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Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 20% commission. At the end of the accounting period, which of the following parties includes the consigned goods in its inventory?

Cecil

Davidson Electronics has the following: Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 $10 Purchase, Aug. 28 20,000 $12 If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is

Correct! Under the average-cost method, total cost of goods available for sale needs to be calculated in order to determine average cost per unit. The total cost of goods available is $430,000 = (5,000 X $8) + (15,000 X $10) + (20,000 X $12). The average cost per unit = ($430,000/total units available for sale or 40,000) = $10.75. Therefore, ending inventory is ($10.75 X 7,000) or $75,250.

Inventory costing methods place primary reliance on assumptions about the flow of

Cost

In a period of inflation, which cost flow method produces the highest net income?

FIFO method

Sheldon's Jewelers uses the specific identification method of inventory costing. During May, Sheldon purchased 3 gemstones for $4,000, $5,000, and $6,000 respectively. During May, Sheldon sold two of the gemstones for $6,500 each. At the end of May, Sheldon determined that the $6,000 gemstone was still in his inventory. What is Sheldon's gross profit for the month of May?

Gross profit = sales (2 x $6,500) - cost of goods sold ($4,000 + $5,000) = $4,000.

In a period of inflation, the cost flow method that results in the lowest income taxes is the

LIFO method

The first costs assigned to ending inventory are the costs of the beginning inventory under the

LIFO method.

Which of the following statements is correct with respect to inventories?

Under FIFO, the ending inventory is based on the latest units purchased.

Tinker Bell Company has the following: Units Unit Cost Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 12 Purchase, Nov. 8 5,000 13 If Tinker Bell has 9,000 units on hand on December 31, the cost of the ending inventory under LIFO is

Under LIFO, ending inventory will consist of 8,000 units from the inventory at Jan. 1 and 1,000 units from the June 19 purchase. Therefore, ending inventory is (8,000 X $11) + (1,000 X $12), or $100,000.

Hudson Company started its year with 600 units of beginning inventory at a cost of $4 per unit. During the year, the company made the following purchases: May, 900 units at $5 per unit and July, 500 units at $6 per unit. A physical count of inventory at year-end indicates that there are 700 units in ending inventory. What is the cost of the ending inventory if Hudson Company uses the FIFO method for valuing inventory?

Under the FIFO method of inventory valuation, ending inventory is: (500 units x $6) + (200 units x $5) =$4,000.

Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is

When the value of inventory is lower than its cost, the inventory is written down to its market value. Therefore, market would be 200 widgets x $80 each, or $16,000.

The lower-of-cost-or-market basis of valuing inventories is an example of

conservatism.

Cost of goods available for sale consists of two elements: beginning inventory and

cost of goods purchased.

understating beginning inventory will understate

cost of goods sold.

In a period of rising prices, FIFO will result in

lower cost of goods sold than LIFO.

Euler Company made an inventory count on December 31, 2014. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, the effects of this error are

overstated no effect overstated

Harold Company overstated its inventory by $15,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Harold's stockholders' equity was

overstated at December 31, 2014, and properly stated at December 31, 2015.

In periods of rising prices, LIFO will produce

ower net income than FIFO

Factors that affect the selection of an inventory costing method do not include

perpetual vs. periodic inventory system.

When the terms of sale are FOB destination, ownership of the goods remains with the seller until the goods

reach the buyer.

Goods in transit should be included in the inventory of the buyer when the

terms of sale are FOB shipping point.