ACCT&201 CHAPTER 6

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Calculate the amount to be reported for ending inventory of Model A.

$10,000

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

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Calculate the amount to be reported for ending inventory of Model B.

$2,000

Inventory records for Dunbar Incorporated revealed the following: 1. Date 2. Transaction 3. Number of Units 4. Unit Cost 1. Apr. 1 2. Beginning inventory 3. 500 4. $2.40 1.Apr. 20 2. Purchase 3. 400 4. 2.50 Dunbar sold 700 units of inventory during the month. Ending inventory assuming LIFO would be:

$480

Given the information below, what is the gross profit? Sales revenue $ 320,000Accounts receivable 50,000Ending inventory 100,000Cost of goods sold 250,000Sales returns 20,000A) $250,000.B) $70,000.C) $220,000.D) $50,000.

$50,000.Explanation: Sales revenue ($320,000) − Sales returns ($20,000) − Cost of goods sold ($250,000) = $50,000.

Inventory records for Dunbar Incorporated revealed the following: 1. Date 2. Transaction 3. Number of Units 4. Unit Cost 1. Apr. 1 2. Beginning inventory 3. 500 4. $2.40 1. Apr. 20 2. Purchase 3. 400 4. 2.50 Dunbar sold 700 units of inventory during the month. Ending inventory assuming FIFO would be:

$500

Units sold during the year: 3,000 What 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

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

$7.00

Units sold during the year: 3,000. 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: 3,000 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 first-in, first-out cost method?

8000

During the year, TRC Corporation has the following inventory transactions. For the entire year, the company sells 450 units of inventory for $70 each. 3. Using weighted-average cost, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.

AVG cost per unit: Weighted-average unit cost = cost of goods available for sale/Number of units available for sale

A company that returns items that were previously purchased on account will debit:

Accounts Payable

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. The year-end adjustment to mark inventory down to net realizable value will involve a debit to _____.

Cost of Goods Sold for $500

Baker Fine Foods has beginning inventory for the year of $12,000. During the year, Baker purchases inventory for $150,000 and ends the year with $20,000 of inventory. Baker will report cost of goods sold equal to:

Cost of goods sold = beginning inventory ($12,000) + purchases ($150,000) - ending inventory ($20,000) =$142,000

The cost of the goods that a company sold during a period is shown in its financial statements as ___________, and the cost of the goods that a company has not yet sold at the end of the year is shown in the financial statements as ____________.

Cost of goods sold; inventory

A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:

Credit to Inventory for $300

The cost of freight-in is initially added to the balance of the Cost of Goods Sold account.

False

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

False

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

Interest expense

What type of company purchases raw materials and makes goods to sell?

Manufacturers

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

Paid by supplier.

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

Results in lower taxes

During the year, TRC Corporation has the following inventory transactions. For the entire year, the company sells 450 units of inventory for $70 each. 1. Using FIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.

Sales revenue: 450 x 70 Gross profit : sales revenue - cost of goods sol

During the year, TRC Corporation has the following inventory transactions. For the entire year, the company sells 450 units of inventory for $70 each. 2. Using LIFO, calculate ending inventory, cost of goods sold, sales revenue, and gross profit.

Sales revenue: 450 x 70 Gross profit : sales revenue - cost of goods sol

Merchandise sold FOB shipping point indicates that:

The seller holds title until the merchandise is received at the buyer's location.

Due to technological advances in recent years, most companies use a perpetual inventory system to track inventory purchases and sales.

True

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

True

The cost of inventory sold during a period is reported on the income statement.

True

Cost of Goods Sold is:

an expense account

Accounting errors must be corrected

as soon as they are discovered.

Inventory is typically reported as a(n):

asset on the balance sheet

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

INVENTORY CALCULATION ASSUING FIFO VIDEO PG. 111

https://www.viddler.com/embed/16579362/?f=1&player=arpeggio&secret=50141503&make_responsive=0

Calculation FIFO, LIFO & Weighted avg, pg 111, pg293

https://www.viddler.com/embed/7821b358/?f=1&player=arpeggio&secret=81228896&make_responsive=0

Inventory calculation assuming the LIFO method: Pg 111

https://www.viddler.com/embed/9f9d0e3/?f=1&player=arpeggio&secret=67529505&make_responsive=0

Robert Skinner, an accountant, discovers an error in accounting for an inventory purchase. He should correct the error

immediately.

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

perpetual

The weighted-average method assumes that:

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

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.

Inventory is reported on the balance sheet at:

the lower of original cost and net realizable value

FOB destination means title to the goods passes

when they arrive at the destination.