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Exam 7: Inventories

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Question 1

True/False

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A perpetual inventory system is an effective means of control over inventory.

A) True
B) False

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Question 2

Multiple Choice

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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 cost of goods sold for the year according to the FIFO method?

A) $1,380
B) $1,375
C) $1,510
D) $1,250

E) B) and C)
F) A) and C)

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Question 3

Multiple Choice

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Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

Safeguarding inventory and proper reporting of the inventory in the books are the reasons for controlling the inventory.

Which of the following measures the relationship between cost of merchandise sold and the amount of inventory carried during the period?

The selection of an inventory costing method has no significant impact on the financial statements.

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 calculates the cost of merchandise sold and ending inventory using LIFO.

For the year ended December 31, 2014 Depot Max's cost of merchandise 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

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is

If a fire destroys the merchandise inventory, the gross profit method can be used to estimate the cost of merchandise destroyed.

Ending inventory is made up of the oldest purchases when a company uses

The beginning inventory and purchases of an item for the period were as follows: The company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine the cost of the 15 units in the inventory by each of the following methods, presenting details of your computations: (a) first-in, first-out; (b) last-in, first-out; (c) average cost. Do not round your intermediate calculations. Round your final answer to two decimal places.

List the internal control objectives illustrated by the following:

One of the two internal control procedures over inventory is to properly report inventory on the financial statements.

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

The inventory costing method that reports the earliest costs in ending inventory is

Complete the chart using the LIFO and FIFO costing methods, assuming a period of increasing costs:

"Market," as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner.

Most large companies will use only one inventory costing methods for all of its different segments.

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