Chapter 6 Wiley Plus Multiple Choice

All of the following statements are true regarding the LIFO reserve except: A. The equation (LIFO inventory - LIFO reserve = FIFO inventory) adjusts the inventory balance from LIFO to FIFO. B. The financial statement differences of using LIFO normally increase the longer a company uses LIFO. C. Current ratios and the inventory turnover can be significantly affected if a company has material LIFO reserves. D. Companies using LIFO are required to report the LIFO reserve.

A

Ayayai Corp. had the following inventory transactions occur during 2022: Units Cost/unit Feb. 1, 2022 Purchase 102 $42 Mar. 14, 2022 Purchase 175 $44 May 1, 2022 Purchase 124 $46 The company sold 288 units at $59 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $1692, what is the company's after-tax income using LIFO? A. $1666.00 B. $2380.00 C. $2810.00 D. $1967.00

A

Blue Spruce Corp. had the following inventory transactions occur during 2022: Units Cost/unit Feb. 1, 2022 Purchase 125 $52 Mar. 14, 2022 Purchase 216 $55 May 1, 2022 Purchase 153 $57 The company sold 355 units at $73 each and has a tax rate of 30%. Assuming that a periodic inventory system is used and operating expenses of $2088, what is the company's after-tax income using FIFO? A. $3254.30 B. $2797.20 C. $4649.00 D. $3996.00

A

If beginning inventory is understated by $10800, the effect of this error in the current period is Cost of Goods Sold Net Income A. understated overstated B. overstated overstated C. overstated understated D. understated understated

A

Marigold has the following inventory data: July 1 Beginning inventory 23 units at $4.70 5 Purchases 94 units at $5.10 14 Sale62 units 21 Purchases 47 units at $5.60 30 Sale 44 units Assuming that a perpetual inventory system is used, what is the value of ending inventory on a LIFO basis for July? A. $288.10 B. $562.60 C. $850.70 D. $439.70

A

Cheyenne Corp. sells six different products. The following information is available on December 31: Item Units Cost per unit NRV per unit Estimated selling price Tin 55 $440 $445 $455 Titanium 204 400 4360 4490 Steel 70 1760 1680 1740 Aluminum 70 310 250 255 Iron 35 350 360 375 Fiberglass 35 260 260 260 When applying the lower-of-cost-or-net-realizable-value rule to each item, what will Cheyenne total ending inventory balance be? A. $278450 B. $267850 C. $268250 D. $268475

B

Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most? A. Average cost B. FIFO C. Income tax expense for the period will be the same under all assumptions D. LIFO

B

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? A. LIFO method B. FIFO method C. Need more information to answer D. Average cost method

B

Splish has the following inventory data: July 1 Beginning inventory 36 units at $72 5 Purchases 216 units at $67 14 Sale 144 units 21 Purchases 108 units at $70 30 Sale 101 units Assuming that a perpetual inventory system is used, what is ending inventory (rounded) under the average cost method for July? A. $7231 B. $7919 C. $7963 D. $7987

B

The situation that requires a departure from the cost basis of accounting to the lower-of- cost-or-net-realizable-value basis in valuing inventory is necessitated by A. a desire for more profit. B. a decline in the value of the inventory. C. an increase in the value of the inventory. D. an increase in selling price.

B

Windsor has the following inventory data: Nov. 1 Inventory 26 units @ $5.20 each 8 Purchase 103 units @ $5.55 each 17 Purchase 52 units @ $5.40 each 25 Purchase 77 units @ $5.70 each A physical count of merchandise inventory on November 30 reveals that there are 86 units on hand. Ending inventory under FIFO is A. $958. B. $488. C. $939. D. $468.

B

Inventory costing methods place primary reliance on assumptions about the flow of A. resale prices. B. values. C. costs. D. good.

C

Marigold has the following inventory data: Nov. 1 Inventory 23 units @ $4.70 each 8 Purchase 94 units @ $5.05 each 17 Purchase 47 units @ $4.90 each 25 Purchase 70 units @ $5.10 each A physical count of merchandise inventory on November 30 reveals that there are 78 units on hand. Assuming that the specific identification method is used and that ending inventory consists of 23 units from each of the three purchases and 9 units from the November 1 inventory, cost of goods sold is A. $750. B. $136. C. $782. D. $777.

C

Nash's Trading Post, LLC uses a periodic inventory system. Details for the inventory account for the month of January 2022 are as follows: Units Per unit price Total Balance, 1/1/2022 220 $4.00 $880 Purchase, 1/15/2022 110 3.90 429 Purchase, 1/28/2022 110 4.10 451 An end of the month (1/31/2022) inventory showed that 180 units were on hand. If the company uses FIFO and sells the units for $7 each, what is the gross profit for the month? A. $1260 B. $1820 C. $784 D. $1036

C

At December 31, 2022, Bramble Corp. inventory records indicated a balance of $649000. Upon further investigation it was determined that this amount included the following: ▪ $123000 in inventory purchases made by Bramble shipped from the seller 12/27/22 terms FOB destination, but not due to be received until January 2nd ▪ $62000 in goods sold by Bramble with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6. ▪ $7600 of goods received on consignment from Kimberly Company What is Bramble's correct ending inventory balance at December 31, 2022? A. $641400 B. $526000 C. $456400 D. $518400

D

At May 1, 2022, Splish Brothers Inc. had beginning inventory consisting of 360 units with a unit cost of $8. During May, the company purchased inventory as follows: ▪ 720 units at $8 ▪ 1080 units at $10 The company sold 1800 units during the month for $14 per unit. Splish Brothers Inc. uses the average cost method. The value of Splish Brothers Inc.'s inventory at May 31, 2022 is A. $19440. B. $3600. C. $2880. D. $3240

D

Concord Corporation had beginning inventory of $12000 at March 1, 2022. During the month, the company made purchases of $52000. The inventory at the end of the month is $13840. What is cost of goods sold for the month of March? A. $65840 B. $52000 C. $64000 D. $50160

D

In periods of rising prices, which is an advantage of using the LIFO inventory costing method? A. Net income will be the highest and thus reflect the prosperity of the company. B. Ending inventory will include latest (most recent) costs and thus be more realistic. C. Phantom profits are reported. D. Cost of goods sold will include the latest (most recent) costs and thus will be more realistic.

D

Vaughn has the following inventory data: July 1 Beginning inventory 54 units at $122 5 Purchases 306 units at $114 14 Sale 204 units 21 Purchases 153 units at $117 30 Sale 143 units Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis? A. $19383 B. $40017 C. $39990 D. $19356

D