Ch 6 Dynamic Study
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 (The weighted average cost per unit at the time of the January 7 sale would be $10.44 per unit, calculated as [(10 units * $10) + (8 units * $11)] / 18 total units = $10.44.)
Data for Shelby Company for the current year is as follows: Sales Revenue $10,000 Cost of Goods Sold: Beginning Merchandise Inventory $3,000 Net Cost of Purchases 7,000 Cost of Goods Available for Sale 10,000 Less: Ending Merchandise Inventory 2,000 Cost of Goods Sold 8,000 Gross Profit $2,000 Assume that the ending Merchandise Inventory was accidentally understated by $300. What are the correct amounts for Cost of Goods Sold and Gross Profit?
Cost of Goods Sold = $7,700 Gross Profit = $2,300
Data for Shelby Company for the current year is as follows: Sales Revenue $10,000 Cost of Goods Sold: Beginning Merchandise Inventory $3,000 Net Cost of Purchases 7,000 Cost of Goods Available for Sale 10,000 Less: Ending Merchandise Inventory 2,000 Cost of Goods Sold 8,000 Gross Profit $2,000 Assume that the ending Merchandise Inventory was accidentally overstated by $500. What are the correct amounts for Cost of Goods Sold and Gross Profit?
Cost of Goods Sold = $8,500 Gross Profit = $1,500
Which of the following costing method results in the highest net income during a period of increasing inventory costs?
FIFO (When costs are rising, in FIFO the lower cost units are moved first to Cost of Goods Sold. This results in a lower Cost of Goods Sold and a higher net income.)
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 LIFO inventory costing method and the perpetual system, what is the ending Merchandise Inventory on March 30?
If Baxter Manufacturing is using LIFO, Cost of Goods Sold would be the (10 units * $22) + (20 units * $20) and Merchandise Inventory would have the remaining 5 units at $20 = $100.
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?
If Jones Manufacturing is using LIFO, Cost of Goods Sold would be the (25 units * $18) + (5 units * $15) and Merchandise Inventory would have the remaining 15 units at $15 = $225. previous
The following statement is true regarding inventory errors (overstating or understating ending Merchandise Inventory):
Inventory errors will cancel out after two periods.
Inventory turnover measures __________.
Inventory turnover measures how rapidly merchandise inventory is sold.
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 (results in a higher Cost of Goods Sold, and then a lower net income, resulting in less taxes being paid. previous)
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.
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?
Since the company is using FIFO, the 10 units in beginning inventory at $10 each would be moved to Cost of Goods Sold first and you would need 1 more unit (for the total sale of 11 units) from the next purchase of $11 per unit. As a result, Cost of Goods Sold for the sale on January 7 is (10 units * $10) + (1 unit * $11) = $111.
Assume Baxter Manufacturing begins January with 11 units of inventory that cost $12 each. During January, the following purchases and goods sold were: Jan 5 Purchased 8 units at $14 7 Sold 12 units 15 Purchased 6 units at $16 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?
Since the company is using FIFO, the 11 units in beginning inventory at $12 each would be moved to Cost of Goods Sold first and you would need 1 more unit (for the total sale of 12 units) from the next purchase of $14 per unit. As a result, Cost of Goods Sold for the sale on January 7 is (11 units * $12) + (1 unit * $14) = $146.
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?
Since the company is using LIFO, the 8 units purchased on January 5 at $11 each would be moved to Cost of Goods Sold first and you would need 3 more units (for the total sale of 11 units) from the beginning inventory of $10 per unit. As a result, Cost of Goods Sold for the sale on January 7 is (8 units * $11) + (3 units * $10) = $118.
Assume Baxter Manufacturing begins January with 11 units of inventory that cost $12 each. During January, the following purchases and goods sold were: Jan 5 Purchased 8 units at $14 7 Sold 12 units 15 Purchased 6 units at $16 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?
Since the company is using LIFO, the 8 units purchased on January 5 at $14 each would be moved to Cost of Goods Sold first and you would need 4 more units (for the total sale of 12 units) from the beginning inventory of $12 per unit. As a result, Cost of Goods Sold for the sale on January 7 is (8 units * $14) + (4 units * $12) = $160.
Assume the following beginning inventory, purchases, and sales during the month of April: April 1 Beginning Merchandise Inventory, 10 units @ $20 each 3 8 units sold 10 Purchased 9 units at $21 23 4 units sold Determine the Cost of Goods Sold using the FIFO inventory costing method and the periodic inventory system on April 30.
Take the first 10 units purchased at $20, then take 2 units * $21 (the next purchase down for a total of 11 units): (10 * $20) + (2 * $21) = $242
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 LIFO inventory costing method and the periodic inventory system on April 30.
Take the last 9 units purchased at $16 , then take 2 units * $15 (the next level up for a total of 11 units): (9 * $16) + (2 * $15) = $174
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?
The Merchandise Inventory account has gone down in value by $200 ($8,000 - $7,800). Therefore you have to credit Merchandise Inventory for $200 to reduce the value, and debit Cost of Goods Sold.
The Smith Manufacturing Company had inventory turnover of 9 for the current year. What is the days' sales in inventory for the current year?
To calculate days' sales in inventory, one must divide the number of days in a year by the number of times the inventory turns over in a year. Therefore, if the inventory turnover ratio is 9, inventory turnover is 365 days / 9 = 40.56 days. previous
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?
Using the lower-of-cost-or-market, the lower of the cost or market value is reported on the Balance Sheet. The market value is lower at $8,700 so that is the amount to report on the Balance Sheet as Merchandise Inventory. (answer: 8,700)
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 (holds that a company should report enough information for outsiders to make knowledgeable decisions about the company.)
