ACC 201 - CH 7

Which of these inventory accounting methods are acceptable under US GAAP?

- FIFO - LIFO - Weighted Avereage Cost - Specific Identification

The goals of inventory managers include ______.

- Having enough inventory on hand to meet customer demand - Keeping the costs of buying and storing inventory as low as possible - Making sure that inventory quality meets customer expectations

Which statements are true?

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

The costs of carrying inventory include the costs of ______.

- Spoilage - Theft - Storage - Obsolescence (outdated/no longer used)

____ inventory consists of products acquired in a finished condition, ready for sale without further processing. (Enter one word per blank.)

Merchandise

FIFO uses the ______ cost for Cost of Goods Sold on the income statement and the ______ cost for Inventory on the balance sheet.

Oldest; newest

Which of the following would be considered merchandise inventory?

Purchased finished goods.

Assuming sales remain unchanged, if Cost of Goods Sold increases then Gross Profit ___.

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 first-in, first-out, Cost of Goods Sold equals ______.

$30, using first items at $10/each.

Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10. It purchased 3 more at $12. It sold 4 units during the period. What is the Cost of Goods Sold using the weighted average cost method?

$44.80, The Cost of Goods Available equals $56 (=(2*10)+3*12)). The Weighted Average Cost Equals $11.20 ($56 Goods Available/5 Units). COGS equals $44.80 = ($11.20/unit * 4 Units 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, the cost of the 43 masks sold equals (40 masks * 12) + (3 masks * 10). Ending inventory equals the 5 remaining masks at $10 each or $50)

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 (Specific identification records the actual diamond sold.)

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 Cost of Goods Sold is ______.

$560, Cost of Goods Sold (using weighted average)=($500 + (2 x $550) + (2 x $600))/(1 + 2 + 2)=$560 per unit; $560 x 1 unit=$560

Chicken Little started the month with 5 eggs in its inventory that cost $2 each. During the month, Chicken Little bought 30 more eggs that cost $2.50 each. At the end of the month, Chicken Little counted its inventory and found that 8 eggs remained unsold. If Chicken Little uses FIFO periodic, its Cost of Goods Sold for the month is ______.

$65 $20 is FIFO Inventory, not Cost of Goods Sold. Since 8 eggs of the 35 eggs available to sell were left, then 27 eggs were sold. The oldest eggs are assumed to be sold first. Thus, Cost of Goods Sold equals (5 eggs x $2) + (22 eggs x $2.50).

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

Cost of the actual item sold.

In a perpetual inventory system, Inventory is initially recorded at ______.

Cost.

Inventory is reported as a(n) ______.

Current asset on the balance sheet.

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.

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

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?

Weighted average cost.