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