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Exam 6: Inventories

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Question 71

Multiple Choice

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Which of the following measures the length of time it takes to acquire,sell,and replace inventory?

A) inventory turnover
B) number of days' sales in inventory
C) retail method of inventory costing
D) gross profit method of inventory costing

E) B) and C)
F) C) and D)

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Question 72

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Under the LIFO inventory costing method,the most recent costs are assigned to ending inventory.

A) True
B) False

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Question 73

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Which document authorizes the purchase of the inventory from an approved vendor?

The following lots of a particular commodity were available for sale during the year: -The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the LIFO method?

During periods of increasing costs,the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.

FIFO is the inventory costing method that follows the physical flow of the goods.

The inventory costing method that reports the most current prices in ending inventory is

List three different security measures taken to safeguard inventory.

Too much inventory on hand

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Based upon the following data,estimate the cost of ending merchandise inventory using the gross profit method.

Taking a physical count of inventory

Merchandise inventory at the end of the year is overstated.Which of the following statements correctly states the effect of the error?

A physical inventory should be taken at the end of every month.

In the retail inventory method,the cost to retail ratio is equal to the cost of merchandise sold divided by the retail price of the merchandise sold.

A business using the retail method of inventory costing determines that merchandise inventory at retail is $2,300,000.If the ratio of cost to retail price is 55%,what is the amount of inventory to be reported on the financial statements?

Which of the following companies would be more likely to use the specific identification inventory costing method?

List the internal control objectives illustrated by the following: a. keeping the inventory storeroom locked b. counting the inventory at the end of the accounting period and comparing it with the inventory ledger clerk's records c. using subsidiary ledgers and a perpetual inventory system

Basic inventory data for April 30 are presented below for a business that employs the lower-of-cost-or-market basis of inventory valuation to each category. $\begin{array}{cccccccc}\text { Commodity } & \begin{array}{c}\text { Inventory } \\\text { Quantity }\end{array} & \begin{array}{c}\text { Cost per } \\\text { Unit }\end{array} & \begin{array}{c}\text { Market Value } \\\text { per Unit }\end{array} & \text { Cost } & \begin{array}{c}\text { Total } \\\text { Market }\end{array} & \text { LCM } \\\hline \text { A } & 35 & \$ 52 & \$ 55 &---&--- & --- \\\hline \text { B } & 20 & 155 & 150 &---&--- & --- \\\hline \text { C } & 25 & 82 & 85 &---&--- & --- \\\hline \text { D } & 40 & 58 & 55 &---&--- & --- \\\hline\end{array}$ a Complete the table. b Determine the amount of reduction in the inventory at April 30 attributable to market decline.

All of the following are reasons to use an estimated method of costing inventory except