Chapter 6 Videos

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Inventory Quantity Unit Cost Unit NRV Model A Quantity 100 Unit Cost $100 Unit NRV $120 Model B Quantity 50 Unit Cost $ 50 Unit NRV $40 Model C Quantity 20 Unit Cost $ 200 Unit NRV $210 Calculate the amount to be reported for ending inventory of Model A. Multiple Choice $12,000 $10,000 $11,000

Answer 10,000 Model A 100 quantity x 100 unit cost = 10,000

The inventory transactions of VTS Corporation are shown below. Date Transaction Number of Units Unit Cost/Price Jan. 1 Transaction Beginning inventory Number of Units 500 Unit Cost/Price $10 Feb. 25 Transaction Sale Number of Units 300 Unit Cost/Price 20 May 21 Transaction Purchase Number of Units 400 Unit Cost/Price 12 Jul. 15 Transaction Purchase Number of Units 500 Unit Cost/Price 15 Dec. 10 Transaction Sale Number of Units 800 Unit Cost/Price 20 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? Multiple Choice Debit to Cost of Goods Sold for $6,000 Debit to Accounts Receivable for $3,000 Credit to Inventory for $5,000 Credit to Sales Revenue for $6,000

Feb 25 300 units x 20 cost/price =6000 Credit to Sales Revenue for $6,000

A _____________ inventory system is one that is continually updated to reflect inventory purchases and sales. Multiple Choice perpetual transitional periodic technical

perpetual

The weighted-average method assumes that: Multiple Choice the first units purchased are the first ones sold. each unit of inventory can be matched with its actual cost. the last units purchased are the first ones sold. the cost of goods sold consists of a random mixture of all goods available for sale.

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

The FIFO method assumes that: the cost of goods sold consists of a random mixture of all goods available for sale. the first units purchased are the first ones sold. the last units purchased are the first ones sold. each unit of inventory can be matched with its actual cost.

the first units purchased are the first ones sold.

Which of the following is an example of a nonoperating expense for a merchandising company? Multiple Choice Interest expense Supplies expense Depreciation expense Advertising expense

Interest expense

Which of the following is true of a sale on account using a periodic inventory system? Multiple Choice No entry is required for inventory reduction. Cost of Goods Sold will be debited. Accounts Receivable will be credited. Inventory will be credited.

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 Selling finished products to merchandising companies Converting raw materials into finished products

Purchasing raw materials

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

Results in lower taxes

Tune Store reports inventory using the lower of cost and net realizable value (NRV). Information related to its year-end inventory appears below. Inventory Quantity Unit Cost Unit NRV Model A Quantity 100 Unit Cost $100 Unit NRV $120 Model B Quantity 50 Unit Cost $ 50 Unit NRV $40 Model C Quantity 20 Unit Cost $ 200 Unit NRV $210 The year-end adjustment to mark inventory down to net realizable value will involve a debit to _____.

There is reduction in Value of Inventory of Model B Value to be reduced = 50 x ($50 - $40) = $500 So, To Reduce Value to NRV we have to debit Cost of Goods Sold by $500 So, Correct Option is : Cost of Goods Sold for $500