ACCT Chapter 6

Which of the following should not be included in the physical inventory of a company? a. Goods held on consignment from another company. b. Goods in transit from another company shipped FOB shipping point. c. Goods shipped on consignment to another company. d. All of these answer choices should be included.

Goods held on consignment from another company.

The factor which determines whether or not goods should be included in a physical count of inventory is a. physical possession. b. legal title. c. management's judgment. d. whether or not the purchase price has been paid.

Legal Title

Which of the following is not a common cost flow assumption used in costing inventory? a. Last-in, first-out b. Average cost c. First-in, first-out d. Middle-in, first-out

Middle-in, first-out

If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered.

The seller has legal title until the goods are delivered.

Jenks Company developed the following information about its inventories in applying the lower of cost or market (LCM) basis in valuing inventories: Product Cost Market --------- ----- -------- A $114000 $120000 B 80000 76000 C 160000 162000 If Jenks Company applies the LCM basis, the value of the inventory reported on the balance sheet would be a. $350000. b. $362000. c. $354000. d. $358000.

a. $350000.

A company purchased inventory as follows: ▪ 200 units at $6.00 ▪ 300 units at $6.60 The average unit cost for inventory is a. $6.36. b. $6.60. c. $6.30. d. $6.00.

a. $6.36.

Automobile Audio has the following inventory data: Nov. 1 Inventory 30 units @ $6.00 each 8 Purchase 120 units @ $6.45 each 17 Purchase 60 units @ $6.30 each 25 Purchase 90 units @ $6.60 each A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Ending inventory (rounded) under FIFO is a. $657. b. $1295. c. $1269. d. $632.

a. $657.

At December 31, 2017 Howell Company's's inventory records indicated a balance of $878000. Upon further investigation it was determined that this amount included the following: ▪ $168000 in inventory purchases made by Howell shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd ▪ $111000 in goods sold by Howell with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th ▪ $9000 of goods received on consignment from Westwood Company What is Howell correct ending inventory balance at December 31, 2017? a. $701000 b. $710000 c. $869000 d. $590000

a. $701000

Dole Industries had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 90 $90 Mar. 14, 2017 Purchase 155 $94 May 1, 2017 Purchase 110 $98 The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars) a. $7720 b. $23650 c. $8480 d. $24410

a. $7720

The selection of an appropriate inventory cost flow assumption for an individual company is made by a. management. b. the SEC. c. the internal auditors. d. the external auditors.

a. management.

Baker Bakery Company just began business and made the following four inventory purchases in June: June 1 150 units $1040 June 10 200 units 1560 June 15 200 units 1680 June 28 150 units 1320 ---------------------------------------- $5600 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory (rounded to whole dollar) for June is a. $1456. b. $1824. c. $1848. d. $1508.

b. $1824.

Olympus Climbers Company has the following inventory data: July 1 Beginning inventory 30 units at $19 $570 7 Purchases 105 units at $20 2100 22 Purchases 15 units at $22 330 ---------------------------------------------------------- $3000 A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is a. $930. b. $2010. c. $2070. d. $990.

b. $2010.

At December 31, 2017 Mohling Company's inventory records indicated a balance of $632000. Upon further investigation it was determined that this amount included the following: ▪ $112000 in inventory purchases made by Mohling shipped from the seller 12/27/17 terms FOB destination, but not due to be received until January 2nd ▪ $74000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th ▪ $6000 of goods received on consignment from Dollywood Company What is Mohling correct ending inventory balance at December 31, 2017? a. $520000 b. $514000 c. $440000 d. $626000

b. $514000

At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with a unit cost of $7. During May, the company purchased inventory as follows: ▪ 600 units at $7 ▪ 900 units at $8 The company sold 1500 units during the month for $12 per unit. Heineken Company uses the average cost method. Heineken Company's gross profit for the month of May is a. $11250. b. $6750. c. $13500. d. $18000.

b. $6750.

When is a physical inventory usually taken? a. When goods are not being sold or received. b. At the end of the company's fiscal year. c. When the company has its greatest amount of inventory. d. When the company has its greatest amount of inventory and at the end of the company's fiscal year

b. At the end of the company's fiscal year.

Inventory costing methods place primary reliance on assumptions about the flow of a. resale prices. b. costs. c. goods. d. values.

b. costs.

Goods held on consignment are a. included as part of no one's ending inventory. b. never owned by the consignee. c. included in the consignee's ending inventory. d. kept for sale on the premises of the consignor.

b. never owned by the consignee.

The LIFO inventory method assumes that the cost of the latest units purchased are a. not allocated to cost of goods sold or ending inventory. b. the first to be allocated to cost of goods sold. c. the last to be allocated to cost of goods sold. d. the first to be allocated to ending inventory.

b. the first to be allocated to cost of goods sold.

A company just began business and made the following four inventory purchases in June: June 1 150 units $990 June 10 200 units 1344 June 15 200 units 1368 June 28 150 units 1062 ----------------------------------------- $4764 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory (rounded to whole dollar) on June 30 is a. $1344. b. $1416. c. $1361. d. $1320.

c. $1361.

Alpha First Company just began business and made the following four inventory purchases in June: June 1 150 units $1040 June 10 200 units 1560 June 15 200 units 1680 June 28 150 units 1320 ---------------------------------------- $5600 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the LIFO inventory method, the value of the ending inventory (rounded to whole dollar) on June 30 is a. $1848. b. $1456. c. $1508. d. $1824.

c. $1508.

Hogan Industries had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 108 $45 Mar. 14, 2017 Purchase 186 $47 May 1, 2017 Purchase 132 $49 The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $1800, what is the company's after-tax income using LIFO? (rounded to whole dollars) a. $2302 b. $3288 c. $1982 d. $2832

c. $1982

Nelson Corporation sells three different products. The following information is available on December 31: Inventory item Units Cost per unit Market value per unit X 300 $4 $3.5 Y 600 $2 $1.5 Z 1500 $3 $4 When applying the lower of cost or market rule to each item, what will Nelson's total ending inventory balance be? a. $6900 b. $6600 c. $6450 d. $7950

c. $6450

Radical Radials Company has the following inventory data: July 1 Beginning inventory 30 units at $19 $570 7 Purchases 105 units at $20 2100 22 Purchases 15 units at $22 330 ----------------------------------------------------------------------- $3000 A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the LIFO inventory method, the amount allocated to ending inventory for July is a. $1056. b. $960. c. $930. d. $912.

c. $930.

The term "FOB" denotes a. free only (to) buyer. b. freight on board. c. free on board. d. freight charge on buyer.

c. free on board.

Charlene Cosmetics Company just began business and made the following four inventory purchases in June: June 1 150 units $1040 June 10 200 units 1560 June 15 200 units 1680 June 28 150 units 1320 ----------------------------------------- $5600 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the average cost method, the amount allocated to the ending inventory (rounded to whole dollar) on June 30 is a. $1764. b. $1824. c. $1638. d. $1680.

d. $1680.

Quiet Phones Company has the following inventory data: July 1 Beginning inventory 30 units at $19 $570 7 Purchases 105 units at $20 2100 22 Purchases 15 units at $22 330 -------------------------------------------------------------- $3000 A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is a. $990. b. $930. c. $2010. d. $2070.

d. $2070.

Hogan Industries had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 108 $45 Mar. 14, 2017 Purchase 186 $47 May 1, 2017 Purchase 132 $49 The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars) a. $14646 b. $14190 c. $5088 d. $4632

d. $4632

Which of the following is an inventory costing method? a. Lower of cost or market b. Perpetual c. Periodic d. Specific identification

d. Specific identification

Selection of an inventory costing method by management does not usually depend on a. tax effects. b. balance sheet effects. c. income statement effects. d. the fiscal year end.

d. the fiscal year end.