Intermediate Accounting Chapter 8
The average days inventory for Sassie Sue is:
113 days
What is Nu's net income if it elects LIFO?
144
Use the following to answer the next two questions: Bakersfield Bakeries started 2000 with $62,000 of merchandise on hand. During 2000, $280,000 in merchandise was purchased on account with credit terms of 2/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. Bakersfield paid freight charges of $9,000. Merchandise with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $316,000. Bakersfield uses a perpetual inventory system. Assuming Bakersfield uses the gross method to record purchases, ending inventory would be:
25,480
What is Nueva's net income if it elects LIFO?
264
hat is Nu's net income if it elects FIFO
288
assie Sue's inventory turnover ratio for 2000 is:
3.23
What is Nueva's net income if it elects FIFO
372
The ending inventory assuming FIFO is
4,410
Blaine Corporation adopted dollar-value LIFO on January 1, 2000 when the inventory value was $500,000 and the cost index was 1.0. On December 31, 2000, the inventory value at year-end costs was $535,000 and the cost index was 1.06. Blaine would report a LIFO inventory of:
505,000
Index Company adopted dollar-value LIFO (DVL) as of January 1, 2000 when it had a cost inventory of $600,000. Its inventory as of December 31, 2000 was $680,000 at year-end prices and the cost index was 1.08. What was DVL inventory on December 31, 2000
632,000
Base Company adopted dollar-value LIFO (DVL) as of January 1, 2000 when it had an inventory of $700,000. Its inventory as of December 31, 2000 was $725,000 at year-end prices and the cost index was 1.05. What was DVL inventory on December 31, 2000
690,476
In a perpetual average cost system:
A new weighted-average unit cost is calculated each time additional units are purchased
In periods when prices are rising LIFO liquidations:
Distort the income statement
Inventory does not inculde
Equipment used in the manufacturing of assets for sale.
In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:
FIFO
In a period when prices are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:
FIFO
The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be
FIFO
Relaxation of the LIFO conformity rule improves
Interfirm comparability
Ending inventory is equal to the cost of items on hand plus:
Items in transit sold f.o.b. destination.
Cost of goods sold is given by:
Net Purchases + beginning inventory - ending inventory.
In a PERIODIC inventory system, the cost of inventories sold is
Not recorded at the time of sale
The use of LIFO during a long inflationary period can result in
Significant cash flow advantages over FIFO.
If a company uses LIFO, a LIFO liquidation is problematic for a company's income taxes
When inventory purchase costs are rising.
A LIFO reserve is
a contra asset
During periods when prices are rising and inventory quantities are stable, ending inventory will be
greater under LIFO then FIFO
Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising prices, Company A's gross profit and inventory turnover, compared to Company B's, would be:
gross profit = greater, inventory turnover = lesser
Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising prices, Company C's gross profit and inventory turnover, compared to Company D's, would be:
gross profit = lesser, inventory turnover = greater
Under the net method, purchase discounts lost are
included in interest expense
The net method considers discounts not taken as
interest expense
In a PERPETUAL inventory system, the cost of purchases is debited to
inventory
Conceptually, the gross method views discounts not taken as
inventory cost
The LIFO conformity rule has been
liberalized.
The LIFO Conformity Rule states that if LIFO is used for
tax purposes, it must be used for financial reporting