Accounting 221 Ch 5 hw
Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be
$9
In a period of rising prices, ending inventory would be highest
FIFO
A high inventory turnover ratio produces a high number of days to collect inventory. This statement is
False
Which of the following would raise suspicion that a manager may be attempting to overstate net income by falsifying the physical count of ending inventory?
The amount of estimated inventory calculated using the gross margin method was lower than the amount determined by the physical count.
which of the following industries is likely to have the highest number of days to sell inventory?
wine producers
Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the LIFO cost flow method, the balance in the inventory account after the sales transaction will be
$30
Which of the following formulas is used to calculate the number of days to sell inventory
365/Inventory turnover
Which of the following formulas is used to calculate the inventory turnover ratio?
Cost of goods sold/Inventory
Assume a company paid $800 for a computer that it plans to sell to its customers. Suppose that as a result of new technology the company could buy the same computer today for $600. Which of the following journal entries would be required to show the inventory at the lower of cost or market?
Debit $200-COGS Credit$200-Inventory
In a period of rising prices, net income would be highest
FIFO
Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. When the Company sold one of the items for $40, it expensed $30 to its cost of goods sold account. Based on this information which of the following cost flow methods is the company using?
FIFO
A low inventory turnover ratio produces a low number of days to collect inventory. This statement is
False
GAAP requires that inventory be shown on the balance sheet at its cost (the price paid) regardless of its current value. This statement is
False
The inventory turnover ratio is not related to the number of days to collect inventory. This statement is
False
In a period of fall prices, net income would be highest
LIFO
In a period of rising prices, cost of goods sold would be highest
LIFO
Which of the following cost flow methods would provide the lowest amount of net income in an inflationary environment?
LIFO
A high inventory turnover ratio produces a low number of days to collect inventory. This statement is
True
Because of its size, cost of goods sold normally has a significant impact on the amount of net income that is reported on the income statement. Since the reported balance in the inventory account has a direct effect on the amount of cost of goods sold, inventory manipulation is a target for unscrupulous managers seeking to control the amount of reported earnings. These statements are
True
The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is
True
In a period of falling prices, the unit cost of goods would be the same for ending inventory and cost of goods sold
Weighted Average
All other things being equal, the profitability is maximized when a company sells inventory with
a high gross margin per unit and a high inventory turnover.
If the amount of ending inventory is overstated, the amount of
cost of goods sold will be understated
A key component of estimating the amount of ending inventory is to determine the gross margin percentage for prior years, The gross margin percentage is calculated by
dividing the gross margin by net sales
The journal entry to recognize the write down of inventory based on the lower cost or market rule will
increase the amount of expenses
If the amount of ending inventory is overstated, the amount of ...(3 answers)
net income will be overstated total assets will be overstated retained earning will be overstated
To avoid the risk of fraud associated with inventory manipulation
the employee in charge of counting the inventory should be different from the employee in charge of recording inventory transactions
Assume that the amount of ending inventory is overstated in Year 1. Further assume the overstatement in Year 1 is not discovered and the ending inventory in Year 2 is reported accurately. Under these circumstances,
the year 2 ending balance in retained earning will be accurate
The gross margin of estimating ending inventory is frequently used
to check the accuracy of a physical count of inventory on hand