Accounting chp.6 Concept Videos

The inventory transactions of VTS Corporation are shown below. All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the amount of LIFO adjustment needed to adjust FIFO inventory records reported for the year to LIFO for external reporting purposes?

$1,300

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Calculate the amount to be reported for ending inventory of Model A.

$10,000 Explanation: ($100 * 100) = $10,000

Travis Corporation begins the year with $50,000 of tire inventory. The company purchases tires worth $150,000 during the year. At the end of the year, the purchase cost of remaining inventory is $30,000. What is the cost of goods sold?

$170,000

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Calculate the amount to be reported for ending inventory of Model B.

$2,000 Explanation: ($40 * 50) = $2,000

Dane Stores begins the year with $30,000 of DVD inventory. It purchases DVDs worth $80,000 during the year. The cost of goods sold for the year is $70,000. What is the amount of ending inventory?

$40,000

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its income statement for the current year, if it uses the last-in, first-out method?

$5,500 Explanation: 500 units * $6 = $3,000 + 500 units * $5 = $2,500 = $5,500

The inventory transactions of VTS Corporation are shown below. All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for _____________.

$9,800

A company that returns items that were previously purchased on account will debit:

Accounts Payable

Inventory is typically reported as a(n):

Asset, Balance Sheet

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. The year-end adjustment to mark inventory down to net realizable value will involve debit to ________.

Costs of Goods Sold for $500

When inventory costs are rising, the ___________ results in a higher reported inventory.

FIFO method

A period-end adjustment is needed both periodic and perpetual systems.

False

An appropriate use of the specific identification method is in accounting for low-cost, similar inventory items that are difficult to separately identify.

False

Companies that purchase inventories in finished form from suppliers are known as manufacturing companies.

False

The cost of freight-in is initially added to the balance of the Cost of Goods Sold account.

False

The multiple-step income statement begins by reporting that a company's sales revenues minus cost of goods sold equals net income.

False

Wholesalers resell inventory to end users.

False

Which of the following is an example of nonoperating expenses for a merchandising company?

Interest expense

All of the following accounts will be affected when a company makes a payment within the discount period under periodic system, except _________.

Inventory

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. The year-end adjustment to mark inventory down to net realizable value will involve credit to ________.

Inventory for $500

Which of the following is true of a period of falling inventory costs?

LIFO will report higher gross profit than FIFO.

Which of the following is true of a sale on account using periodic inventory system?

No entry is required for inventory reduction.

Which of the following steps in the flow of inventory costs for a manufacturing company occurs first?

Purchasing raw materials

Which of the following is an advantage of using LIFO in a period of rising costs?

Results in lower taxes

The LIFO conformity rule requires that

a company that uses LIFO for tax reporting to also use LIFO for financial reporting.

The LIFO method assumes that:

last units purchased are the first ones sold

A _________ inventory system is one that is continually updated to reflect inventory purchases and sales.

perpetual

Under the periodic system, freight charges are __________.

recorded in an account called Freight-in.

Walmart is an example of a:

retailer

Accountants often call FIFO the balance-sheet approach because ___________.

the amount it reports for ending inventory better approximates the current cost of inventory.

The weighted-average method assumes that:

the cost of goods sold consists of a random mixture of all goods available for sale.

The FIFO method assumes that:

the first units purchased are the first ones sold

Inventory is reported on the balance sheet at:

the lower of original cost and net realizable value

Due to technological advances in recent years, most companies use a perpetual inventory system to track inventory purchases and sales.

true

Products that have been started in the production process but are not yet complete at the end of the period are known as:

work-in-process

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?

$20,000

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the last-in, first-out method?

$22,500 Explanation: 2,000 units * $8 = $16,000 + 500 units. * $7 = $3,500 + 500 units * $6 = $3,000 = $22,500

The inventory transactions of VTS Corporation are shown below. All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. What is the ending balance of Inventory under the FIFO method?

$4,500

Trivia Company reports a gross profit of $100, income tax expense of $15, selling, general, and administrative expenses of $35, nonoperating revenues of $10, and nonoperating expenses of $15. What is the company's operating income?

$65. Explanation: $100-$35= $65.

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its income statement for the current year, if it uses the weighted-average method?

$7,000 Explanation: (4000-3000) * $7.00 = $7,000 (# of units - units sold) * avg. unit cost = $7,000

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the weighted-average unit cost?

$7.00 Explanation: Add up all # of units Add up all unit costs Divide units costs by $ of units = 28,000/4000 = 70

The inventory transaction of Green Products Inc. are shown below. Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?

$8,000

The inventory transactions of VTS Corporation are shown below. All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on May 21?

Credit to Accounts Payable

A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:

Credit to Inventory for $300

The inventory transactions of VTS Corporation are shown below. All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. Which of the following will be recorded on February 25?

Debit to Accounts Receivable for $3,000 (I think)

Companies that report inventory using the LIFO method must report the difference between the LIFO cost and FIFO cost of its inventory. This difference is commonly called the LIFO reserve.

True

FOB shipping point means title passes when the seller ships the inventory, not when the buyer receives it.

True

The cost if beginning inventory plus additional purchases during the year make up the cost of inventory available for sale.

True

The cost of inventory sold during a period is reported on the income statement.

True

The periodic system and perpetual system will always produce the same amounts of cost of goods sold and inventory when the FIFO inventory method is used

True

When inventory costs are rising, LIFO results in lower tax expense when compared to LIFO.

True