Intermediate Ch 8
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's cost of goods sold for the 2016 fiscal year would have been
$50,000 higher if it had used FIFO
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's pretax income for the 2016 fiscal year would have been
$50,000 higher if it has used FIFO
Smith Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $690,000. Its inventory as of December 31, 2016, was $758,100 at year-end costs and the cost index was 1.05. What was DVL inventory on December 31, 2016?
$723,000 -
What type of expenditures should be included in the cost of inventory of a manufacturing company?
-Expenditures necessary to acquire inventory. -Expenditures necessary to bring inventory to sales location.
Which of the following are disadvantages of unit LIFO?
-Significant recordkeeping costs -Possibility of LIFO liquidation
The cost of inventory includes
-expenditures to acquire the inventory -the cost to bring inventory to its desired location -the cost to bring inventory to its desired condition
Doris recently started her position at Monro Company. The company uses the dollar-value LIFO inventory method. On her first day at work, Doris was asked to calculate the cost index for a new inventory layer. The company's records reveal that the cost in terms of the base year was $50,000 and the cost in terms of the layer year was $100,000. What is the cost index for the new layer?
2 - Cost index in layer year = Cost in layer year / Cost in base year
Neumann Company places 100 units on consignment with Hartman Consignments Company. At the end of the accounting period, 45 of those units remain unsold, how many units should be included in Neumanns's ending inventory
45 units
Palmer Company's beginning inventory consist of 1,000 units at $1.00 per unit. During the year, the company purchases 5,000 units costing a total of $5,800. At the end of the accounting period, Palmer still has 1,000 units on hand. If Palmer uses the weighted average cost method, its cost of goods sold (rounded to the nearest dollar) will be.
5,000 x [(1,000 + 5,800)/6,000] = 5667
Cost flow ________ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
Assumptions
Suppose that Michale Company operates in an environment of rising prices and utilizes the periodic inventory system. If the company were to use the LIFO inventory method, its cost of goods would be $500,000; if it were to use the FIFO method, its cost of goods sold would be $400,000. Based on this information, which of the following predictions would be correct with respect to the weighted-average cost method?
Cost of goods sold would be between $400,000 and $500,000.
What is the first step in measuring inventory and cost of goods sold?
Determining the physical quantities of goods.
What type of expenditures should be included in the cost of inventory of a manufacturing company? (Select all that apply.)
Expenditures necessary to bring inventory to sales location, Expenditures necessary to acquire inventory.
When the DVL method is used, a LIFO layer is added when
current period ending inventory at base-year cost has increased
Which of the following is true regarding the use of gross and the net method of accounting for purchase discounts?
Financial statements do not differ under gross and net methods if discounts are always taken, the net method results in a higher gross margin than the gross method if discounts are not taken
The cost of inventory includes
expenditures to acquire the inventory, the cos to bring inventory to its desired location, the cost to bring inventory to its desired condition
The amount of cost of goods sold determined under the average cost method typically
falls between the amounts determined using LIFO and FIFO.
The gross profit ratio is computed as __________ divided by net sales
gross profit
The layer cost index is calculated by dividing the cost in ______ year by the cost in _____ year
layer, base
Use of LIFO inventory pools reduces the chance of unintentional LIFO layer
liquidation
Ruy Company typically tries to sell its oldest inventory items first. Ruy Company
may choose any of the three accepted inventory methods
A _____ company resells goods while a _____ company produces goods.
merchandising; manufacturing
A company can apply
more than one inventory cost flow assumption
In a perpetual inventory system, weighted-average cost becomes a ___________-average cost.
moving
Discounts not taken are reported as interest expense under the _____________ method of accounting for discounts
net
GAAP requires disclosure of significant LIFO liquidations with respect to the effect on
net income
Which of the following methods are acceptable in accounting for purchase accounts
net method and gross method
In a periodic inventory system, the inventory account is _____ and cost of goods sold is recorded _____.
not adjusted as purchases and sales are made; at the end of the reporting period
A physical count of inventory is necessary in a ____________ inventory system to determine cost of goods sold
periodic
in a ___________ inventory system, cost of goods sold is recorded at the end of the accounting period
periodic
Which inventory system allocates cost of goods available for sale only at the end of each reporting period?
periodic inventory system
A _____ inventory system recognizes cost of goods sold each time a sale occurs; a _____ inventory system decreases inventory each time a sale occurs.
perpetual; perpetual
if goods are shipped to a F.O.B destination, the _________ usually is responsible for the shipping.
seller
Which factors may influence a company's choice of inventory cost flow assumption
tax implications of choice, financial statement effect, actual physical flow of inventory
The cost of inventory includes (Select all that apply.)
the cost to bring inventory to its desired location; expenditures to acquire the inventory; the cost to bring inventory to its desired condition
The LIFO inventory method assumes that the units sold are
the most recent units purchased
When merchandise is shipped f.0.b. shipping point, who includes the inventory on their balance sheet when goods are with the common carrier?
the purchaser
Which of the following could cause a difference between the quantities of inventory determined by physical count and the quantities tracked by a perpetual inventory system?
thefts, system errors, spoilage, breakage
Within LIFO inventory pools, all purchases during the period are considered to be made at the same _________________ and the same __________________
time, cost
High recordkeeping costs and possible LIFO liquidation are disadvantages of
unit LIFO.
When a company determines the quantity of inventory items, it must consider (Select all that apply.)
units it currently possesses, units on consignment, units in transit
When a company determines the quantity of inventory items, it must consider
units on consignment, units it currently possesses, units in transit
The LIFO reserve shows how ending inventory would have differed if the company had utitlized _________ or __________ instead of LIFO
weighted average, FIFO
Which of the following accounts would be found on the balance sheet of a manufacturing company?
work in progress
Perpetual inventory
Freight is added directly into the inventory account
Inventory cost flow assumptions can be used to assign dollar amounts to (Select all that apply.)
Goods Sold; ending inventory
Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what?
How units of goods and their associated costs flow through the system.
Dollar amounts are assigned to goods sold and goods remaining in ending inventory by making an assumption regarding what?
How units of goods are their associated costs flow though the system
If a company uses _____ to measure taxable income, they must use the same method for external financial reporting.
LIFO
Another name for the LIFO reserve account is
LIFO allowance
If a company uses LIFO to measure its taxable income, the IRS requires that LIFO also be used to measure income reported to investors and creditors.This is know as the
LIFO conformity rule
Turn Company utilizes the LIFO inventory method to calculate taxable income. Which method is available to Turn for financial reporting purposes?
LIFO only
The goods a wholesale company purchases in finished form are referred to as what?
Merchandise inventory
The cost of components purchased from outside companies that will become part of the finished product are referred to as what?
Raw materials
Advantages of using LIFO inventory pools include which of the following?
Reduce the risk of LIFO layer liquidations, simplify recordkeeping
Which inventory costing method matches each unit sold with its actual cost?
Special identification method
Which of the following is not a characteristic of an asset classified as inventory?
The item is currently used as part of a company's day-to-day operations
Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the periodic LIFO method, cost of goods sold will be.
$1,760 (1980/900 x 800) =
In a perpetual inventory system the inventory account is
continually adjusted.
Western Company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and the cost index was 1.08. What was DVL inventory on December 31, 2016?
$758,200 - $815,400/1.08 = $755,000 giving 2 layers of $715,000 and $40,000. $715,000 x 1.0 = $715,000 $40,000 x 1.08 = $43,200 $715,000 + $43,200 = $758,200
Chase Company reports gross sales revenue of $7.5 million, net sale revenue of $7 million, and cost of goods sold of $3.5 million. Rounding to the nearest percent, the company's gross profit ratio would be
(7 mil - 3.5 mil)/7 mill = 50%
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be.
2,880/900 x 200 = 640
Rudy Company reports gross sales revenue of 5.2 million, net sales revenue of 5 million, and cost of goods sold for 3 million. Rounding to the nearest percent, the company's gross profit ratio would be
40% (5 - 3 ) / 5
Inventory is an ________
Asset
Which inventory costing method assumes that items sold are those that were acquired first?
FIFO
Which of the following inventory methods result in the same ending inventory and cost of goods sold
FIFO - periodic and perpetual
Consistent with IFRS, which of the following cot flow assumptions are currently permitted?
FIFO, weighted average
The gross profit ratio is computed as _____ divided by net sales.
Gross profit
A ___________ inventory pool groups items based on physical similarities
LIFO
In which type of inventory costing system are inventory costs on the balance sheet generally out of date?
LIFO
A(n)________ inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise.
Perpetual
A slowing turnover ratio combined with higher than normal inventory levels may indicate which of the following?
Potential for decreased production, potential for inventory becoming obsolete
Wholesale and retail companies
Purchase goods that are primarily in completed form.
Manufacturing companies
Purchase goods that are used to produce another product.
On January 1, Gerhard Company has 100 units in beginning inventory. On January 3, the company purchases 500 units; on February 23, 800 units; and on March 19, 1000 units. If the company sells 100 units on January 4, which units would be assumed to have been sold in a periodic FIFO system
The units in beginning inventory
Which of the following is correct?
There is no requirement to choose a cost flow assumption that approximates actual physical flow of units.
LIFO, FIFO, and the weighted average inventory costing methods are all allowed under GAAP
True
True or false: The impact on reported income numbers is an important consideration when choosing an inventory cost flow method.
True
Determining ownership of goods that are in transit at the end of the accounting period is important to
assure propper inventory cutoff
A periodic inventory system allocates cost of goods available for sale _____; a perpetual inventory system allocates cost of goods available for sale _____.
at the end of the period; each time goods are sold
The inventory turnover ratio is computed as cost of goods sold divided by ____________
average inventory
if goods are shipped f.o.b shipping point, at the time of shipment
legal title passes to the buyer
The LIFO inventory method assumes that the units that remain in ending inventory are
the oldest units in inventory.
Gerhard Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, COGS would have been
$2,000 higher
Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that at the end of 2016, Pernell's ending inventory would have been
$150,000 higher if it had used FIFO.
Which of the following accounts are typically reported on the balance sheet of a manufacturing company?
-raw materials -work in process -finished goods
The dollar-value LIFO (DVL) method
-simplifies record keeping -reduces the risk of liquidation of layers
The LIFO reserve shows how ending inventory would have differed if the company had utilized _______ or ______, instead of LIFO.
-weighted average -FIFO
In a perpetual inventory system the inventory account is adjusted
-when inventory is purchased -when inventory is sold
Rudy Company reports gross sales revenue of 5.2 million, net sales revenue of 5 million, and cost of goods sold for 3 million. It's inventory balance was 250,000 at the beginning of the accounting period and 300,000 at the end of the accounting period. The company's inventory turnover ratio is closest to
3 million/(250k+300k/2)=10.9 Rounds to 11
Which inventory costing method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale?
Average cost
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold?
FIFO
Items a company intends to sell in the normal course of business, has in production for future sale, or uses currently in production, are all examples of what?
Inventory
Finished goods is a type of inventory found on a _____ company's balance sheet.
Manufacturing
Inventory for a ______ company consists of raw materials, work in process, and finished goods.
Manufacturing
Orange Co., a computer retailer, shows the following selected assets on its balance sheet. Indicate which account would be properly classified as inventory.
Mouse pads
Which inventory system allocates cost of goods available for sale only at the end of each reporting period?
Periodic inventory system
Which inventory costing method matches each unit sold with its actual cost?
Specific indenification
True or false: Dollar-value LIFO allows a company to combine a large variety of goods into one pool.
True - DVL extends the concept of inventory pools and allows various goods to be combined into one pool.
Inventory is
an asset
FIFO most closely
approximates the actual physical flow of inventory
At the end of an accounting period, it is important to ensure proper inventory _____ to determine the ownership of goods in transit.
cutoff
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the SALE of inventory during the year includes which of the following?
debit A/R 70k credit sales revenue 70k
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000 and the cost of the inventory sold was $40,000. Assuming Western uses a perpetual inventory system, the journal entry to record the purchase of inventory during the year includes which of the following?
debit inventory 100k credit cash 100k
Over the total life of a company, total cost of goods sold
is the same under each cost flow assumption
Which of the following are characteristics of inventory?
it will be used in the production of goods to be sold, it will be sold in the normal course of business
The layer year cost index is calculated by dividing the cost in __________ year by the cost in ____________ year
layer; base
A(n) _________ inventory system adjusts for each change caused by a purchase, a sale, or a return of merchandise.
perpetual
LIFO inventory pools
simplifies recordkeeping and reduces the risk of LIFO liquidation by grouping inventory units into pools based on physical similarities of the individual units.
A DVL pool is made up of items
that are likely to have similar cost change pressures.
Under US GAAP, companies are required to disclose the inventory costing methods used
true
Ending inventory determined under the FIFO perpetual system method is the same as under the FIFO periodic inventory system
under all circumstances
High recordkeeping costs and possible LIFO liquidation are disadvantages of
unit LIFO
On January 1, Bern Company has 100 units costing $100 in beginning inventory. On January 2, Bern purchases and additional 400 units for $1.50 per unit, and sells 300 units. On January 3, the company sells an additional 100 units. On January 4, Bern purchases 200 additional units for $1.60 per unit. If Bern utilizes a perpetual LIFO system, per unit cost of goods sold for the January 3 sale will be.
$1.50
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased 1,200 units, pretax income would have been
$2,000 lower - Currently cost of goods sold is computed using the 1,000 units at $20 plus 200 units at $10 so the units from beginning inventory are liquidated. If they had purchased at least 1,200 units, cost of goods sold would have been higher resulting in lower pretax income.
Western company adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $715,000. Its inventory as of December 31, 2016, was $815,400 at year-end costs and cost index was 1.08. What was DVL inventory on December 31, 2016?
$758,200
Ownership of inventory at the end of the accounting period is determined for
-goods shipped by suppliers -goods shipped to customers
Bethany Corp. use a periodic inventory system. Cost of beginning inventory is $150,000. During the year, Bethany purchases inventory costing $250,000. Based on a physical count at the end of the period, Bethany determines that inventory costing $25,000 is still on hand. Bethany Corporation's cost of goods sold will be
150k + 250k - 25k = 375k
Doris recently started her position at Monro Company. The company uses the dollar-value LIFO inventory method. On her first day at work, Doris was asked to calculate the cost index for a new inventory layer. The company's records reveal that the cost in terms of the base year was $50,000 and the cost in terms of the layer year was $100,000. What is the cost index for the new layer?
2
Joachim Company has 300 units costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1,000 units costing $20 per unit and sells 1,200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1,200 units, pretax income would have been.
2,000 lower
On December 31, Richard Company purchases 1,000 units of merchandise, F.O.B destination, from Neumann Corp. and 2,000 units, f.o.b. shipping point from Smith Corp. The goods are shipped on December 31. How many units should Richard include in its inventory on December 31 from this purchase?
2,000 units
Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals 200 units remain in ending inventory. If the company uses the FIFO method, the cost of goods sold will be.
2,540
Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1000 units for a total cost of $3300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method ending inventory will be
200 units remain. (3300/1000) = 3.30 x 200 = 660
Gerhard company has 300 unis costing $10 per unit in beginning inventory. During the year, the company purchases an additional 1000 units costing $20 per unit and sells 1200 units. The company has used the LIFO inventory method for the past 5 years. If the company had purchased at least 1200 units, COGS would have been.
2000 higher
Smith Company has 150 units costing $450 in beginning inventory. During the year, the company purchases 1000 units for a total cost of $3300. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method cost of goods sold will be
3,090 - 950 units sold (3300/1000) = 330 X 800 = 2640 + 450 = 3090
Chase Company reports gross sales revenue of $7.5 million, net sales revenue of $7 million, and cost of goods sold of $3.5 million. Rounding to the nearest percent, the company's gross profit ratio would be
50% - Gross profit ratio is computed as gross profit/NET SALES. Be sure to use the net sales number, not gross sales. ($7 million -$3.5 million)/$7 million
In a perpetual inventory system the inventory account is?
Continually adjusted
The ____________ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies
FIFO
Which inventory costing method assumes that items in ending inventory are the most recently acquired?
FIFO
which inventory costing method assumes that items in ending inventory are most likely required?
FIFO
Many companies maintain their internal records using _____ or the average cost method, but use ______ for external reporting and income tax purposes.
FIFO; LIFO
The actual flow of a company's inventory must correspond with the cost flow assumption chosen by the company
False
True or false: A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count.
False
True or false: A periodic inventory system allows management to determine the amount of goods on hand without having to take a physical count.
False - A periodic inventory system does not track inventory changes and a physical count is necessary.
In a perpetual inventory system, when inventory is returned which accounts will the purchaser adjust to reflect the effect of the return.
Inventory, accounts payable
Assuming that prices raise over time, which inventory cost flow assumption will result in the lowest ending inventory.
LIFO
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?
LIFO
If a company uses ___________ to measure taxable income, they must use the same method for external financial reporting
LIFO
The __________ inventory method assumes that units in ending inventory were the items acquired first.
LIFO
When prices increase, the ______ inventory method provides the best matching of revenue and expenses.
LIFO
Which inventory costing method assumes that the units sold are the most recent units purchased
LIFO
Which inventory costing method assumes that the units sold are the most recent units purchased?
LIFO
which inventory costing method assumes that units sold are the most recent units purchased
LIFO
if a company uses LIFO to measure its taxable income, the IRS requires that LIFO also be used to measure income reported to investors and creditors. This is know as the
LIFO conformity rule
The layer year cost index is calculated by dividing the cost in ______ year by the cost in ______ year.
Layer; base
Orange Co., a computer retailer, shows the following selected assets on its balance sheet. Indicate which account would be properly classified as inventory. Desks, Mouse pads, Office supplies, Patents.
Mouse Pads
A(n) _________ inventory system adjusts inventory at the end of the each reporting period.
Periodical
Wholesale and retail companies _________? Manufacturing companies __________?
Purchase goods that are primarily in completed form; Purchase goods that are used to produce another product.
Which of the following are disadvantages of unit LIFO? (Select all that apply.)
Significant recordkeeping costs, Possibility of LIFO liquidation
Which of the following is correct regarding financial statement note disclosures for merchandise inventory valuations for a company utilizing LIFO?
Supplemental notes may show amounts that would have been determined for a non-LIFO method
What of the following could motivate a company that uses LIFO for external reporting to use another method for internal recordkeeping? (Select all that apply.)
The high recordkeeping cost of LIFO, Contractual agreements such as bonus contracts.
Which of the following would increase the gross profit ratio
The sales price of a product increases by a higher percentage than does cost of goods sold, the sales price decreases by exactly the same amount as does cost of goods sold
Dollar-value LIFO allows a company to combine a large variety of goods into one pool
True DVL extends the concept of inventory pools and allows various goods to be combined into one pool.
The average cost method assumes that ending inventory consists of
a mixture of all the goods available for sale
the average cost method assume that cost of goods sold consists of
a mixture of all the goods available for sale
The average cost method assumes that ending inventory consists of
a mixture of all the goods available for sale.
Under the DVL approach, cost indexes are used to determine whether
a real increase in inventory has occurred
Periodic inventory
a separate freight-in account is used
When a LIFO inventory pool is used and the quantity of ending inventory increases, ending inventory will consist of beginning inventory plus.
a single layer at the average cost of purchases during the period
A just-in-time inventory system
assists managers with inventory management, allows companies to maintain relatively low inventory balances.
Cost flow _________ are made to assign dollar amounts to the physical quantities of goods sold and remaining in ending inventory.
assumptions
Determining ownership of goods that are in transit at the end of the accounting period is important to
assure proper inventory cut off
Which of the following correctly reflect the determination of cost of goods sold in a periodic inventory system.
beginning inventory + net purchases - ending inventory
The measurement of inventory and cost of goods sold starts with determining the physical quantities of goods in which of the following systems?
both the periodic and perpetual inventory system
The dollar-value LIFO method extends the concept of inventory pools by allowing companies to
combine a large variety of goods in one pool
The dollar-value LIFO method extends the concept of inventory pools by allowing companies to?
combine a large variety of goods in one pool.
In a perpetual inventory system the inventory account is
continually adjusted
In a LIFO inventory system, inventory amounts shown in the balance sheet may be distorted because they may represent.
cost incurred several years earlier
Weighted-average unit cost is determined by dividing __________ by quantity of goods available for sale.
cost of goods available for sale
Where can freight-out charge be found
cost of goods sold, selling expenses
Smith Corporation began 2016 with a difference of $50,000 between inventory valued internally using FIFO and inventory valued using LIFO. At the end of 2016, this difference increased to $75,000. The journal entry to record this increase would include a
credit to LIFO reserve for $25,000
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. a physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to at the end of the year once the physical count occurs includes which of the following?
debit inventory(ending) $110,000 credit purchases $100,000 debit cost of goods sold $40,000 credit inventory(beginning) $50,000
Western Company begins the year with $50,000 of inventory on hand. During 2018, Western purchases additional inventory for $100,000 cash. Sales for the year, all on account, totaled $70,000. A physical count determined the cost of inventory at the end of the year to be $110,000. Assuming Western uses a periodic inventory system, the journal entry to record the purchase of inventory during the year includes which of the following?
debit purchases 100k credit cash 100k
When inventory quantities _____ during a period, out-of-date inventory layers are liquidated and cost of goods sold will match noncurrent costs with current selling prices in a LIFO inventory costing system.
decline
When inventory quantities __________ during a period, out-of-date inventory layers are liquidated and cost of goods sold will match noncurrent costs with current selling prices in a LIFO inventory costing system
decline
What may offset the income tax motivation for using LIFO in periods of rising prices?
desire to report higher net income
A periodic inventory system (Select all that apply.)
does not continuously track the quantity of merchandise; does not continuously track the cost of merchandise sold.
Which of the following costs would be properly classified as manufacturing overhead?
electricity to operate facility, depreciation of equipment
Periodic LIFO applies the last-in, first-out concept to total sales and total purchases at the ________________ of the reporting period, while perpetual LIFO applies the concept after every purchase is made
end
Inventory cost flow assumptions can be used to assign dollar amount to
ending inventory and goods sold
The amount of cost of goods sold determined under the average cost method typically
falls between the amounts determined using LIFO and FIFO
Once products are completely manufactured, the related cost are transferred to __________ ____________
finished goods
Inventory cost flow assumptions can be used to assign dollar amounts to.
goods sold, ending inventory
The ___________ method of recording purchase discounts, subtracts the discount from total purchases to determine net purchases
gross
Steiner Company's average days in inventory has decreased during 2016 as compared to the prior year. From he information, we can conclude that Steiner
has a higher inventory turnover ratio, is selling its inventory faster
What of the following could motivate a company that uses LIFO for external reporting to use another method for internal recordkeeping?
high recordkeeping cost, contractual agreements such as bonus contracts
Initial adoption of IFRS by a company that currently utilizes the LIFO method would likely result in
higher taxable income, lower cost of goods sold
At the end of the fiscal period, Schmidt Company estimates that inventory costing $4,000 that was sold for $10,000 will be returned at the beginning of the following year. Schmidt Company should
include $4000 in ending inventory, reduce cost of goods sold by $4000
estimated future sales returns must be
included in ending inventory, deducted from cost of goods sold
Under the DVL method, a layer may only be added during the current year if inventory at base-year cost has ___________
increased
Which of the following can affect earning quality for a company?
inventory write-downs, change in inventory method, choice of inventory method
Which of the following are characteristics of inventory
it will be used in the production of goods to be sold, it will be sold in the normal course of business
The definition of inventory includes which of the following items? (Select all that apply.)
items currently in production for future sale; items used currently in the production of goods to be sold; items held for resale
the definition of inventory includes which of the following items
items used currently in production of goods to be sold, items currently in production for future sale, items held for resale
The specific identification method of inventory costing matches each unit with?
its actual cost.
Cost of goods sold is typically the _________ expense in the income statement
larger
Which of the following would be an important consideration for management in choosing the perpetual or periodic inventory system?
management control, cost of implementation
Finished goods is a type of inventory found on a _____ company's balance sheet.
manufacturing
LIFO provides better
matching of current revenues with current inventory cost
Ruy Company typically tries to sell its oldest inventory items first. Ruy Company
may choose any of the three accepted inventory methods.
Work-in-process contains costs of inventory items that are
not yet complete
Which of the following items that should be classified as inventory for a company that manufacturers accounting textbooks.
paper used, textbooks ready to be shipped
A disadvantage to the ________________ inventory system is that all inventory quantities not on hand at the end of the period are assumed to have been sold, and damaged or stolen items are not identified.
periodic
A ________________ inventory system allows management to determine the amount of goods on hand on any date without having to take a physical count
perpetual
In a ________________ inventory system, the average cost method is applied by computing a moving average unit cost each time inventory is purchased.
perpetual
Under the ___________ inventory system, purchase discounts are treated as a reduction in the inventory account
perpetual
in a __________ system, each time inventory is purchased or sold the layers are adjusted
perpetual LIFO
Those costs that are included in inventory are referred to as ___________ costs
product
In a perpetual inventory system, a new weighted-average unit cost is calculated after each __________
purchase
in a perpetual inventory system, a new weighted-average unit cost is calculated after each
purchase
Which of the following accounts are typically reported on the balance sheet of a manufacturing company? (Select all that apply.)
raw materials; Finished goods; work in progress
the sellers reviews returns as a reduction of net _________; the buyer views returns as net _______
sales, purchases
Which of the following are disadvantages of unit LIFO?
significant recordkeeping costs, possibility of LIFO liquidation
The dollar-value LIFO (DVL) method
simplifies recordkeeping, reduces risk of liquidation of layers
What method of inventory valuation matches each unit on hand at the end of the period with its actual cost?
specific i
In a period of rising prices, LIFO produces a higher cost of goods sold, lower net income and therefore, lower _____________ liability
tax
Which factors may influence a company's choice of inventory cost flow assumption? (Select all that apply.)
tax implications of choice, actual physical flow of inventory, financial statement effect
The LIFO inventory method assumes that units that remain in ending inventory are
the oldest units in inventory
which of the following represent a reason why managers closely monitor inventory levels?
to ensure that sufficient units are available, to minimize costs of ordering and carrying inventory
There is no requirement to choose a cost flow assumption that approximates actual physical flow of units
true
A company is most likely to utilize the specific identification method if its inventory consists of
very expensive products, unique products
Consistent with the IFRS, which of the following cost flow assumptions are currently permitted.
weighted average, FIFO
Which of the following accounts would be found on the balance sheet of a manufacturing company?
work in process
The specific identification method
would be beneficial to a company that makes fine jewelry, matches each unit of inventory with its actual cost
