ACC CH6

A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units $ 585 June 15 200 units $ 630 June 28 150 units $ 510 TOTAL: $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

$1,290

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; Second purchase $76; Third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be...

$60

A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units $ 585 June 15 200 units $ 630 June 28 150 units $ 510 TOTAL: $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is...

$683

A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units $ 585 June 15 200 units $ 630 June 28 150 units $ 510 TOTAL: $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is...

$755

Which of the following statements is true regarding inventory cost flow assumptions?

A company may use more than one costing method concurrently

A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000. The amounts reflected in the current end of the period balance sheet are...

assets: correct owner's equity: correct

Freight terms of FOB shipping point mean that the...

buyer must bear the freight costs

The specific identification method of costing inventories is used when the...

company sells a limited quantity of high-unit cost items

The consistent application of an inventory costing method is essential for...

comparability

Under a consignment arrangement, the...

consignor has ownership until goods are sold to a customer

Understating beginning inventory will understate...

cost of goods sold

An error in the physical count of goods on hand at the end of a period resulted in a $15,000 overstatement of the ending inventory. The effect of this error in the current period is

cost of goods sold: understated net income: overstated

If beginning inventory is understated by $13,000, the effect of this error in the current period is...

cost of goods sold: understated net income: overstated

The cost of goods available for sale is allocated to the cost of goods sold and the

ending inventory

If inventories are valued using the LIFO cost assumption, they should not be classified as a current asset on the balance sheet.

false

TRUE-FALSE STATEMENTS: Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company

false

TRUE-FALSE STATEMENTS: The more inventory a company has in stock, the greater the company's profit.

false

The term "FOB" denotes...

free on board

The factor which determines whether or not goods should be included in a physical count of inventory is

legal title

The selection of an appropriate inventory cost flow assumption for an individual company is made by

management

An error that overstates the ending inventory will also cause net income for the period to be overstated.

true

Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale.

true

Inventories are reported in the current assets section of the balance sheet below receivables.

true

TRUE-FALSE STATEMENTS: . If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.

true

TRUE-FALSE STATEMENTS: Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods.

true

TRUE-FALSE STATEMENTS: The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

true

The cost of goods available for sale consists of the beginning inventory plus the cost of goods purchased.

true

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

true

Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold.

true

Under the lower-of-cost-or-market basis, market is defined as current replacement cost.

true