ACCT 211 Chapter 7 SmartBook

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, Cost of Goods Sold equals ______.

$33

Risen, Inc. has beginning inventory of $16 which consists of 2 units at $8 each. It purchased 10 units at $10 each. It sold 5 units for $20 each. Which would result in the higher Gross Profit, FIFO or LIFO and why?

FIFO because the older, less expensive units are assumed to be sold first making Cost of Goods Sold lower and Gross Profit higher than LIFO

Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds that was purchased on July 9. Using periodic specific identification, its Cost of Goods Sold is ______.

$550

The weighted average cost method uses the weighted average cost to calculate the value of ______. (Check all that apply.)

Cost of Goods Sold Inventory

Which of the following statements are true? (Check all that apply.)

Using a different inventory accounting method leads to reporting a different amount for cost of goods sold. Managers can choose the method of accounting for inventory cost (i.e., FIFO, LIFO, etc.) that best fits their business.

Which of these inventory accounting methods are acceptable under US GAAP? (Check all that apply.)

Weighted average LIFO FIFO Specific identification

The assumption that a company makes about its inventory cost flow has ______. (Check all that apply.)

an effect on the company's income statement an effect on the company's balance sheet

Specific identification is ______.

an inventory method that tracks which item is actually sold and debits Cost of Goods Sold for the actual cost of the item

Inventory is reported on the ______. Later, when the inventory is sold, it becomes ______.

balance sheet as a current asset; Cost of Goods Sold on the income statement

Merchandise inventory ______. (Select all that apply.)

consists of products acquired in a finished condition that are available for sale is reported as a current asset on the balance sheet

Assuming sales remain unchanged, if Cost of Goods Sold increases then Gross Profit _____. (Enter one word per blank.)

decreases

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, the 3 goods sold are ______.

from the purchases made during the month

LIFO uses the ______ unit costs for Cost of Goods Sold on the income statement and the ______ unit costs for Inventory on the balance sheet.

newest; oldest

True or false: Accounting rules allow companies to choose, from a variety of methods, the inventory method that best fits their business environment.

true

Which statement are true? (Select all that apply.)

The inventory methods apply to both perpetual and periodic inventory systems. Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods. The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory.

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using first-in, first-out, the 3 goods sold are assumed to be ______.

from the beginning inventory

Alpha Company bought 75 units of inventory for $4 each and 25 units of inventory for $5 each. Alpha's weighted average cost per unit is ______.

$4.25

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its Cost of Goods Sold for the year ended is ______.

$500

Which of the following income statement line items are affected by the inventory method chosen? (Select all that apply.)Income before

Income before Income Tax Expense Gross Profit Income from Operations Income Tax Expense Net Income

Applying the lower of cost or market rule results in inventory being reported at the ______.

market value if lower than cost

Which of the following is merchandise inventory?

Goods held for sale in the normal course of business

True or false: The inventory method selected by management does not have to correspond to the physical flow of goods to be in accordance with GAAP.

true

Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 7 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 2 quilts remained unsold. If Mountain Made uses periodic weighted average cost, its Cost of Goods Sold for the month is ______.

$1,656

Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchased 3 more at $12 each. What is the weighted average cost per unit?

$11.20

The goals of inventory managers include ______. (Check all that apply.)

making sure that inventory quality meets customer expectations keeping the costs of buying and storing inventory as low as possible having enough inventory on hand to meet customer demand

True or false: Specific identification is an inventory method typically used when accounting for expensive and unique inventory items.

True

What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory? Multiple choice question. LIFO

Weighted average cost

Inventory is reported as a(n) ______.

Current Asset, Balance Sheet

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its inventory after the December 24 sale is ______.

$2,240

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its Inventory at December 31 is ______.

$2,300

Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 20 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 5 quilts remained unsold. If Mountain Made uses LIFO periodic, its Cost of Goods Sold for the month is ______.

$3,780

Which of the following would be considered merchandise inventory?

Purchased finished goods

On May 1, there were 4 inventory items that cost $30 each. On May 5, 2 items were purchased for $35 each. Given one item from the beginning inventory and one from the May 5 inventory were sold, under the __________ _________inventory method, cost of goods sold would equal $65.

Specific Identification

Which inventory method is typically used when accounting for expensive and unique inventory items?

Specific identification

As inventory quality increases, its cost usually___ . (Enter one word per blank.)

increases

Beta Company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each. It sold 90 units for $25 each. Beta's weighted average cost is ______.

$12.10

Which of these might cause the value of inventory to fall below its original cost? (Check all that apply.)

Damage Obsolescence from going out of style Increased competition

Which inventory costing method assumes that the inventory's cost flow out in the same order the goods are received?

FIFO

Which inventory costing method uses the oldest cost for Cost of Goods Sold on the income statement and the newest cost for Inventory on the balance sheet?

FIFO

Which statements are true? (Select all that apply.)

A grocery store may use the Last-in, First-out inventory method. The inventory method is an assumed cost flow and does not have to correspond with the actual physical flow of goods.

If a company assumes that its inventory costs flow out in the opposite order from which the goods were purchased, it uses _______to value its inventory. (Please respond using the acronym.)

LIFO

Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest cost for Inventory on the balance sheet?

LIFO

When using the specific identification inventory method, cost of goods sold equals the ______.

cost of the actual item sold

FIFO, an inventory costing method, actually describes how to calculate the cost of ______.

goods sold

King Costume started the month with 8 masks in its beginning inventory that cost $10 each. During the month, King Costume purchased 40 additional masks for $12 each. At the end of the month, King counted its inventory and found that 5 masks remained unsold. If King Costume uses LIFO periodic, its Cost of Goods Sold for the month is ______.

$510