acct 201 chp 6 quizzes meta&wiley

A Company recorded the following data: January 1 - beginning inventory: 400 units @ $1.00 each January 8 - purchase: 600 units @ $1.10 each January 12 - sale: 200 units The weighted average unit cost of the inventory at January 31 is:

$1.06 -Average cost per unit is calculated as Total Cost (aka Cost of Goods Available for Sale) divided by Total Units: ($400*1.00+60*1.10/ 1000)

Perptual Inventory System

An inventory system in which the accounting records continuously show the inventory that should be on hand at any point in time.

cost of goods available for sale

The sum of the beginning inventory plus the cost of goods purchased

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.

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

Understating ending inventory will overstate

cost of goods sold

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

terms of sale are FOB shipping point.

specific identification method

the inventory costing method that tracks the actual physical flow of the goods available for sale.

F Company had 300 units of inventory on hand at January 1 costing $32 each. Purchases during January were as follows:: Units Unit Cost January 15 400 $33 January 23 550 $34 January 29 100 $35 A physical count of inventory on January 31 shows 450 units on hand. The cost of the inventory at January 31 under the LIFO method is:

$14,550

LP Company's inventory at December 31 (the last day of the accounting period) was $300,000 based on a physical count of goods on that date. The following items are in transit on that date and were not included in the count: 1. Goods costing $5,000 shipped FOB shipping point on December 29 to a customer and received by the customer on January 3. 2. Goods costing $10,000 were shipped FOBdestination on December 30 to a customer and received by the customer on January 4. What amount should LP Company report as inventory on its December 31 balance sheet?

$310,000

Manufacturing companies usually classify inventory into three categories:

-raw materials -work in process - finished goods inventory.

lower of cost or market basis

A method of valuing inventory that recognizes the decline in the value when the current purchase price (market) is less than cost

Which of the following should not be included in the physical inventory of a company?

Goods held on consignment from another company.

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

Since ending inventory is an asset on the balance sheet, total assets would be overstated, and cost of goods sold would be understated on the income statement. Therefore net income would be overstated and stockholders' equity would be overstated.

First-In, First-Out (FIFO)

The inventory costing method which assumes that the earliest goods acquired are the first to be recognized as cost of goods sold.

Average Cost Method

The inventory costing method which assumes that the goods available for sale are homogeneous.

Last-In, First-Out (LIFO)

The inventory costing method which assumes that the latest units purchased are the first to be allocated to cost of goods sold.

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.

The inventory held on consignment by Roger's should be included in Railway Company's inventory balance at cost ($35,000). The correct amount of inventory is $215,000 ($180,000 + $35,000)

Inventory items on an assembly line in various stages of production are classified as

Work in process also called Goods in Process

In a period of inflation, the use of the LIFO method will result in:

a better matching of costs and revenues than FIFO

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

costs of goods purchased

In a period of rising prices, FIFO will have a

lower cost of goods sold than LIFO

In a period of rising prices, FIFO will result in

lower cost of goods sold than LIFO