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Exam 5: Inventories and Cost of Sales

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Question 61

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Goods in transit are included in a purchaser's inventory:

A) At any time during transit
B) When the purchaser is responsible for paying freight charges
C) When the supplier is responsible for freight charges
D) If the goods are shipped FOB destination
E) After the half-way point between the buyer and seller

F) B) and E)
G) A) and E)

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Question 62

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The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost or stolen.

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Question 63

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Acme-Jones Corporation uses a FIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit. August 5, 10 units were purchased at $13 per unit August 15, 12 units were sold at $25 per unit. August 18, 15 units were purchased at $14 per unit. What was the amount of the ending inventory for the month of August?

The inventory valuation method that tends to smooth out erratic changes in costs is:

Interim statements:

Given the following information, determine the cost of ending inventory at December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit December 15: 20 units were purchased at $10.15 per unit December 22: 18 units were sold at $35 per unit

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory. $\begin{array} { | l | l | } \hline \text { January 1: } & \text { Purchased } 100 \text { units at } \$ 10 \text { per unit } \\\hline \text { February 5: } & \text { Purchased } 60 \text { units at } \$ 12 \text { per unit } \\\hline \text { March 16: } & \text { Sold } 40 \text { Units for } \$ 16 \text { per unit } \\\hline\end{array}$ Prepare general journal entries to record the March 16 sale using the FIFO inventory valuation method.

Physical inventory counts:

All incidental costs of inventory acquisition and handling whether necessary or not, are assigned to inventory.

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

The understatement of the beginning inventory balance causes:

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when the goods arrive at their destination.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

The inventory turnover ratio:

How do the consistency principle and the full disclosure principle affect inventory valuation?

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Given the following information, determine the cost of goods sold at November 30 using the LIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit November 18: 30 units were purchased at $10.75 per unit November 30: 20 units were sold at $55 per