acct

An understatement of the 2019 ending inventory will affect

2019 Cost of Goods Sold 2020 Beginning Inventory 2020 Cost of Goods Sold

Which of the following income statement line items are affected by the inventory method chosen?

Income from Operations Gross Profit Income Tax Expense Income before Income Tax Expense Net Income

Which of these might cause the value of inventory to fall below its original cost?

Obsolescence from going out of style Increased competition Damage

How is the lower-of-cost-or-market rule applied when there are more than 2 types of inventory?

Only the items that have market values lower than the costs will be written down.

FIFO perpetual and FIFO periodic inventory methods result in the same amount of Cost of Goods Sold. True false question.

true

Specific identification, weighted average cost, LIFO and FIFO are acceptable GAAP costing methods.

true

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. Market values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. CurlZ should report its inventory at

$1,000=(200 bottles x $1) + (100 boxes x $8)).

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 last-in, first-out, Cost of Goods Sold equals

$33 (3 x $11).

Which financial statements are needed to calculate the inventory turnover ratio? (Check all that apply.)

Balance sheet Income statement

Risen, Inc. has beginning inventory of $16 which consists of 2 units at $8 each. It purchased 10 units at $10 each. It sold 5 units for $20 each. Which would result in the higher Gross Profit, FIFO or LIFO and why?

FIFO's COGS equals $46 (=(2 older units x $8) + (3 newer units x $10)). LIFO COGS equals $50 (=5 newer units x $10). Gross Profit is higher with FIFO because the COGS is lower.

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

Which inventory costing methods are based on assumptions that accountants make about the flow of inventory costs?

LIFO FIFO

Which inventory method is typically used when accounting for expensive and unique inventory items?

Specific identification

Specific identification is

an inventory method that tracks which item is actually sold and debits Cost of Goods Sold for the actual cost of the item

The weighted average cost method uses the ______ cost for Cost of Goods Sold on the income statement and the ______ cost for Inventory on the balance sheet.

average; average

Inventory is reported on the ______. Later, when the inventory is sold, it becomes ______.

balance sheet as a current asset; Cost of Goods Sold on the income statemen

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

decreases

To ensure the accuracy of inventory accounted for using a perpetual system, physical counts ______. (Check all that apply.)

detect shrinkage detect theft detect bookkeeping errors

Assuming rising inventory prices, rank which inventory method results in the higher ending inventory value. List from top to bottom, in order of highest ending inventory to lowest ending inventory value.

fifo weighted average cost lifo

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

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 last-in, first-out, the 3 goods sold are

from the purchases made during the month

An increase in a company's inventory balance from a prior year is

good if the inventory turnover ratio is higher

When costs to purchase inventory are rising, using LIFO leads to reporting ______ cost of goods sold and ______ net income than FIFO.

higher; lower

As inventory quality increases, its cost usually

increases

Applying the lower of cost or market rule results in inventory being reported at the ______. Multiple choice question.

market value if lower than cost

Inventory shrinkage as a result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory

only in a perpetual system

The inventory turnover ratio directly measures

the times per period the average inventory balance is sold

Ending inventory errors in 2019

will affect the 2020 goods available for sale but will not affect the 2020 ending inventory

Barry, Inc.'s sales equal $30,000 and cost of goods sold equals $10,000. Its beginning inventory was $800 and its ending inventory is $1,200. Barry's inventory turnover ratio equals ______ times.

10 inventory turnover ratio=cost of goods sold/average inventory or $10,000/ (($800 + $1,200)/2).

How does the inventory costing methods affect the income statement when costs tend to rise over time?

Cost of Goods Sold on the income statement differs between the methods causing Income Tax Expense to differ.

What effect does the inventory costing method have on the income statement? The inventory methods affects the amount of the ______.

Cost of Goods Sold, Gross Profit, Income from Operations, Income before Income Tax Expense, Income Tax Expense and Net Income

When costs are rising, ______ produces a larger Inventory balance (making the balance sheet appear to be stronger) and smaller Cost of Goods Sold (resulting in a larger Gross Profit) which makes the company look more profitable.

FIFO

Delta Diamonds had 5 diamonds available for sale this year: June 1 - purchased 1 for $500; July 9 - purchased 2 for $550 each; and on September 23 - purchased 2 for $600 each. On December 24, it sold 1 of the diamonds. Using LIFO periodic, its ending inventory is ______. Multiple choice question.

Reason: Delta uses LIFO (not specific identification). With LIFO, the 1 diamond sold is assumed to be the most recently purchased. Thus ending inventory (using LIFO) are the older remaining diamonds which equals $2,200 (=$500 + (2 x 550) + 600).

The goals of inventory managers include ______.

Selling inventory for cash Selling inventory on account

The company has 1,000 of each of the following items in its inventory: Cost per Item Market Value per item Jeans $20 $21 T-shirts $4 $3 What is the amount of the lower-of-cost-or-market write down, if any?

The write down would be $1,000.

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

Beta Company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each. It sold 90 units for $25 each. Beta's weighted average cost is

Weighted average=((80 x $12) + (20 x $12.50))/100

When costs are rising, ______ produces a larger Inventory balance (making the balance sheet appear to be stronger) and smaller Cost of Goods Sold (resulting in a larger Gross Profit) which makes the company look more profitable.

fifo