Chapter 6 Study Guide

Assume Jones Manufacturing begins January with 10 units of inventory that cost $10 each. During January, the following purchases and goods sold were: Jan 5: Purchased 8 units at $11 7: Sold 11 units What is the weighted average cost per unit in the perpetual system at the time the 11 units are sold on January 7?

$10.44

Assume Baxter Manufacturing begins March with 25 units of inventory that cost $20 each. During March, the following purchases and goods sold were: March 15: Purchased 10 units at $22 30: Sold 30 units Using the FIFO inventory costing method and the perpetual system, what is the ending Merchandise Inventory on March 30?

$110

Assume Jones Manufacturing begins January with 10 units of inventory that cost $10 each. During January, the following purchases and goods sold were: Jan 5: Purchased 8 units at $11 7: Sold 11 units 15: Purchased 6 units at $12 30: Sold 15 units Using the FIFO inventory costing method and the perpetual system, how much is Costs of Goods Sold for the sale of January 7?

$111

Assume Jones Manufacturing begins January with 10 units of inventory that cost $10 each. During January, the following purchases and goods sold were: Jan 5: Purchased 8 units at $11 7: Sold 11 units 15: Purchased 6 units at $12 30: Sold 15 units Using the LIFO inventory costing method and the perpetual system, how much is Costs of Goods Sold for the sale of January 7?

$118

Assume the following beginning inventory, purchases, and sales during the month of April: April 1: Beginning Merchandise Inventory, 10 units @ $15 each 3: 7 units sold 10: Purchased 9 units at $16 23: 4 units sold Determine the Cost of Goods Sold using the FIFO inventory costing method and the periodic inventory system on April 30.

$166

Assume Jones Manufacturing begins March with 20 units of inventory that cost $15 each. During March, the following purchases and goods sold were: March 15: Purchased 25 units at $18 30: Sold 30 units Using the LIFO inventory costing method and the perpetual system, what is the ending Merchandise Inventory on March 30?

$225

Bates Manufacturing purchased merchandise inventory for $10,000. At the end of the accounting period it has a market value of $8,700. Using the lower-of-cost-or-market rule, what is the amount to report on the Balance Sheet as Merchandise Inventory?

$8,700

The Smith Manufacturing Company had inventory turnover of 9 for the current year. What is the days' sales in inventory for the current year?

40.56 days

Ace Manufacturing purchased merchandise inventory for $8,000. At the end of the accounting period it has a market value of $7,800. Using the lower-of-cost-or-market rule, what is the journal entry to record the adjustment?

Debit: Costs of Goods Sold (200) Credit: Merchandise Inventory (200)

Which principle holds that a business's financial statements must report enough information for outsiders to make a knowledgeable decision about the company?

Disclosure Principle

Which of the following costing method results in the highest net income during a period of increasing inventory costs?

FIFO

Inventory turnover measures __________.

How rapidly merchandise inventory is sold

The following statement is true regarding inventory errors (overstating or understating ending Merchandise Inventory):

Inventory errors will cancel out after 2 periods

When inventory costs are rising, a company may prefer to use the __________ method in the perpetual system in order to pay the lowest amount of taxes.

LIFO

Which inventory costing method results in a higher Cost of Goods Sold to be reported on the Income Statement when inventory costs are rising?

LIFO

On December 31 of the current year, Aztec Company understated ending Merchandise Inventory by $10,000. How does this error affect the Cost of Goods Sold and the Net Income for the current year?

Overstates Cost of Goods Sold and understates Net Income