ACC CHAPTER 6

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the amount of LIFO adjustment needed to adjust FIFO inventory records reported for the year to LIFO for external reporting purposes?

1300

Units sold during the year: 3,000What is the weighted-average unit cost?

700

Which of the following steps in the flow of inventory costs for a manufacturing company occurs first?

Purchasing raw materials

Inventory is typically reported as a(n):

asset on the balance sheet

The weighted-average method assumes that:

the cost of goods sold consists of a random mixture of all goods available for sale.

Travis Corporation begins the year with $50,000 of tire inventory. The company purchases tires worth $150,000 during the year. At the end of the year, the purchase cost of remaining inventory is $30,000. What is the cost of goods sold?

$170,000

Dane Stores begins the year with $30,000 of DVD inventory. It purchases DVDs worth $80,000 during the year. The cost of goods sold for the year is $70,000. What is the amount of ending inventory?

$40,000

What is the amount of ending inventory that Green Products will report in its balance sheet at the end of the year, if it uses the last-in, first-out cost method?

$5,500

Units sold during the year: 3,000What is the amount of ending inventory that Green Products will report in its balance sheet at the end of the year, if it uses the first-in, first-out cost method?

$8,000

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for _____.

$9,800

When inventory costs are rising, the _____ results in a higher reported inventory.

FIFO method

Which of the following is an example of a nonoperating expense for a merchandising company?

Interest expense

Which of the following is true of a period of falling inventory costs?

LIFO will report higher gross profit than FIFO.

Which of the following is an advantage of using LIFO in a period of rising costs?

Results in lower taxes

A _____________ inventory system is one that is continually updated to reflect inventory purchases and sales.

T

Companies that report inventory using the LIFO method must report the difference between the LIFO cost and FIFO cost of its inventory. This difference is commonly called the LIFO reserve.

T

FOB shipping point means title passes when the seller ships the inventory, not when the buyer receives it.

T

The LIFO conformity rule requires that _____.

a company that uses LIFO for tax reporting to also use LIFO for financial reporting

Walmart is an example of a:

retailer

Accountants often call FIFO the balance-sheet approach because _____.

the amount it reports for ending inventory better approximates the current cost of inventory

The FIFO method assumes that:

the first units purchased are the first ones sold.

The LIFO method assumes that:

the last units purchased are the first ones sold.

Products that have been started in the production process but are not yet complete at the end of the period are known as:

work-in-process inventory

Units sold during the year: 3,000What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?

$20,000

Units sold during the year: 3,000What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the last-in, first-out cost method?

$22,500

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the ending balance of Inventory under the FIFO method?

$4,500

Trivia Company reports a gross profit of $100, income tax expense of $15, selling, general, and administrative expenses of $35, nonoperating revenues of $10, and nonoperating expenses of $15. What is the company's operating income?

$65

Units sold during the year: 3,000What is the amount of ending inventory that Green Products will report in its balance sheet for the current year, if it uses the weighted-average method?

$7,000

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on May 21?

Credit to Accounts Payable for $4,800

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on February 25?

Credit to Sales Revenue for $6,000

An appropriate use of the specific identification method is in accounting for low-cost, similar inventory items that are difficult to separately identify.

FALSE

Companies that purchase inventories in finished form from suppliers are known as manufacturing companies.

FALSE

The multiple-step income statement begins by reporting that a company's sales revenues minus cost of goods sold equals net income.

FALSE

Wholesalers resell inventory to end users.

FALSE