Refer to Exhibit 7-6. If Martin Inc. uses a LIFO periodic inventory system, the ending inventory of supply number 47519 at October 31 is reported
as
85. Exhibit 7-6
Martin Inc. is a wholesaler of office supplies. The activity for supply number 47519 during October is shown
below:
Date
Balance/Transaction
Units
Cost
October 1
Inventory
2,000
$36.00
7
Purchase
3,000
37.20
12
Sales
3,600
21
Purchase
4,800
38.00
22
Sales
3,800
29
Purchase
1,600
38.60
Refer to Exhibit 7-6. If Martin Inc. uses a periodic average cost inventory system, the ending inventory of supply number 47519 at October 31 is
reported as (round the average cost to the nearest cent)
86. With LIFO, cost of goods sold is $780,000, and ending inventory is $180,000. If FIFO ending inventory is
$260,000, how much is FIFO cost of goods sold?
87. Which of the following factors are used in calculating a company’s inventory turnover?
88. Which of the following factors are used in calculating a company’s number of days’ sales in inventory?
89. The two ratios that help a company measure how effectively it is managing its inventory are
90. Which ratio tells how many times a year a company is replenishing its inventory?
91. Which ratio tells how much long it takes a company to pay its suppliers?
92. Monica Mills Co. began the year with $100,000 in inventory and ends the year with $300,000. Purchases
during the year amounted to $1,660,000. The number of days’ sales in inventory for the year was
93. Andromeda, Inc., purchased $100,000 of inventory during the year and had average receivables and
payables of $46,575 and $21,918, respectively. The number of days’ purchases in accounts payable was
approximately
94. During the current calendar year, Bowman Corporation purchased $660,000 of inventory. The beginning
inventory balance was $84,000, and the inventory balance at year-end was $120,000. The inventory turnover for
the current year was
95. The following information was taken from the records of Kane Company:
Beginning inventory
$ 135,000
Ending inventory
150,000
Net credit sales
1,440,000
Cost of goods sold
810,000
Net income
112,500
Given this information, Kane’s inventory turnover is
96. The December 31, 2012, balance sheet and income statement for Santana Company are presented below:
Santana Company
Balance Sheet
December 31, 2012
Assets
Liabilities and
Stockholders’ Equity
Cash
Accounts Payable
$ 243,000
Accounts Receivable
Income Taxes Payable
67,000
Inventory
Salaries Payable
46,000
Plant and Equipment
Bonds Payable
760,000
Intangible Assets
Common Stock
340,000
Retained Earnings
244,000
Total Liabilities
and
$1,700,000
Stockholders’ Equity
$1,700,000
Santana Company
Income Statement
For the Year Ended December 31,
2012
Net sales revenue
$1,800,000
Cost of goods sold
945,000
Gross margin
$ 855,000
Operating expenses (including
$40,000 of bond interest)
567,000
Income before taxes
$ 288,000
Income taxes
115,000
Net income
$ 173,000
Additional information:
Total assets (12/31/11)
$2,400,000
Inventory (12/31/11)
238,500
Total stockholders’ equity (12/31/11)
616,000
Given this information, Santana’s inventory turnover during 2012 was
97. The December 31, 2012, balance sheet and income statement for Santana Company are presented below.
Santana Company
Balance Sheet
December 31, 2012
Assets
Liabilities and
Stockholders’ Equity
Cash
$ 96,000
Accounts
Payable
$ 243,000
Accounts Receivable
560,000
Income Taxes
Payable
67,000
Inventory
194,500
Salaries
Payable
46,000
Plant and Equipment
770,000
Bonds
Payable
720,500
Intangible Assets
40,000
Common
Stock
340,000
Retained
Earnings
244,000
Total
Liabilities and
Total Assets
$1,660,500
Stockholders’ Equity
$1,660,500
Santana Company
Income Statement
For the Year Ended December 31, 2012
Net sales revenue
$1,800,000
Cost of goods sold
945,000
Gross margin
$ 855,000
Operating expenses (including $40,000 of bond
interest)
567,000
Income before taxes
$ 288,000
Income taxes
115,000
Net income
$ 173,000
Additional information:
Total assets (12/31/11)
$2,400,000
Inventory (12/31/11)
238,500
Accounts payable (12/31/11)
287,000
Total stockholders’ equity (12/31/11)
616,000
Given this information, Santana’s number of days’ purchases in accounts payable during 2012 was
98. The following information is available for Belden Company:
Cost of goods sold for 2012
$3,600,000
Inventories at December 31, 2011
1,050,000
Inventories at December 31, 2012
930,000
Assuming that a business year consists of 360 days, the number of days’ sales in inventory for 2012 was
99. The following information is available for Lendo Company:
Lendo Company
Partial Balance Sheet
December 31, 2012 and 2011
2012
2011
Accounts receivable
$500,000
$470,000
Allowance for uncollectible accounts
(25,000)
(20,000)
Net accounts receivable
$475,000
$450,000
Inventories at lower of cost or market
$600,000
$550,000
Lendo Company
Partial Income Statement
For the Years Ended December 31, 2012 and 2011
2009
2008
Net credit sales
$2,500,000
$2,200,000
Net cash sales
500,000
400,000
Net sales
$3,000,000
$2,600,000
Cost of goods sold
$2,800,000
$1,800,000
Selling, general, and administrative expenses.
300,000
270,000
Other expenses
50,000
30,000
Total operating expenses
$2,350,000
$2,100,000
Lendo’s inventory turnover for 2012 is computed by
100. How many years does it take for an inventory error to correct itself assuming the ending inventory count in
the second year is correct?
101. When ending inventory is overstated in period 1, net income in period 2 will be
102. An understatement of purchases results in cost of goods sold being
103. Under the periodic inventory method, if an inventory purchase has been made and recorded but has NOT
yet arrived (and thus is not counted), the financial statements will
104. The misclassification of Freight-in as an operating expense will result in
105. Golva Company sold $15,000 of inventory on December 31. This sale was recorded in the books and was
also included in the ending inventory count. How will this information affect the financial statements?
106. Cait Company sold $5,000 of inventory on December 31, 2011. This sale was recorded in the books and
was also included in the ending inventory count. How will this information affect the financial statements for
2012?
107. Which inventory cost flow assumption will provide the same amounts for ending inventory and cost of
goods sold under both the periodic and perpetual inventory systems?
108. Under certain methods of inventory cost flow assumption, the amount of cost of goods sold can be affected
by when the sale occurs. Which of the following methods is NOT affected by when the sale occurs?
109. Under which system must a determination of the “last in” units be evaluated at the time of each individual
sale?
110. The following information is available for Waggoner Corporation for the month of June:
Beginning inventory
16 units ´ $40 = $640
Purchased, June 3
10 units ´ $44 = $440
Purchased, June 5
14 units ´ $48 = $672
Sold, June 9
18 units
Purchased, June 15
16 units ´ $32 = $512
Sold, June 19
12 units
Given this information, the perpetual LIFO ending inventory balance is
111. Exhibit 7-7
Iliescu Sporting Goods had the following inventory records for one line of skis for the month of January:
Beginning inventory
70 pairs ´ $100 per pair = $7,000
Sales, Jan. 1 – Jan. 7
50 pairs
Purchase, Jan. 8
46 pairs ´ $104 per pair = $4,784
Sales, Jan. 9 – Jan. 16
59 pairs
Purchase, Jan. 17
62 pairs ´ $110 per pair = $6,820
Sales, Jan. 18 – Jan. 29
56 pairs
Purchase, Jan. 30
18 pairs ´ $112 per pair = $2,016
Refer to Exhibit 7-7. Assuming the perpetual FIFO inventory method is used, what is the cost of Iliescu’s ending inventory?
112. Exhibit 7-7
Iliescu Sporting Goods had the following inventory records for one line of skis for the month of January:
Beginning inventory
70 pairs ´ $100 per pair = $7,000
Sales, Jan. 1 – Jan. 7
50 pairs
Purchase, Jan. 8
46 pairs ´ $104 per pair = $4,784
Sales, Jan. 9 – Jan. 16
59 pairs
Purchase, Jan. 17
62 pairs ´ $110 per pair = $6,820
Sales, Jan. 18 – Jan. 29
56 pairs
Purchase, Jan. 30
18 pairs ´ $112 per pair = $2,016
Refer to Exhibit 7-7. Assuming the perpetual LIFO inventory method is used, what is the cost of Iliescu’s ending inventory?
113. Exhibit 7-7
Iliescu Sporting Goods had the following inventory records for one line of skis for the month of January:
Beginning inventory
70 pairs ´ $100 per pair = $7,000
Sales, Jan. 1 – Jan. 7
50 pairs
Purchase, Jan. 8
46 pairs ´ $104 per pair = $4,784
Sales, Jan. 9 – Jan. 16
59 pairs
Purchase, Jan. 17
62 pairs ´ $110 per pair = $6,820
Sales, Jan. 18 – Jan. 29
56 pairs
Purchase, Jan. 30
18 pairs ´ $112 per pair = $2,016
Refer to Exhibit 7-7. Assuming the perpetual LIFO inventory method is used, what is Iliescu’s cost of goods sold?
114. Monango Clothing Store sells jackets. During January, its inventory records of one brand of designer
jackets were as follows:
Beginning inventory
10 jackets ´ $44 = $440
January 6 purchase
4 jackets ´ $50 = $200
January 10 sale
5 jackets
January 15 purchase
7 jackets ´ $60 = $420
January 20 sale
10 jackets
January 25 purchase
4 jackets ´ $60 = $240
Using this information, perpetual LIFO cost of goods sold is
115. The ceiling, or the maximum market amount at which inventory can be carried on the books, is equal to
116. The floor, or the minimum market amount at which inventory can be carried on the books, is equal to
117. Inventories are carried in the accounting records at cost, EXCEPT when
118. Inventory is usually carried in the accounting records at
119. Inventory valued at lower of cost or market can never be recorded at amounts below its
120. Exhibit 7-8
Tena Company has the following information related to its two products:
Original
Replacement
Cost
Cost
Ceiling
Floor
Product A
$12
$ 9
$10
$ 8
Product B
$15
$16
$18
$14
Refer to Exhibit 7-8. The net realizable value of product B is
121. Exhibit 7-8
Tena Company has the following information related to its two products:
Original
Replacement
Cost
Cost
Ceiling
Floor
Product A
$12
$ 9
$10
$ 8
Product B
$15
$16
$18
$14
Refer to Exhibit 7-8. Assuming that the lower of cost or market rule is applied to individual products, the amount at which product A should be
valued is
122. Commodity X sells for $18.00; selling expenses are $3.60; normal profit is $4.50. If the cost of
Commodity X is $11.70 and the replacement cost is $10.00, the lower of cost or market is
123. A firm is writing its inventory down to the lower of cost or market. It has determined the following per unit
costs and market prices for its product:
Original cost
$104
Sales price
120
Selling cost
20
Normal profit
18
Replacement cost
78
Given these data, the firm should value its inventory at a per unit cost of
124. Which of the following statements is true of the gross margin method of estimating the dollar amount of
ending inventory?
125. The use of the gross profit method assumes
126. The gross profit method of estimating inventory would NOT be useful when
127. A firm had a beginning inventory balance of $1,000, net purchases of $35,000, and sales of $40,000. Its
gross margin percentage was 25 percent. Using the gross margin method, the ending inventory balance is
128. Penn Company needs an estimate of its ending inventory balance. The following information is available:
Sales revenue
$180,000
Beginning inventory
45,000
Net purchases
100,000
Gross margin percentage
30%
Given this information, when using the gross margin estimation method, ending inventory is approximately
129. The following information is available for the Segura Company for the three months ended June 30:
Inventory, April 1
$1,200,000
Purchases
4,500,000
Freight In
300,000
Sales
6,400,000
The gross margin was 25 percent of sales. What is the estimated inventory balance at June 30?
130. The following information appears in Gordon Company’s records for the year ended December 31:
Inventory, January 1
$ 325,000
Purchases
1,150,000
Purchase returns
40,000
Freight in
30,000
Sales
1,700,000
Sales discounts
10,000
Sales returns
15,000