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Exam 6: Inventories

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Question 1

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Assume that three identical units of merchandise are purchased during October, as follows: ​ $\begin{array} { | l | c | c | c | c | } \hline & & & \text { Units } & \text { Cost } \\\hline \text { October } & 5 & \text { Purchase } & 1 & \$ 5 \\\hline & 12 & \text { Purchase } & 1 & 13 \\\hline & 28 & \text { Purchase } & \underline { 1 } & \underline { 15 } \\\hline \text { Total } & & & \underline { 3 } & \underline { \$ 33 } \\\hline\end{array}$ ​ Assume one unit is sold on October 31 for $28. Determine cost of goods sold, gross profit, and ending inventory under the FIFO method.

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Question 2

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Assume that three identical units of merchandise were purchased during October, as follows: ​ $\begin{array}{|l|r|l|c|r|}\hline & & & \text { Units } &{\text { Cost }} \\\hline \text { October } & 5 & \text { Purchase } & 1 & \$ 5 \\\hline & 12 & \text { Purchase } & 1 & 13 \\\hline & 28 & \text { Purchase } & 1 & 15 \\\hline \text { Total } & & & \underline{3} & \$ 33 \\\hline\end{array}$ ​ Assume one unit is sold on October 31 for $28. Determine cost of goods sold, gross profit, and ending inventory under the average cost method.

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Question 3

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On the basis of the following data, determine the estimated cost of the inventory as of March 31 using the retail method.

If a company values inventory at the lower of cost or market, which of the following is the value of inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. $\begin{array}{|l|c|c|c|}\hline {\text { Item }} & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \\\hline \text { Froduct C } & 420 & \$ 6 & \$ 5 \\\hline \text { Froduct D } & 370 & 12 & 14 \\\hline\end{array}$

For the year ended December 31, Depot Max's cost of goods sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max's number of days' sales in inventory is closest to

A purchase order establishes an initial record of the receipt of the inventory.

Use the information below to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. ​ ​ -Assuming that the company uses the perpetual inventory system, determine the May 31 inventory balance using the FIFO inventory cost method.

Use of the retail inventory method requires taking a physical count of inventory.

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work.

The following lots of Commodity Z were available for sale during the year. Use this information to answer the questions that follow. $\begin{array} { l l } \text { Beginning inventory } & 10 \text { units at } \$ 30 \\\text { First purchase } & 25 \text { units at } \$ 32 \\\text { Second purchase } & 30 \text { units at } \$ 34 \\\text { Third purchase } & 10 \text { units at } \$ 35\end{array}$ ​ ​ -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 ending inventory balance at the end of the year according to the LIFO method?

Unsold consigned merchandise should be included in the consignee's inventory.

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

The following data were taken from the annual reports of Big Bang Inc., a manufacturer of fireworks, and Orange Inc., a manufacturer of computers. $\begin{array}{|l|r|r|}\hline & \text { Big Bang, Inc. } &{\text { Orange, Inc. }} \\\hline \text { Cost of goods sold } & \$ 830,000 & \$ 11,540,000 \\\hline \text { Inventory, end of year } & 190,000 & 320,000 \\\hline \text { Inventory, beginning of year } & 240,000 & 290,000 \\\hline\end{array}$ What is the inventory turnover for Big Bang and Orange.

Cost flow is in the reverse order in which costs were incurred when using

On the basis of the following data, what is the value of the total inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. $\begin{array} { | l | c | c | c | } \hline \text { Item } & \text { Inventory Quantity } & \text { Unit Cost Price } & \text { Unit Market Price } \\\hline \text {product C } & 300 & \$ 6 & \$ 5 \\\hline \text { product D } & 420 & 12 & 14 \\\hline\end{array}$

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the

The units of an item available for sale during the year were as follows: ​ There are 48 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method. Show your work.

The following lots of Commodity Z were available for sale during the year. Use this information to answer the questions that follow. $\begin{array} { l l } \text { Beginning inventory } & 10 \text { units at } \$ 30 \\\text { First purchase } & 25 \text { units at } \$ 32 \\\text { Second purchase } & 30 \text { units at } \$ 34 \\\text { Third purchase } & 10 \text { units at } \$ 35\end{array}$ ​ ​ -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 ending inventory balance at the end of the year according to the FIFO method?

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. What is the effect on the balance sheet and income statement?

Beginning inventory, purchases, and sales data for widgets are as follows: ​ Complete the inventory cost card assuming the business maintains a perpetual inventory system and determine the cost of goods sold and ending inventory using LIFO.