MG242

A company purchased inventory on August 1, August 17, August 22, and August 30. The unit cost from which of these purchases would likely be used to compute the ending inventory value for August under FIFO, assuming a periodic inventory system and that not all the units owned were sold?

August 30

Four companies computed their days' sales in inventory as follows:Company A: 47.2Company B: 36.5Company C: 45.1Company D: 39.4

Company B

Which of the following statements regarding the perpetual FIFO inventory method is true?

Costs are included in the cost of merchandise sold in the order in which units were purchased.

Which cost flow method is used most frequently?

FIFO

The inventory costing method that will yield a higher ending inventory during times of inflation will be the

FIFO inventory cost method.

The inventory costing method that will yield an ending inventory that is closer to current prices is the

FIFO inventory cost method.

Which of the following inventory costing methods under a perpetual inventory system is widely used for tax purposes?

LIFO

During the taking of its physical inventory, a company inadvertently counted its inventory as $89,300 instead of the correct amount of $86,700. Indicate the effect of the misstatement on the balance sheet of the current year.

Owner's equity is overstated by $2,600.

Which of the following will NOT be misstated on the income statement as a result of inventory errors?

Sales

Cost flow assumptions follow the physical flow of goods for which of the following?

Specific identification

Which of the inventory costing methods under a periodic inventory system provides results that are similar to the physical flow of goods, assuming purchases are relatively uniform?

Weighted average

Morgan Industries is comparing and contrasting its ending inventory value in terms of the three common inventory costing methods in order to help management determine the most appropriate method to use. The company determines three values, which are $96,000, $100,000, and $105,000. If management determines that $100,000 is the most appropriate value for its ending inventory, what inventory costing method has it most likely chosen?

Weighted average inventory cost method

Average inventory is computed as

[Inventory (at beginning of period) + Inventory (at end of period)] ÷ 2.

An advantage of using the retail method of inventory costing is

a. that it may be used as an aid in taking a physical inventory. b. that it allows management to monitor operations more closely when the number of physical inventories is reduced. c. that it provides inventory figures for preparing monthly and quarterly financial statements when the periodic system is used. d. All of these choices are correct-ANSWER

The lower-of-cost-or-market method can be applied to

a. total inventory as a whole. b. each major class or category of inventory. c. each item in the inventory. d. All of these choices are correct. answer

Several controls are used to safeguard inventory EXCEPT

allowing all employees access to the materials warehouse.

Inventory turnover measures

both the efficiency and effectiveness of inventory management and the relationship between cost of merchandise sold and the amount of inventory carried during the period.

Merchandise inventory is found on the balance sheet as a

current asset.

several controls are used to safeguard inventory, and one of those is to

hire security guards.

The inventory subsidiary ledger is used to keep track of

inventory purchased. b. proper inventory maximum and minimum levels. c. inventory sold. d. All of these choices are correct. -ANSWER

When a periodic inventory system is used,

only revenue is recorded each time a sale is made.

Determining gross profit using the weighted average cost flow method assumes that the cost of the units sold

s costed the same as the ending inventory, that is using a weighted average of the purchase cost of all units. b. is a weighted average of the purchase cost of all units. Both of these choices are corrcet.

Inventory is added to the inventory records after all of the following are reconciled, EXCEPT the

sales invoice.

Which of the following statements regarding the perpetual LIFO inventory method is true?

the cost of the units sold is the cost of the most recent purchases.

Days' sales in inventory measures

the length of time it takes to acquire, sell, and replace inventory.

Regarding consigned inventory,

the manufacturer is the consignor.

The ending inventory valuation using the FIFO cost flow method is made up of

the most recent purchases.

The ending inventory valuation using the LIFO cost flow method is made up of

the oldest purchases.

Estimating inventory may be needed for all of the following reasons EXCEPT

when the periodic method is used instead of taking a physical inventory.