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Exam 6: Inventories

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Question 91

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The managers of Mayo Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

A) LIFO
B) Average Cost
C) FIFO
D) Physical inventory method

E) C) and D)
F) A) and C)

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Question 92

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Boyer Company applied FIFO to its inventory and got the following results for its ending inventory. The cost of purchasing units at year-end was VCRs $71, DVD players $69, and iPods $78. Instructions Determine the amount of ending inventory at lower-of-cost-or-market.

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Question 93

Multiple Choice

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Which of the following items will increase inventoriable costs for the buyer of goods?

A company purchased inventory as follows: 200 units at $10 300 units at $12 The average unit cost for inventory is

A new average cost is computed each time a purchase is made in the

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be

The pool of inventory costs consists of the beginning inventory plus the cost of goods purchased.

If inventories are valued using the LIFO cost assumption, they should not be classified as a current asset on the balance sheet.

Linden Watch Company reported the following income statement data for a 2-year period. Linden uses a periodic inventory system. The inventories at January 1, 2010, and December 31, 2011, are correct. However, the ending inventory at December 31, 2010, was overstated $3,000. Instructions (a) Prepare correct income statement data for the 2 years. (b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?

Finch Company is preparing the annual financial statements dated December 31, 2010. Information about inventory stocked for regular sale follows: Instructions Compute the valuation for the December 31, 2010, inventory using the lower-of-cost-or-market basis.

Flott Department Store prepares monthly financial statements but only takes a physical count of merchandise inventory at the end of the year. The following information has been developed for the month of July: The net sales for July amounted to $140,000. Instructions Use the retail inventory method to estimate the ending inventory at cost for July. Show all computations to support your answer.

If the unit cost of inventory has continuously increased, the ______________, first-out inventory valuation method will result in a higher valued ending inventory than if the ______________, first-out method had been used.

If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the LIFO and FIFO inventory methods.

Selection of an inventory costing method by management does not usually depend on

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.

Unitech has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. The inventory method which results in the highest gross profit for June is

Lee Industries had the following inventory transactions occur during 2010: The company sold 51 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's after-tax income using FIFO? (rounded to whole dollars)