @ $6.45 each
17 Purchase 60 units @ $6.30 each
25 Purchase 90 units @ $6.60 each
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Ending inventory under FIFO is
a. $657
b. $1,269
c. $632
d. $1,295
103. Carryable CDs has the following inventory data:
Nov. 1 Inventory 30 units @ $6.00 each
8 Purchase 120 units @ $6.45 each
17 Purchase 60 units @ $6.30 each
25 Purchase 90 units @ $6.60 each
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Cost of goods sold under LIFO is
a. $657
b. $1,269
c. $632
d. $1,295
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-24
104. Delightful Discs has the following inventory data:
Nov. 1 Inventory 30 units @ $6.00 each
8 Purchase 120 units @ $6.45 each
17 Purchase 60 units @ $6.30 each
25 Purchase 90 units @ $6.60 each
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Ending inventory under LIFO is
a. $657
b. $632
c. $1,269
d. $1,295
105. Laser Listening has the following inventory data:
Nov. 1 Inventory 30 units @ $6.00 each
8 Purchase 120 units @ $6.45 each
17 Purchase 60 units @ $6.30 each
25 Purchase 90 units @ $6.60 each
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Assuming that the specific identification method is used and that ending
inventory consists of 30 units from each of the three purchases and 10 units from the
November 1 inventory, cost of goods sold is
a. $640.
b. $1,286
c. $1,281
d. $1,254
106. Which inventory costing method should a gasoline retailer use?
a. Average cost
b. LIFO
c. FIFO
d. Either LIFO or FIFO.
107. In periods of rising prices, which is an advantage of using the LIFO inventory costing
method?
a. Ending inventory will include latest (most recent) costs and thus be more realistic.
b. Cost of goods sold will include latest (most recent) costs and thus will be more
realistic.
c. Net income will be the highest and thus reflect the prosperity of the company.
d. Phantom profits are reported.
Reporting and Analyzing Inventory
6-25
108. Hogan Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 108 $45
Mar. 14, 2017 Purchase 186 $47
May 1, 2017 Purchase 132 $49
The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using LIFO?
(rounded to whole dollars)
a. $14,646
b. $14,190
c. $5,088
d. $4,632
109. Hogan Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 108 $45
Mar. 14, 2017 Purchase 186 $47
May 1, 2017 Purchase 132 $49
The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, and operating expenses of $1,800, what is the
company’s after-tax income using LIFO? (rounded to whole dollars)
a. $2,832
b. $3,288
c. $2,302
d. $1,982
110. Hogan Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 108 $45
Mar. 14, 2017 Purchase 186 $47
May 1, 2017 Purchase 132 $49
The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using FIFO?
(rounded to whole dollars)
a. $14,646
b. $14,190
c. $5,088
d. $4,632
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-26
111. Hogan Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 108 $45
Mar. 14, 2017 Purchase 186 $47
May 1, 2017 Purchase 132 $49
The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used and operating expenses of $1,800, what is the
company’s after-tax income using FIFO? (rounded to whole dollars)
a. $2,832
b. $3,288
c. $2,302
d. $1,982
112. Dole Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 90 $90
Mar. 14, 2017 Purchase 155 $94
May 1, 2017 Purchase 110 $98
The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using LIFO?
(rounded to whole dollars)
a. $24,410
b. $23,650
c. $8,480
d. $7,720
113. Dole Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 90 $90
Mar. 14, 2017 Purchase 155 $94
May 1, 2017 Purchase 110 $98
The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, and operating expenses of $2,500, what is the
company’s after-tax income using LIFO? (rounded to whole dollars)
a. $5,220
b. $5,404
c. $4,186
d. $3,654
Reporting and Analyzing Inventory
6-27
114. Dole Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 90 $90
Mar. 14, 2017 Purchase 155 $94
May 1, 2017 Purchase 110 $98
The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using FIFO?
(rounded to whole dollars)
a. $24,410
b. $23,650
c. $8,480
d. $7,720
115 Dole Industries had the following inventory transactions occur during 2017:
Units Cost/unit
Feb. 1, 2017 Purchase 90 $90
Mar. 14, 2017 Purchase 155 $94
May 1, 2017 Purchase 110 $98
The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used and operating expenses of $2,500, what is the
company’s after-tax income using FIFO? (rounded to whole dollars)
a. $5,220
b. $5,980
c. $4,186
d. $3,654
116. Hoover Company had beginning inventory of $15,000 at March 1, 2017. During the
month, the company made purchases of $65,000. The inventory at the end of the month is
$17,300. What is cost of goods sold for the month of March?
a. $62,700
b. $65,000
c. $80,000
d. $82,300
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-28
117. A company just starting in business purchased three merchandise inventory items at the
following prices. First purchase $80; Second purchase $95; Third purchase $85. If the
company sold two units for a total of $270 and used FIFO costing, the gross profit for the
period would be
a. $95.
b. $105.
c. $90.
d. $80.
118. At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with
a unit cost of $7. During May, the company purchased inventory as follows:
600 units at $7
900 units at $8
The company sold 1,500 units during the month for $12 per unit. Heineken uses the
average cost method. The average cost per unit for May is
a. $7.00.
b. $7.50.
c. $7.60.
d. $8.00.
119. At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with
a unit cost of $7. During May, the company purchased inventory as follows:
600 units at $7
900 units at $8
The company sold 1,500 units during the month for $12 per unit. Heineken uses the
average cost method. Heineken's gross profit for the month of May is
a. $6,750
b. $11,250
c. $13,500
d. $18,000
120. At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with
a unit cost of $7. During May, the company purchased inventory as follows:
600 units at $7
900 units at $8
The company sold 1,500 units during the month for $12 per unit. Heineken uses the
average cost method. The value of Heineken's inventory at May 31, 2017 is
a. $2,100
b. $2,250
c. $2,400
d. $13,500
Reporting and Analyzing Inventory
6-29
121. Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2017 are as follows:
Units Per unit price Total
Balance, 1/1/2017 300 $5.00 $1,500
Purchase, 1/15/2017 150 5.30 795
Purchase, 1/28/2017 150 5.50 825
An end of the month (1/31/2017) inventory showed that 240 units were on hand. How
many units did the company sell during January 2017?
a. 90
b. 240
c. 300
d. 360
122. Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2017 are as follows:
Units Per unit price Total
Balance, 1/1/2017 300 $5.00 $1,500
Purchase, 1/15/2017 150 5.30 795
Purchase, 1/28/2017 150 5.50 825
An end of the month (1/31/2017) inventory showed that 240 units were on hand. If the
company uses FIFO, what is the value of the ending inventory?
a. $1,320
b. $1,200
c. $1,302
d. $1,818
123. Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2017 are as follows:
Units Per unit price Total
Balance, 1/1/2017 300 $5.00 $1,500
Purchase, 1/15/2017 150 5.30 795
Purchase, 1/28/2017 150 5.50 825
An end of the month (1/31/2017) inventory showed that 240 units were on hand. If the
company uses LIFO, what is the value of the ending inventory?
a. $1,264
b. $1,200
c. $1,302
d. $1,920
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-30
124. Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2017 are as follows:
Units Per unit price Total
Balance, 1/1/2017 300 $5.00 $1,500
Purchase, 1/15/2017 150 5.30 795
Purchase, 1/28/2017 150 5.50 825
An end of the month (1/31/2017) inventory showed that 240 units were on hand. If the
company uses FIFO and sells the units for $10 each, what is the gross profit for the
month?
a. $1,782
b. $1,818
c. $3,600
d. $2,400
125. In periods of rising prices, the inventory method which results in the inventory value on the
balance sheet that is closest to current cost is the
a. FIFO method.
b. LIFO method.
c. average-cost method.
d. tax method.
126. In a period of declining prices, which of the following inventory methods generally results
in the lowest balance sheet figure for inventory?
a. Average cost method
b. LIFO method
c. FIFO method
d. Need more information to answer
127. In a period of rising prices, which of the following inventory methods generally results in
the lowest net income figure?
a. Average cost method
b. LIFO method
c. FIFO method
d. Need more information to answer
128. Which inventory method generally results in costs allocated to ending inventory that will
approximate their current cost?
a. LIFO
b. FIFO
c. Average cost method
d. Whichever method that produces the highest ending inventory figure
Reporting and Analyzing Inventory
6-31
129. Two companies report the same cost of goods available for sale but each employs a
different inventory costing method. If the price of goods has increased during the period,
then the company using
a. LIFO will have the highest ending inventory.
b. FIFO will have the highest cost of goods sold.
c. FIFO will have the highest ending inventory.
d. LIFO will have the lowest cost of goods sold.
130. If companies have identical inventoriable costs but use different inventory flow
assumptions when the price of goods have not been constant, then the
a. cost of goods sold of the companies will be identical.
b. cost of goods purchased during the year will be identical.
c. ending inventory of the companies will be identical.
d. net income of the companies will be identical.
131. In a period of increasing prices, which inventory flow assumption will result in the lowest
amount of income tax expense?
a. FIFO
b. LIFO
c. Average cost method
d. Income tax expense for the period will be the same under all assumptions.
132. Given equal circumstances and generally rising costs, which inventory method will
increase the tax expense the most?
a. FIFO
b. LIFO
c. Average cost
d. Income tax expense for the period will be the same under all assumptions.
133. The specific identification method of costing inventories is used when the
a. physical flow of units cannot be determined.
b. company sells large quantities of relatively low cost homogeneous items.
c. company sells large quantities of relatively low cost heterogeneous items.
d. company sells a limited quantity of high-unit cost items.
134. The specific identification method of inventory costing
a. always maximizes a company's net income.
b. always minimizes a company's net income.
c. has no effect on a company's net income.
d. may enable management to manipulate net income.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-32
135. The managers of Hong Company receive performance bonuses based on the net income
of the firm. Which inventory costing method are they likely to favor in periods of declining
prices?
a. LIFO
b. Average Cost
c. FIFO
d. Physical inventory method
136. In periods of inflation, phantom or paper profits may be reported as a result of using the
a. perpetual inventory method.
b. FIFO costing assumption.
c. LIFO costing assumption.
d. periodic inventory method.
137. Selection of an inventory costing method by management does not usually depend on
a. the fiscal year end.
b. income statement effects.
c. balance sheet effects.
d. tax effects.
138. The accountant at Landry Company is figuring out the difference in income taxes the
company will pay depending on the choice of either FIFO or LIFO as an inventory costing
method. The tax rate is 30% and the FIFO method will result in income before taxes of
$17,480. The LIFO method will result in income before taxes of $16,200. What is the
difference in tax that would be paid between the two methods?
a. $1,280
b. $896
c. $384
d. Cannot be determined from the information provided.
139. The accountant at Patton Company has determined that income before income taxes
amounted to $11,000 using the FIFO costing assumption. If the income tax rate is 30%
and the amount of income taxes paid would be $900 greater if the LIFO assumption were
used, what would be the amount of income before taxes under the LIFO assumption?
a. $11,900
b. $14,000
c. $8,000
d. $10,100
Reporting and Analyzing Inventory
6-33
140. The manager of Weiser is given a bonus based on net income before taxes. The net
income after taxes is $59,500 for FIFO and $49,000 for LIFO. The tax rate is 30%. The
bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of
LIFO?
a. $15,000
b. $21,000
c. $3,000
d. $10,500
141. The consistent application of an inventory costing method enhances
a. conservatism.
b. accuracy.
c. comparability.
d. efficiency.
142. Ace Company is a retailer operating in an industry that experiences inflation (rising
prices). Ace wants to maintain a high current ratio. Which inventory costing method should
Ace consider using?
a. LIFO
b. Average
c. FIFO
d. No inventory costing method directly affects the current ratio.
143. Ace Company is a retailer operating in an industry that experiences inflation (rising
prices). Ace wants the most realistic net income. Which inventory costing method should
Ace consider using?
a. Average because all inventory costs will then represent an average amount.
b. Specific identification is the most realistic method because it involves the actual costs.
c. LIFO because cost of goods sold represents the latest costs.
d. FIFO because cost of goods sold represents the earliest costs.
144. Ace Company is a retailer operating in an industry that experiences inflation (rising
prices). Ace wants the most realistic ending inventory. Which inventory costing method
should Ace consider using?
a. Average because all inventory costs will then represent an average amount.
b. Specific identification is the most realistic method because it involves the actual costs.
c. LIFO because ending inventory represents the earliest costs.
d. FIFO because ending inventory represents the latest costs.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-34
145. The lower of cost or market basis of valuing inventories is an example of
a. comparability.
b. the historical cost principle.
c. conservatism.
d. consistency.
146. When applying the lower of cost or market rule to inventory valuation, market generally
means
a. current replacement cost.
b. original cost.
c. resale value.
d. original cost, less physical deterioration.
147. The situation that requires a departure from the cost basis of accounting to the lower of
cost or market basis in valuing inventory is necessitated by
a. a decline in the value of the inventory.
b. an increase in selling price.
c. an increase in the value of the inventory.
d. a desire for more profit.
148. Which statement concerning lower of cost or market (LCM) is incorrect?
a. LCM is an example of a company choosing the accounting method that will be least
likely to overstate assets and income.
b. Under the LCM basis, market does not apply because assets are always recorded and
maintained at cost.
c. The LCM basis uses current replacement cost because a decline in this cost usually
leads to a decline in the selling price of the inventory item.
d. LCM is applied after one of the cost flow assumptions has been applied.
149. Jenks Company developed the following information about its inventories in applying the
lower of cost or market (LCM) basis in valuing inventories:
Product Cost Market
A $114,000 $120,000
B 80,000 76,000
C 160,000 162,000
If Jenks applies the LCM basis, the value of the inventory reported on the balance sheet
would be
a. $354,000.
b. $358,000.
c. $350,000.
d. $362,000.
Reporting and Analyzing Inventory
6-35
(A cost + B mark. + C cost)
150. Nelson Corporation sells three different products. The following information is available on
December 31:
Inventory Item
Units
Cost per unit
Market value per unit
X
300
$4.00
$3.50
Y
600
$2.00
$1.50
Z
1,500
$3.00
$4.00
When applying the lower of cost or market rule to each item, what will Nelson's total
ending inventory balance be?
a. $6,900
b. $6,450
c. $7,950
d. $6,600
151. Whitman Corporation sells six different products. The following information is available on
December 31:
Inventory Item
Units
Cost per unit
Market value per unit
Estimated Selling Price
Tin
60
$ 500
$ 505
$515
Titanium
20
5,000
4,950
5,100
Stainless Steel
80
2,000
1,910
1,985
Aluminum
80
350
285
290
Iron
40
400
410
425
Fiberglass
40
300
295
310
When applying the lower of cost or market rule to each item, what will Whitman's total
ending inventory balance be?
a. $346,000
b. $332,400
c. $333,100
d. $332,800
152. Johnson Company has a high inventory turnover that has increased over the last year. All
of the following statements are true regarding this situation except Johnson Company:
a. is minimizing funds tied up in inventory.
b. is increasing the amount of inventory on hand relative to sales.
c. may be losing sales due to inventory shortages.
d. has a cost of goods sold that is increasing relative to its average inventory.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-36
153. Use the following information regarding Black Company and Red Company to answer the
question “Which amount is equal to Black Company's "days in inventory" for 2017 (to the
closest decimal place)?”
Year
Inventory
Turnover
Ending Inventory
Black Company
2015
$26,340
2016
8.7
$29,890
2017
8.4
$30,100
Red Company
2015
$25,860
2016
7.0
$24,750
2017
7.5
$22,530
a. 43.5 days
b. 52.1 days
c. 48.7 days
d. 42.0 days
154. Use the following information regarding Black Company and Red Company to answer the
question “Which amount is equal to Red Company's "days in inventory" for 2016 (to the
closest decimal place)?”
Year
Inventory
Turnover
Ending Inventory
Black Company
2015
$26,340
2016
8.7
$29,890
2017
8.4
$30,100
Red Company
2015
$25,860
2016
7.0
$24,750
2017
7.5
$22,530
a. 43.5 days
b. 48.7 days
c. 42.0 days
d. 52.1 days
Reporting and Analyzing Inventory
6-37
155. Use the following information regarding Black Company and Red Company to answer the
question “Which of the following is Black Company's "cost of goods sold" for 2016 (to the
closest dollar)?”
Year
Inventory
Turnover
Ending Inventory
Black Company
2015
$26,340
2016
8.7
$29,890
2017
8.4
$30,100
Red Company
2015
$25,860
2016
6.8
$24,750
2017
7.5
$22,530
a. $252,840
b. $260,043
c. $244,601
d. $260,957
156. Use the following information regarding Black Company and Red Company to answer the
question “Which of the following is Red Company's "cost of goods sold" for 2017 (to the
closest dollar)?”
Year
Inventory
Turnover
Ending Inventory
Black Company
2015
$26,340
2016
8.7
$29,890
2017
8.2
$30,100
Red Company
2015
$25,860
2016
7.0
$24,750
2017
7.5
$22,530
a. $260,043
b. $189,788
c. $168,975
d. $177,300
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-38
157. Which of the following companies would most likely have the highest inventory turnover?
a. An art gallery.
b. An automobile manufacturer.
c. A piano manufacturer.
d. A bakery.
158. An aircraft company would most likely have a
a. high inventory turnover.
b. low profit margin.
c. high volume.
d. low inventory turnover.
159. The inventory turnover is calculated by dividing cost of goods sold by
a. beginning inventory.
b. ending inventory.
c. average inventory.
d. 365 days.
160. Days in inventory is calculated by dividing 365 days by
a. average inventory.
b. beginning inventory.
c. ending inventory.
d. the inventory turnover.
161. Which of these would cause the inventory turnover ratio to increase the most?
a. Increasing the amount of inventory on hand.
b. Keeping the amount of inventory on hand constant but increasing sales.
c. Keeping the amount of inventory on hand constant but decreasing sales.
d. Decreasing the amount of inventory on hand and increasing sales.
162. The following information was available for Camara Company at December 31, 2017:
beginning inventory $80,000; ending inventory $120,000; cost of goods sold $630,000;
and sales $900,000. Camara’s inventory turnover in 2017 was
a. 9.0 times.
b. 7.9 times.
c. 6.3 times.
d. 5.3 times.
Reporting and Analyzing Inventory
6-39
163. The following information was available for Camara Company at December 31, 2017:
beginning inventory $80,000; ending inventory $120,000; cost of goods sold $630,000;
and sales $900,000. Camara’s days in inventory in 2017 was
a. 40.6 days.
b. 46.2 days.
c. 57.9 days.
d. 68.9 days.
164. The following information was available for Bowyer Company at December 31, 2017:
beginning inventory $90,000; ending inventory $70,000; cost of goods sold $800,000; and
sales $1,100,000. Bowyer’s inventory turnover in 2017 was
a. 13.8 times.
b. 10.0 times.
c. 11.4 times.
d. 8.9 times.
165. The following information was available for Bowyer Company at December 31, 2017:
beginning inventory $90,000; ending inventory $70,000; cost of goods sold $800,000; and
sales $1,100,000. Bowyer’s days in inventory in 2017 was
a. 26.4 days.
b. 36.5 days.
c. 32.0 days.
d. 41.0 days.
166. A low number of days in inventory may indicate all of the following except
a. Sales opportunities may be lost because of inventory shortages.
b. There is less chance of having obsolete inventory items.
c. The company has fewer funds tied up in inventory.
d. Management has achieved the best balance between too much and too little inventory
levels.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
6-40
167. Redeker Company had the following records:
2017 2016
Ending inventory $32,650 $30,490
Cost of goods sold 213,600 209,040
What is Redeker’s inventory turnover for 2017? (rounded)
a. 6.8 times
b. 7.0 times
c. 6.6 times
d. 6.5 times
168. Redeker Company had the following records:
2017 2016
Ending inventory $32,650 $30,490
Cost of goods sold 213,600 209,040
What is Redeker’s average days in inventory for 2017? (rounded)
a. 53.7 days
b. 56.2 days
c. 55.3 days
d. 52.1 days
169. Barnett Company had the following records:
2017 2016
Ending inventory $32,650 $30,490
Cost of goods sold 306,300 313,600
What is Barnett’s inventory turnover for 2017? (rounded)
a. 9.4 times
b. 9.7 times
c. 9.9 times
d. 10.0 times
