ACCT201 Chapter 6

The following inventory was available for sale during the year for Trusted Tools: Beginning inventory ................. 10 units at $160 First purchase ........................ 15 units at $220 Second purchase .................... 30 units at $280 Third purchase ....................... 20 units at $260 Trusted Tools has 25 units on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method? A) $ 6,600 B) $11,900 C) $ 6,300 D) $ 7,800

A) $ 6,600

The following inventory was available for sale during the year for Thomasina Tools: Beginning inventory ................. 10 units at $ 80 First purchase ........................ 15 units at $110 Second purchase .................... 30 units at $140 Third purchase ....................... 20 units at $130 Thomasina has 25 units on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method? A) $3,300 B) $5,950 C) $3,150 D) $3,900

A) $3,300

Data on the physical inventory for Home Needs Company as of December 31, 2016 are given below: Inventory Items Quantity on hand Unit Cost Unit Market Value Appliances: Refrigerators 12 $1,000 $900 Dishwashers 18 $ 600 $550 Ovens 15 $ 500 $600 Electronics: Stereos 20 $ 700 $750 Televisions 25 $ 900 $852 Assuming the Home Needs Company applies the LCM method on the inventory by major category of items, the inventory balance reported on the Balance Sheet as of December 31, 2016 will be: A) $66,000 B) $66,200 C) $66,600 D) $66,800

A) $66,000

Assuming Blumen, Inc. uses FIFO perpetual inventory procedures, it records sale No. 2 as an entry to Cost of Goods Sold for: A) $740 B) $800 C) $560 D) $840

A) $740

Assuming Blumen, Inc. uses weighted-average (perpetual) inventory procedures, sale No. 2 is recorded as an entry to Cost of Goods Sold for: A) $760 B) $744 C) $680 D) $710

A) $760

The following data represent the beginning inventory and, in order of occurrence, the purchases and sales of Blumen, Inc., for an operating period. Units Unit Cost Total Cost Units Sold Beginning Inventory 30 $14 $ 420 Sale No. 1 20 Purchase No. 1 50 20 1,000 Sale No. 2 40 Purchase No. 2 20 22 440 __ Totals 100 $1,860 60 27. Assuming Blumen, Inc. uses FIFO periodic inventory procedures, the ending inventory cost is: A) $840 B) $880 C) $560 D) $620

A) $840

Assume that Lumber Company purchases 11,400 more of the $160 units on December 31, 2016. Compute Lumber Company's gross profit for 2016. A) $1,824,000 B) $ 624,800 C) $2,073,200 D) $ 857,200

B) $ 624,800

Assuming Blumen, Inc. uses weighted-average (periodic) inventory procedures, the ending inventory cost is: A) $ 737 B) $ 744 C) $1,100 D) $ 760

B) $ 744

Nature Creations Company imports and sells a product produced in Canada. In the summer of 2016, a natural disaster disrupted production, affecting its supply of product. Nature Creations Company uses the LIFO inventory method. On January 1, 2016, Nature Creations Company's inventory records were as follows: Year purchased Quantity (units) Cost per unit Total cost 2014 2,000 $160 $ 320,000 2015 5,000 $220 1,100,000 Total 7,000 $1,420,000 Through mid-December of 2016, purchases were limited to 8,000 units, because the cost had increased to $320 per unit. Nature Creations sold 14,200 units during 2016 at a price of $408 per unit, which significantly depleted its inventory. Assume that Nature Creations Company purchases 11,400 more of the $320 units on December 31, 2016. Compute Nature Creations Company's gross profit for 2016. A) $3,648,000 B) $1,249,600 C) $4,146,400 D) $1,714,400

B) $1,249,600

Use the following data for Rocket Company, determine the value inventory under the lower of cost or market rule, applied on an individual item basis. Commodity Inventory Quantity Unit Cost Price Unit Market Price A 200 $20 $14 B 100 $28 $32 C 400 $16 $12 A) $12,000 B) $10,400 C) $13,600 D) $13,400

B) $10,400

The following hammers were available for sale during the year for Charlie's Tools: Beginning inventory ................... 10 units at $160 First purchase ......................... 15 units at $200 Second purchase ..................... 30 units at $240 Third purchase ........................ 25 units at $260 Waiculus has 30 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method? A) $ 7,900 B) $10,600 C) $ 6,300 D) $ 7,800

B) $10,600

Use the following data for Model Car Company, determine the value inventory under the lower of cost or market rule, applied on an individual item basis. Commodity Inventory Quantity Unit Cost Price Unit Market Price A 200 $40 $28 B 100 $56 $64 C 400 $32 $24 A) $24,000 B) $20,800 C) $27,200 D) $26,800

B) $20,800

The following hammers were available for sale during the year for Waiculus Tools: Beginning inventory ................... 10 units at $ 80 First purchase ......................... 15 units at $100 Second purchase ..................... 30 units at $120 Third purchase ........................ 25 units at $130 Waiculus has 30 hammers on hand at the end of the year. What is the dollar amount of cost of goods sold for the year according to the first-in, first-out method? A) $3,950 B) $5,300 C) $3,150 D) $3,900

B) $5,300

Assuming Blumen, Inc. uses LIFO perpetual inventory procedures, sale No. 2 is recorded as an entry to Cost of Goods Sold for: A) $560 B) $800 C) $740 D) $880

B) $800

Relias Company's average inventory for 2016 was $30,000 and its inventory turnover for 2016 was 7.0; Relias's 2016 days' sales in inventory (computed to one decimal place) is: A) 12.7 days B) 52.1 days C) 68.5 days D) 53.8 days

B) 52.1 days

Tang Company's average inventory for 2016 was $15,000 and its inventory turnover for 2016 was 5.5; Tang's 2016 days' sales in inventory (computed to one decimal place) is: A) 12.7 days B) 66.4 days C) 68.5 days D) 53.8 days

B) 66.4 days

If a firm's inventory turnover increases, its days' sales in inventory will: A) Increase B) Decrease C) Be unaffected D) Change, but the direction of the effect can't be predicted

B) Decrease

Goods in transit which are shipped F.O.B. shipping point should be: A) Included in the inventory of the shipping company B) Included in the inventory of the buyer C) Included in the inventory of the seller D) None of the above

B) Included in the inventory of the buyer

A firm's inventory turnover: A) Is computed by dividing cost of goods sold by the end-of-year inventory B) Is affected by the inventory costing method used C) Becomes the days' sales in inventory when multiplied by 365 D) Is generally interpreted as favorable if it is smaller than the industry average

B) Is affected by the inventory costing method used

The following amounts and costs of platters were available for sale by New Mexico Pottery during 2016: Beginning inventory.................. 10 units at $164 First purchase.......................... 15 units at $220 Second purchase....................... 30 units at $280 Third purchase......................... 25 units at $260 New Mexico Pottery has 35 platters on hand at the end of the year. How much is cost of goods sold in dollars at the end of the year according to the weighted-average cost method? A) $19,840 B) $ 7,440 C) $11,160 D) $ 6,930

C) $11,160

The following amounts and costs of platters were available for sale by Utah Pottery during 2016: Beginning inventory.................. 10 units at $ 82 First purchase.......................... 15 units at $110 Second purchase....................... 30 units at $140 Third purchase......................... 25 units at $130 Utah Pottery has 35 platters on hand at the end of the year. How much is cost of goods sold in dollars at the end of the year according to the weighted-average cost method? A) $9,920 B) $3,720 C) $5,580 D) $3,465

C) $5,580

Assuming Blumen, Inc. uses LIFO periodic inventory procedures, the ending inventory cost is: A) $560 B) $840 C) $620 D) $880

C) $620

For 2016, Brutus Company reported sales of $1,800,000, cost of goods sold of $1,200,000, and a gross profit of $600,000. Brutus's inventory at January 1, 2016 was $340,000; the inventory at December 31, 2016 was $500,000. Brutus's 2016 inventory turnover is: A) 7.20 B) 4.27 C) 2.86 D) 2.08

C) 2.86

For 2016, Sean Company reported sales of $3,600,000, cost of goods sold of $2,000,000, and a gross profit of $1,600,000. Sean's inventory at January 1, 2016 was $480,000; the inventory at December 31, 2016 was $600,000. Sean's 2016 inventory turnover is: A) 3.33 B) 4.17 C) 3.70 D) 2.08

C) 3.70

Which of the following is not an inventory account for manufacturing companies? A) Work-in-process B) Finished goods C) Cost of goods sold D) Raw materials

C) Cost of goods sold

Impact Corporation sells three different products. The following information is available on December 31: Inventory Item Units Cost per unit Market value per unit X 100 $16.00 $12.00 Y 200 $ 8.00 $ 4.00 Z 500 $12.00 $16.00 When applying the lower of cost or market rule to each item, what will Impact report as its cost of ending inventory on December 31? A) $ 9,200 B) $ 8,800 C) $10,600 D) $ 8,000

D) $ 8,000

The following amounts and costs of platters were available for sale by Port Aransas Ceramics during 2016: Beginning inventory................. 10 units at $164 First purchase.......................... 15 units at $220 Second purchase...................... 30 units at $280 Third purchase........................ 25 units at $260 Port Aransas Ceramics has 35 platters on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the weighted-average cost method? A) $19,840 B) $12,400 C) $ 6,930 D) $ 8,680

D) $ 8,680

Assume that Lumber Company makes no further purchases during 2016. Compute Lumber Company's gross profit for 2016. A) $ 881,200 B) $2,073,200 C) $2,494,000 D) $ 970,800

D) $ 970,800

Nature Creations Company imports and sells a product produced in Canada. In the summer of 2016, a natural disaster disrupted production, affecting its supply of product. Nature Creations Company uses the LIFO inventory method. On January 1, 2016, Nature Creations Company's inventory records were as follows: Year purchased Quantity (units) Cost per unit Total cost 2014 2,000 $160 $ 320,000 2015 5,000 $220 1,100,000 Total 7,000 $1,420,000 Through mid-December of 2016, purchases were limited to 8,000 units, because the cost had increased to $320 per unit. Nature Creations sold 14,200 units during 2016 at a price of $408 per unit, which significantly depleted its inventory. 14. Assume that Nature Creations Company makes no further purchases during 2016. Compute Nature Creations Company's gross profit for 2016. A) $1,762,400 B) $4,146,400 C) $4,988,000 D) $1,941,600

D) $1,941,600

Quasim Corporation sells three different products. The following information is available on December 31: Inventory Item Units Cost per unit Market value per unit X 100 $8.00 $6.00 Y 200 $4.00 $2.00 Z 500 $6.00 $8.00 When applying the lower of cost or market rule to each item, what will Quasim report as its cost of ending inventory on December 31? A) $4,600 B) $4,400 C) $5,300 D) $4,000

D) $4,000

The following amounts and costs of platters were available for sale by Corpus Christy Ceramics during 2016: Beginning inventory................. 10 units at $ 82 First purchase.......................... 15 units at $110 Second purchase...................... 30 units at $140 Third purchase........................ 25 units at $130 Corpus Christy Ceramics has 35 platters on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the weighted-average cost method? A) $9,920 B) $6,200 C) $3,465 D) $4,340

D) $4,340

What is consigned inventory? A) Goods that are sold, but payment is not required until the goods are sold B) Goods that are shipped, and title transfers to the buyer C) Goods that have been segregated for shipment to a customer D) Goods that are shipped, but title remains with the seller

D) Goods that are shipped, but title remains with the seller

A weighted-average approach to costing inventory most naturally fits operations that involve differentiated products of high unit value.

False

FIFO inventory costing yields more accurate reporting of the inventory balance on the balance sheet than the LIFO method.

True

In periods of rising prices, companies that use FIFO inventory costing report higher gross profit than they would if they used LIFO

True

Under the periodic FIFO method of inventory costing, the ending inventory amount reflects the most recent acquisition costs.

True

Under the periodic inventory system, an uncorrected error in an ending inventory amount will affect income determination for two accounting periods.

True

When a company uses LIFO and prices are declining, profits will be higher than if the company had used FIFO.

True

When inventory quantities are maintained or increased during a period, the periodic LIFO method prevents any part of the beginning inventory amount from becoming part of the period's cost of goods sold.

True