Chapta 6 Acconting

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, cost of goods sold will be

$1760

Blog Inc., has net sales of $50,000, cost of goods sold of $30,000, and selling expenses of $5,000. Its gross profit is ______.

$20,000

Prather Inc. has sales of $100,000, sales returns of $5,000, cost of goods sold of $60,000, and selling expenses of $3,000. Calculate gross profit.

$35,000

Beginning inventory is $60,000. Purchases of inventory during the year are $100,000. Cost of goods sold is $120,000. What is ending inventory?

$40,000

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, ending inventory will be

$420

In a perpetual inventory system, when a company sells inventory on account, how many entries are required?

2

Inventory is classified as

A Current Asset

Josh Corporation uses the perpetual inventory system. Josh sells goods to a customer on account for $2,000. The cost of goods sold is $1,500. What is the entry required to record the expense of the inventory sold?

Debit Cost of Goods Sold $1,500; credit Inventory $1,500

Clark uses the perpetual inventory system. Clark sells goods to a customer on account for $1,000. The cost of the goods sold was $700. Which of the following entries are required?

Debit Cost of Goods Sold $700; credit Inventory $700 Debit Accounts Receivable $1,000; credit Sales Revenue $1,000

For internal record keeping, most companies carry their inventory using the _____ basis.

FIFO

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Which of the following methods are available for costing inventory? (Select all that apply.)

FIFO,LIFO, special identification, and weighted-average

The FIFO method assumes that units sold are the ______ units aquired.

First

Net sales revenue minus cost of goods sold is

Gross profit

Items held for sale in the normal course of business are referred to as __________

Inventory

The cost of goods not yet sold is recorded in the ______ account, whereas the cost of goods that are sold to customers is recorded in _____.

Inventory; cost of goods sold

Which of the following methods are not used for inventory costing? (Select all that apply.)

NIFO, simple average

Gross Profit is

Net Sales Revenue minus Cost of Goods Sold.

At year end, CurlZ Inc.'s inventory consists of 100 bottles of CleanZ with a cost of $1, and a selling price of $0.80 per bottle. It also has 100 boxes of DyeZ with a cost of $10, and a selling price of $11 per box. Using the lower of cost and net realizable value method, the year-end Inventory balance should include which of the following amounts?

The cost of $1,000 for the DyeZ boxes. The selling price of $80 for the CleanZ bottles.

The LIFO inventory method assumes that the units that remain in ending inventory are

The oldest units that remain

True or false: When goods are sold, the cost of the goods is transferred from the Inventory account to the Cost of Goods Sold account.

True

Berta Company's inventory value has declined during the current period. Berta does not expect to sell its inventory during the current year. Berta should recognize the loss in the period when the inventory

Value declines

Which of the following accounts would be found in the balance sheet of a manufacturing company?

Work in process

Which of the following accounts are typically reported in the balance sheet of a manufacturing company?

Work in process Raw materials Finished goods

Using the perpetual inventory system, what is the effect of a sale of inventory on assets?

assets decrease by the cost of the inventory assets increase by the sales price of the inventory

Meller purchases inventory on account. As a results, Meller's

assets will increase

A periodic inventory system measures cost of goods sold by

counting inventory at the end of the period.

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ______ than cost of goods sold determined using the FIFO inventory assumption.

higher

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

included in Gerald's inventory.

Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to:

increase an asset and increase revenue decrease an asset and increase an expense

Purchasing inventory on account:

increases liabilities increases assets

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs

incurred several years earlier.

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

inventory

The estimated selling price of inventory less any costs of completion, disposal, and transportation is referred to as:

net realizable value

The FIFO inventory method assumes that units remaining in ending inventory are them ________ units purchased. (Enter one word per blank)

newest

Kilian Company's inventory balance at the end of the current year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered, the effect of this error on financial statements in the following year will be:

overstated net income

The LIFO inventory method assumes that the units sold are

the most recent units purchased.

The lower of cost and net realizable value method causes losses in the value of inventory to be recognized in the period when

the value declines below cost.

FOB shipping point means title to the goods passes

when they are shipped.

FOB destination means title to the goods passes

when they arrive at the destination.

At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. The net realizable values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. Using the lower of cost and net realizable value method, CurlZ should report its inventory at:

$1000

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be

$640

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Inventory Cost of Goods Sold

__________ inventory includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw Materials

Which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw materials inventory

The weighted average cost method assumes that ending inventory consists of

a mixture of all the goods available for sale.

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

Where is inventory reported in the financial statements?

balance sheet as a current asset

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

debit inventory

The estimated selling price of inventory less costs necessary to sell the inventory is referred to as net .

realizable value

Beginning inventory is $20,000. Purchases of inventory during the year are $100,000. Ending inventory is $50,000. What is cost of goods sold?

$70,000

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.)

Inventory Cost of goods sold

The definition of inventory includes which of the following items?

Items used currently in the production of goods to be sold Items held for resale Items currently in production for future sale

Companies that produce the inventory they sell are referred to as __________

Manufacturers

What type of company purchases raw materials and makes goods to sell?

Manufacturers

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be than ending inventory determined using the FIFO inventory assumption.

lower

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.

lower of cost and net realizable value; greater

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

paid by the supplier.

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, cost of goods sold will be

$2540

What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements? (Assume that the sales price is higher than the cost of inventory)

total assets increase stockholders' equity increases net income increases

Weighted-average unit cost is determined by dividing cost of goods available for sale by

total quantity available for sale.

Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be:

understated assets, retained earnings, and net income